Two City of Industry executives were indicted after their companies allegedly ignored reports that dehumidifiers they were distributing were catching fire and continued selling them for months, the U.S. Department of Justice said in a news release Friday.
Simon Chu, 63, of Chino Hills, and Charley Loh, 60, of Arcadia, were charged with a multiple-object conspiracy to commit wire fraud, to fail to furnish information under the Consumer Product Safety Act and to defraud the U.S. Consumer Product Safety Commission. The indictment also charged both defendants with one count of wire fraud and one count of failure to furnish information under the CPSA, the DOJ said.
Starting in July 2012, the companies received several reports that their dehumidifiers were defective, including receiving a video that showed a dehumidifier on fire, the indictment alleged.
Chu was part owner and chief administrative officer of two corporations that imported, distributed, and sold China-manufactured dehumidifiers to retailers. Loh was also part owner and chief executive officer, according to the indictment.
Two months after receiving reports of fires, Chu conducted a test and found that the plastic used in the dehumidifiers could burn when the device overheated, and that the materials used didn’t meet safety standards, according to a copy of the indictment obtained by KTLA.
The indictment did not name the two corporations involved or the retailers that were reselling the dehumidifiers to customers across the country.
Law requires that product safety information be immediately reported the U.S. Consumer Product Safety Commission. The indictment alleged that both defendants were aware of this, failed to report on the defects and continued to distribute the dehumidifiers to retailers for at least six months, according to the news release.
Chu and Loh “deliberately” withheld information about the defective dehumidifiers, according to the indictment.
The safety commission announced a recall of 2.5 million dehumidifiers in September 2013, including Chinese dehumidifiers sold by Loh’s and Chu’s companies between September 2012 and April 2013, according to the DOJ.
The recalled devices sparked at least 450 fires that resulted in about $19 million in property damages, the safety commission said.
It is unclear how many of the recalled dehumidifiers were distributed by the defendant’s corporations.
Both defendants were facing up to 20 years in prison for the wire fraud charge and another five years for each of the conspiracy and the failure to furnish information counts. They could also have to pay a fine of at least $250,000 if convicted, the DOJ said.
The case was investigated by U.S. Homeland Security Investigations in the Department of Homeland Security.