Unsafe Children's Disney Products, 3 Florida Companies Arrested and Jailed for Smuggling

Last week the US District Court for the Southern District of Florida sentenced a Florida import company president to 22 months in federal prison for violating consumer product safety and other laws. His wife, an executive of a related company, was sentenced to a year of probation. The case is significant because it involves a criminal prosecution of importers of unsafe children’s products. It also highlights the enforcement partnering between the Consumer Product Safety Commission (CPSC) and Customs and Border Protection (CBP).

Defendants Hung Lam and wife, Isabella Kit Yeung, allegedly owned and operated three Florida businesses, LM Import-Export, Inc. (LM), LK Toys Corporation (LK) and Lam’s Investments Corp. (LIC), which they used to import and sell children’s and other consumer products. Between October 1997 and February 2011, CBP allegedly seized 35 of LM’s shipments from Hong Kong for violations of the Federal Hazardous Substances Act (FHSA) and Consumer Product Safety Act (CPSA). The majority of the products confiscated from LM allegedly violated the lead ban and small parts regulations enforced by the CPSC.

According to court documents, the CPSC sent 25 letters of noncompliance advising LM of the hazards discovered during CPSC lab testing. Those notices instructed LM to cease sale and distribution of those products and to ensure that subsequent shipments complied with all consumer product safety rules. LM continued to import, ship and offer the offending products for sale online and in discount stores. An investigation further revealed that LM also imported allegedly counterfeit products, such as toys featuring Disney characters. The packages also contained misleading shipping labels and invoices, referring to children’s puzzle mats as “door mats,” for example, and failing to identify the country of origin as China.

The picture the US Attorney’s office painted was clear: LM and its agents and officers willfully and knowingly violated multiple consumer product safety and copyright laws — despite actual notice of their violations — and actively tried to cover their tracks. The US government filed parallel criminal and civil cases against Lam, Yeung and their companies. The civil complaint sought a permanent injunction to enjoin further violations of consumer product safety rules by the defendants and civil penalties for those violations already committed.1 The criminal suit contained several counts, including trafficking counterfeit goods, smuggling, entry of goods by false statements and conspiracy. The latter count alleged that the defendants conspired to violate consumer product safety laws and to commit the other enumerated criminal acts.2

Although the defendants initially pled not guilty, the parties entered into two separate consent decrees in the civil action in April 2012 — one for a permanent injunction and one for the payment of civil penalties — that required the defendants to plead guilty in the criminal case. The defendants agreed to pay a civil penalty of $287,500.

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