April 14 (Bloomberg) -- Mega Brands Inc., the Canadian toymaker, agreed to pay a $1.1 million penalty after a U.S. consumer safety agency determined the company withheld information about the risks of its magnetic building sets.

The action stems from reports filed by the toymaker, then known as Rose Art Industries and under different ownership, following the death in 2005 of a 22-month-old child who ingested multiple magnets from the Magnetix toy set. Rose Art said at the time it had no other records of such incidents, the Consumer Product Safety Commission said in a statement today.

Three months after the child’s death, the company recalled almost 4 million Magnetix sets for children under six years old. Subpoenaed records from Mega Brands showed there had been more than 1,100 consumer complaints about the item at the time of Rose Art’s initial report, the CPSC said.

Montreal-based Mega Brands expanded the recall to users of all ages in 2007, after more than 25 children suffered intestinal injuries that required surgery to remove swallowed magnets, it said.

The U.S. Congress tightened toy safety rules last year, after a spate of recalls in 2007 and 2008 for toys with lead paint or loose magnets.

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

Last Updated: April 14, 2009 17:45 EDT