Judge Issues Civil Penalty Against Colorado Company That Sold Recalled Magnets
A federal judge yesterday issued a $5.5 million civil penalty against Zen Magnets LLC, a Colorado company, which illegally sold powerful small magnets that already had been recalled by another company, the Justice Department announced. Because of the company’s inability to pay the penalty, most of it was suspended.
U.S. District Court Judge Christine M. Arguello of the District of Colorado had previously ruled that Zen Magnets LLC and its owner, Shihan Qu, had violated the Consumer Product Safety Act by selling hundreds of thousands of magnets that another company had recalled. In the earlier ruling, the court found that Zen Magnets had purchased large amounts of the magnets – estimated to be in quantities of hundreds of thousands -- at a substantial discount from another company. That other company agreed, one week later, to recall the magnets as part of an agreement with the U.S. Consumer Product Safety Commission (CPSC).
“Selling potentially dangerous products that another company had recalled put consumers at risk,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The civil penalty imposed by the district court indicates that violations like this will not be taken lightly. The Department of Justice will continue to work with the CPSC to protect consumers by keeping recalled products out of the stream of commerce.”
In recognition that Zen Magnets is a small company and has a limited ability to pay, all but $10,000 of the civil penalty was suspended.
“Protecting consumers, especially children, from a product that can cause harm and even death is what the Colorado U.S. Attorney’s Office, and the Department of Justice as a whole is all about,” said Acting U.S. Attorney Bob Troyer for the District of Colorado. “The civil penalty leveled by Judge Arguello provides a more than appropriate deterrence to companies to ensure their products are safe.”
The magnets at issue are typically sold in sets of hundreds and are commonly marketed and sold as “sculptural” desk toys. According to the CPSC, when a person ingests more than one of the powerful small magnets, the magnets are attracted to each other in the digestive system, creating the potential for serious damage to the intestinal tissue trapped in between or even death.
The hundreds of thousands of recalled magnets that Zen Magnets unlawfully sold were obtained prior to and thus were not covered by a rule issued by the CPSC that went into effect in April 2015. In a separate legal proceeding, Zen Magnets challenged that rule, which prohibited the sale of magnets or magnet sets that are small enough to be swallowed and that have a high degree of magnetic attraction. On Nov. 22, the U.S. Court of Appeals for the Tenth Circuit issued an opinion holding that the rule should be vacated and remanded to the CPSC for further proceedings.
The case in which the district court issued the civil penalty was handled by Senior Litigation Counsel Patrick Jasperse of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorneys Jacob Licht-Steenfat and Jamie Mendelson of the District of Colorado.
For more information about the Consumer Protection Branch and its enforcement efforts, visit its website at https://www.justice.gov/civil/consumer-protection-branch. For more information about the U.S. Attorney’s Office for the District of Colorado, visit its website at https://www.justice.gov/usao-co.