Source: Office of United States Attorneys
LOS ANGELES – Two corporate executives were sentenced today to federal prison terms for conspiring to defraud the United States and for failing to report information about defective dehumidifiers linked to multiple fires in the first criminal enforcement action against corporate executives for failing to report required information ever brought under the Consumer Product Safety Act. (CPSA)
Simon Chu, 70, of Pomona, was sentenced to 38 months in federal prison and was fined $5,000 by United States District Judge Dale S. Fischer. Judge Fischer today also sentenced Charley Loh, 67, of Arcadia, to 40 months in federal prison and fined him $12,000.
The executives each were found guilty by a jury in November 2023 of one count of conspiracy to defraud the United States Consumer Product Safety Commission (CPSC) and one count of failure to furnish information as required by the CPSA.
“Federal law requires companies to report potentially dangerous products to the Consumer Product Safety Commission to help protect consumers from harm,” said Assistant Attorney General Brett Shumate of the Justice Department’s Civil Division. “The Justice Department will continue to investigate and bring to justice companies and individuals who willfully evade these requirements and put the public in danger.”
“Corporate executives who choose to ignore the law will be held accountable – especially when death and serious injuries result,” said United States Attorney Bill Essayli. “By putting profits over the safety of others, these defendants created serious risks to consumers, and we will continue to prosecute those who endanger the public.”
“These Chinese-made products were hazardous, and the defendants knew it,” said CPSC Acting Chairman Peter Feldman. “Today’s sentences are a clear message that the CPSC will take a hard line against executives who break American laws and endanger families. I commend the CPSC and Justice Department teams for their work to secure this outcome.”
The defective dehumidifiers sold by Chu’s and Loh’s two corporations were included in multiple recalls of a larger number of defective dehumidifiers manufactured by Gree Electric Appliances Inc. of Zhuhai (Gree Zhuhai) in China. Recall notes stated that more than 450 reported fires and millions of dollars in property damage have been linked to the recalled Gree Zhuhai dehumidifiers.
The most recent recall announcements for the Gree dehumidifiers can be found here and here. The CPSC’s most recent warning about the recalled Gree dehumidifiers is here.
Chu was part owner and chief administrative officer of Gree USA Inc. and another corporation in the City of Industry, that distributed and sold to retailers for consumer purchase dehumidifiers that were made by Gree Zhuhai in China. Loh was part owner and CEO of the same two corporations.
The CPSA requires manufacturers, importers and distributors of consumer products to report “immediately” to the CPSC information that reasonably supports the conclusion that a product contains a defect that could create a substantial product hazard or creates an unreasonable risk of serious injury or death. This duty also applies to the individual directors, officers, and agents of those companies.
By September 2012, Chu, Loh and their companies received multiple reports that their Chinese dehumidifiers were defective, dangerous and could catch fire. They also knew that they were required to report this product safety information to the CPSC immediately. Despite their knowledge of consumer complaints of dehumidifier fires and test results showing defects in the dehumidifiers, Chu and Loh failed to disclose their dehumidifiers’ defects and hazards for at least six months while they continued to sell their products to retailers, for resale to consumers.
The jury acquitted both defendants of one count of wire fraud.
Gree USA was sentenced in April 2023 to pay a $500,000 criminal fine after pleading guilty to failing to notify the CPSC about the problems with the dehumidifiers. The fine, along with provisions to pay restitution to victims, was part of a $91 million criminal resolution with Gree USA, Gree Zhuhai and another related Gree company, Hong Kong Gree Electric Appliances Sales Co. Ltd.
Homeland Security Investigations investigated this matter.
Assistant United States Attorney Dennis Mitchell of the Environmental Crimes and Consumer Protection Section, and Justice Department Trial Attorneys Natalie Sanders, Speare Hodges, and Stephen Gripkey of the Civil Division’s Consumer Protection Branch prosecuted this case, with the assistance of Patricia Vieira of the CPSC’s Office of General Counsel.