On March 29, 2019, the U.S. Department of Justice announced that for the first time it had indicted two corporate executives for failing to furnish information under the Consumer Product Safety Act (CPSA). The DOJ alleged that Simon Chu and Charley Loh—in turn the Chief Administrative Officer and the Chief Executive Officer of companies that imported, distributed and sold dehumidifiers—knew of complaints and testing results indicating that the products could catch fire but failed to timely report these defects to the Consumer Product Safety Commission (CPSC) as required by Section 15(b) of the CPSA. Press Release, DOJ, Two Corporate Executives Indicted in First-Ever Criminal Prosecution for Failure to Report Under Consumer Product Safety Act (March 29, 2019) (“Press Release, March 29, 2019”); 15 U.S.C. §2064 (b). The indictment alleges that the defendants knew of the defects for at least six months, during which they continued to sell the dehumidifiers and did not disclose the defects to the CPSC. Press Release, March 29, 2019; see also Indictment, United States v. Chu, 2:19-cr-00193 (C.D. Cal. March 28, 2019) ECF 1.
This prosecution is a reminder to companies of the range of CPSC tools available to enforce its consumer product safety laws, including criminal penalties against directors, officers and agents. In a press release, the U.S. Attorney for the Central District of California warned, “If you plan to profit from selling defective products, you should also plan to face justice.” Press Release, March 29, 2019. Significantly, the indictment comes after a $15.45 million civil penalty was already obtained from companies that manufactured, imported and sold the defective humidifiers in a related CPSC matter. News Release, CPSC, Gree Agrees to Pay Record $15.45 Million Civil Penalty, Improve Internal Compliance for Failure to Report Defective Humidifiers (March 25, 2016). The criminal case highlights the need for prompt and fulsome disclosure of known safety risks in the consumer product arena as well as the risks that flow from incomplete or inaccurate communications.
