e-cigarettes

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As Juul announces mass layoffs, a new lawsuit alleges it shipped a million contaminated pods

A lawsuit filed a by former Juul executive alleges that the company knew a batch of contaminated e-liquid had been used in about one million pods shipped to retailers earlier this year, but did not inform customers. The lawsuit, first reported by BuzzFeed, was brought by Siddharth Breja, former senior vice president of global finance at Juul from May 2018 to March 2019, who alleges he was fired after complaining about the contaminated pods.

News of the lawsuit comes the same day as Juul’s announcement it will lay off about 500 people, or 10% to 15% of its workforce, and the departure of four executives, including chief financial officer Tim Danaher. Juul is currently under scrutiny by the Food and Drug Administration, which claims the startup made misleading statements about its product and targeting of teens.

In the lawsuit, Breja claims that during a meeting on March 12, he learned a contaminated batch of mint e-liquid was used to make 250,000 refill kits, or a total of one million pods, that had already been shipped to retailers.

Breja alleges that when he complained about Juul’s refusal to issue a product recall or health and safety notice, Danaher said doing so would cost the company billions of dollars in lost sales, hurting its then-$38 billion valuation. About a week later, Breja says the company fired him, telling him that it was because he had misrepresented himself as former chief financial officer at Uber. In the lawsuit, Breja says the claim was “preposterous,” and that he had accurately represented his former position as a chief financial officer of a division at Uber.

In the lawsuit, Breja also claims that Juul wanted to sell pods that were almost a year old and when he asked the company to include an expiration or best by date, or a date of manufacture on the packaging, he was told by former CEO Kevin Burns that “half our customers are drunk and vaping like mo-fos, who the fuck is going to notice the quality of our pods?”

TechCrunch has contacted Juul and the law firm representing Breja for comment. In a statement to BuzzFeed, Breja’s attorney Harmeet Dhillon said “Mr. Breja became aware of very concerning actions at the company, and he performed his duty to shareholders and to the board by reporting these issues internally. In exchange for doing that, he was inappropriatey terminated. This is very concerning, particularly since some of the issues he raised concerned matters of public safety.”

Burns was replaced in September by K.C. Crosthwaite, a former executive at Juul’s largest shareholder Altria . A replacement for Danaher has not been announced yet.

China plans e-cigarette regulation as industry booms

China is taking steps to regulate its blossoming vaping market as health concerns over electronic cigarettes increase in recent times.

China’s National Health Commission has begun research into e-cigarettes and plans to issue legislation for the industry, said the head of the health authority Mao Qunan at a press conference this week. The attempt came as Chinese e-cigarette startups raised loads of venture capital over the past year in their fight to vie for attention in the world’s largest market of smokers.

Vaping suppliers in China range from little-known workshops that have come under legal attack from industry giant Juul, which is reportedly mulling a China entry itself, to venture-backed startups operating out of manufacturing hub Shenzhen. At least 20 e-cigarette companies in China have raised fundings since the beginning of 2019, according to data collected by Crunchbase.

These players are in effect up against state monopoly China Tobacco, which is the world’s biggest cigarette maker and provides the government with colossal tax revenues.

Some researchers support the use of vaping to help adults quit smoking while others have shown that e-cigarettes are just as addictive as traditional ones. The other major controversy is the growing use of e-cigarettes among teenagers, which has led to California’s plan to ban vaping product sales.

China is also applying more scrutiny to the new smoking technology. Research shows that the aerosol produced by heating up e-cigarettes can contain “a lot of harmful substances” and additives in e-cigarettes can “pose health risks,” said Mao. He also noted that equivocal labeling of nicotine level can misguide smokers and sloppy device standards can result in battery explosion and other safety incidents.

Like the U.S., China has seen a worryingly high vaping rate among young people, which is another reason that urges Beijing to hold the industry in check. The use of e-cigarettes by kids, teens and young adults has been proven unsafe because nicotine, which is highly addictive, can harm brain development.

In May, China drew up a set of standards (in Chinese) for e-cigarettes that specify the level of nicotine, the type of additives and other components and designs allowed in battery-powered cigarette devices.