Dec. 15 (Bloomberg) -- Mattel Inc., the world’s biggest toymaker, agreed to pay $12 million to 39 U.S. states to settle claims it shipped toys tainted with lead paint, according to Massachusetts Attorney General Martha Coakley.

The accord, filed today in state court in Boston, resolves a 15-month probe of Mattel’s Chinese-made Sesame Street dolls, Dora the Explorer accessories and dozens of products shipped to the U.S. last year, according to Coakley. The toys never reached store shelves, she said.

“Had there been danger involved, the amount would have been higher,” Coakley, whose state led the investigation, said at a press conference. “No harm actually occurred, but the risk of harm was very high.”

Under the settlement, El Segundo, California-based Mattel agreed to implement immediately new federal guidelines reducing lead content in toys by August 2009. The new standards cut the permissible lead content to 90 parts per million from 600 parts per million.

Mattel has “taken steps that go beyond current requirements to give parents greater confidence that the Mattel toys that they buy this holiday season will be the safest ever,” the toymaker said today in an e-mailed statement.

Mattel fell 18 cents, or 1.2 percent, to $14.42 at 2:24 p.m. in New York Stock Exchange composite trading. The shares had fallen 25 percent this year through yesterday.

Fisher-Price Toys

Massachusetts began the probe in August 2007 after the U.S. Consumer Product Safety Commission recalled 2 million toys made by Mattel and its Fisher-Price subsidiary. The products, made by third-party contractors in China, contained lead levels of as much as 50,000 parts per million, according to court papers.

“This settlement should help stem the tsunami of toxic toys threatening to swamp playrooms and playpens, poisoning children,” Connecticut Attorney General Richard Blumenthal said in a statement. His state will get $218,028 of the settlement, he said.

Mattel will pay $340,000 to New York, according to a statement today from Attorney General Andrew Cuomo, who warned of lead in “innocent-looking products.”

“Lead poisoning is one of the greatest threats to children’s health and safety in New York, but is also one of the most preventable,” Cuomo said in the statement.

Children’s Jewelry

Cuomo said he reached a separate settlement with five discount “dollar” stores and a local supplier in New York’s Westchester County requiring strict safeguards after a sample of children’s jewelry found on store shelves contained lead levels as high as 1,000 times the legal limit.

Other states involved in the Mattel settlement include Arizona, Florida, Kentucky, Missouri, Ohio, Pennsylvania and Vermont.

This month, a lawyer for California reached a similar deal with Mattel, requiring the toymaker to adopt the new safety standards early. In that lawsuit, California claimed Mattel and other companies failed to warn residents about the risks posed by lead exposure, which can cause cancer and birth defects. The failures violated the state’s safe drinking water and toxic enforcement laws, according to the complaint.

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.

Last Updated: December 15, 2008 14:43 EST