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$2.6 Million Penalty, Compliance Program Required for Failure to Report Defective Products

Monday, January 12, 2015
Sandler, Travis & Rosenberg Trade Report

The Consumer Product Safety Commission announced Jan. 5 that a Wisconsin company has agreed to pay a $2.6 million civil penalty and abide by a permanent injunction for knowingly failing to report a defect and an unreasonable risk of serious injury involving one of its products.

The company began receiving reports of laceration injuries caused by this product in 2005 but a recall was not issued until 2011. Federal law requires manufacturers, distributors and retailers to report to the CPSC immediately after obtaining information reasonably supporting the conclusion that a product contains a defect that could create a substantial product hazard, creates an unreasonable risk of serious injury or death, or fails to comply with any consumer product safety rule or any other rule, regulation, standard or ban the CPSC enforces.

The injunctive relief granted by the consent decree requires the company to implement and maintain a compliance program that, at a minimum, contains the following elements.

- written standards and policies

- procedures for reviewing claims and reports for safety concerns and for implementing corrective and preventive actions when compliance deficiencies or violations are identified

- confidential employee reporting of compliance-related questions or concerns to either a compliance officer or another senior manager

- effective communication of compliance-related policies and procedures to all employees through training programs or otherwise

- senior manager responsibility for compliance and accountability for violations

- oversight of compliance by the company’s governing body

- records retention requirements

The consent decree further requires the company to maintain and enforce internal controls and procedures designed to ensure that the company reports to the CPSC as required by federal law; that all reports are timely, truthful, complete and accurate; and that any material deficiencies or weaknesses in the design or operation of the internal controls are promptly disclosed to the company’s management.

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