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November 1, 2019

Juul shipped 1M tainted e-cigarette pods (and never alerted the public), former employee claims

Daily Briefing

    A former Juul executive in a lawsuit filed Tuesday alleged the company shipped one million "contaminated" mint-flavored e-cigarette nicotine pods to retailers, and then failed to recall the products and warn consumers.

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    The lawsuit comes amid growing scrutiny into Juul's marketing practices.

    The Federal Trade Commission (FTC) in September announced it had launched an investigation into whether Juul used influencers and other marketing tactics to target minors. FDA also recently announced it had warned Juul for illegally marketing its nicotine pads as a less harmful alternative to traditional cigarettes and for doing so in a presentation to youth at a U.S. school.

    Lawsuit details

    In the lawsuit filed in the United States District Court for the Northern District of California, Siddharth Breja, Juul's former senior vice president of global finance, alleges he was "inappropriately terminated" on March 21 days after raising concerns about the shipment and objecting to the company's refusal to inform the public.  The suit also alleges that Juul breached several California business regulations.

    Breja, who left Uber to join Juul in May 2018, said he learned about the contaminated shipment of mint-flavored refill kits during a March 12 executive meeting. According to court documents, Breja was asked to recover $7 million from the supplier for the tainted pods.

    Breja claims he urged Juul's CFO to issue either a recall or alert the public via a product safety warning.

    Breja said he was fired about a week after the meeting. Breja in the suit states that while he was not permitted to take notes during his termination meeting, he recalls being told he was fired for having misrepresented his prior role at Uber. Breja in the suit denies having misrepresented his former role.

    Breja's attorney Harmeet Dhillon said, "Breja became aware of very concerning actions within the company that could be jeopardizing the health of millions of Juul users. He performed his duty to shareholders, the board, and the public by reporting these issues internally, expecting that Juul's senior management would do the right thing." He added, "Instead, Juul fired him under concocted, false pretenses, and then sought to smear him to justify its misconduct."

    Breja in the suit also describes an executive culture of indifference to safety and quality-control issues. The suit quotes then-CEO Kevin Burns as saying, in a meeting in February, "Half our customers are drunk and vaping" and would not "notice the quality of our pods."

    Juul's response

    Ted Kwong, a Juul spokesperson, said Breja's claims about the company were baseless.

    Kwong said, "He was terminated in March 2019 because he failed to demonstrate the leadership qualities needed in his role." He added, "The allegations concerning safety issues with Juul products are equally meritless, and we already investigated the underlying manufacturing issue and determined the product met all applicable specifications."

    Juul said it plans to "vigorously defend" itself in the lawsuit, the Washington Post reports.

    Burns, who stepped down as Juul CEO in September, in a statement Wednesday also denounced Beja's claims. "I never said this, or anything remotely close to this, period." He added, "As CEO, I had the company make huge investments in product quality, and the facts will show this claim is absolutely false and pure fiction" (Telford, Washington Post, 10/30; Ownes, "Vitals," Axios, 10/31; Hellman, The Hill, 10/30; Kaplan/Hoffman, New York Times, 10/30; Budryk, The Hill, 10/29).

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