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CAUTION -- PLACE HANDKERCHIEF NEAR TEAR DUCTS. THE BATF HAS DETERMINED THAT SUBSTANTIAL FLUID LOSS MAY CAUSE DEATH FROM LAUGHING. STIFF UPPER LIP SUGGESTED.
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August 24, 2000
Smith & Wesson's Gun-Safety Deal
With Regulators Fired Off Blanks
By GARY FIELDS
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- Smith & Wesson Corp.'s gun-safety deal with federal regulators appears to have misfired for the nation's largest handgun manufacturer.
The company's chief executive officer, Ed Shultz, signed a code-of-conduct agreement with the Treasury Department and the Department of Housing and Urban Development in March, promising to equip firearms with trigger locks and accept an unusual level of government oversight into the way the company does business.
For the company, a unit of Britain's Tomkins PLC, the agreement was supposed to allow an escape from government lawsuits being filed against the industry, but Smith & Wesson is still a defendant in all but one of the cases.
--------------------------------------------------------------------------------
Backfire
Things haven't gone as planned for Smith & Wesson since reaching a gun safety agreement with federal regulators.
March 17 - S&W announces a gun safety deal with the Treasury and HUD in exchange for dismissal from government gun lawsuits.
March 22 - HUD Secretary Cuomo suggests federal, state and local governments give preferential treatment in their gun purchases to S&W.
April 19 - Gun manufacturers sue Mr. Cuomo and other officials saying they've imposed rules violating free trade.
Also in April - Parent Tompkins PLC draws up plans to sell S&W to concentrate on core businesses.
In June - New York City and Philadelphia sue S&W and other gun makers. S&W later dropped from Philadelphia suit.
July 3 - S&W furloughs workers for a month due in part to drop-off in gun orders.
July 20 - Senate Appropriations Committee moves to bar the White House from giving S&W preferences because of the gun safety deal.
--------------------------------------------------------------------------------
Meanwhile, promises of preferential treatment in government gun purchases -- a reward for the company's commitment to gun safety -- have been slow to materialize. In fact, even though HUD Secretary Andrew Cuomo is the Clinton administration's point man on the matter, HUD's Inspector General's Office recently bought guns from Smith & Wesson rival Glock Inc.
Expanded Furlough
Fallout from the agreement, and the resulting drop in business, forced Smith & Wesson to expand its normal one- or two-week summer employee furlough to more than three weeks last month.
HUD has kept its commitment that its 3,200 local housing authorities wouldn't name Smith & Wesson as a defendant in any class-action gun-violence lawsuits they might file. But those authorities haven't filed such actions against any other gun manufacturer either.
The result, said one Smith & Wesson official, is that the company has gotten little, if any, advantage from signing the agreement. "Smith and Wesson is a long way from being satisfied," said the official. "So we've been a leader. Well, what has it got us?"
A senior Treasury Department official involved in the pact said that the company's dour view is understandable, but he noted the agreement is still intact. "Some days it's a step forward and other days, it's a step back," the official said.
In signing the agreement, Smith & Wesson clearly aimed to cut its losses. Mr. Shultz, who declined to be interviewed for this article, noted at the time that the $100 million sought in the suit brought by the city of Boston eclipsed his company's combined profit in the past decade. He also said the legal costs of getting even one of the lawsuits to trial could be $1 million.
To avoid potentially catastrophic losses, Mr. Shultz agreed the company would take a number of actions, such as developing and producing a technologically advanced gun that can only be fired by authorized users.
Individual Consent Decrees
What didn't get much attention was the requirement that Smith & Wesson enter into individual consent decrees with each jurisdiction that accepted the code of conduct before the company could be dropped as a defendant in a lawsuit.
At the press conferences that have followed, Mr. Cuomo and others have touted that 19 jurisdictions have dropped Smith & Wesson from their lawsuits.
But in fact, the company remains a defendant in each case until it signs the consent decrees with those cities and counties. The individual governments have each made their own demands in the decrees, and in the midst of complex negotiations, not one has been signed. "The entire affair may have been trumpeted too much and prematurely," said Georgetown University law school professor Paul Rothstein. "At this point, the agreement ... is really just an agreement to agree."
HUD spokeswoman Sandi Abadinsky says the fact that the consent decrees haven't been filed doesn't mean the agreement has failed. "We are committed to moving forward on this and to promote the safer manufacture and distribution of guns. Smith & Wesson is our partner in this," she said.
Smith & Wesson's national counsel, Jeff Nelson, says the company is working with the various jurisdictions to enter into the consent decrees, but he has no timetable for when that might happen.
Still Vulnerable
Robert Pugsley, a law professor at the Southwestern University School of Law in Los Angeles, says what all of the discussions mean is that Smith & Wesson is still vulnerable. "Until the ink dries on those decrees, Smith & Wesson is as much a clay pigeon as all of the manufacturers who didn't sign the agreement," he said.
Just what the company's exposure to damages will be is a matter of debate, Mr. Pugsley says. Judges have dismissed the actions by Cincinnati, Miami-Dade County and Bridgeport, Conn., primarily on the grounds that the plaintiffs couldn't show direct injury from guns. The rulings all have been appealed.
Lawsuits in Atlanta, Detroit, Boston and Cleveland have made it over that first hurdle. In New Orleans, the lawsuit was moving forward but is now frozen, as the two sides await a Louisiana Supreme Court ruling; the court must determine if two laws passed in 1999 and applied retroactively to New Orleans's 1998 lawsuit are constitutional. One law prohibits cities, counties and other municipalities from suing the gun industry. The other amended the state's product-liability law to exempt the gun industry.
Daniel Abel, one of the lawyers handling the case for New Orleans, says he thinks the city will win, but he can't say when. Until then, the city can't consider whether to join in the agreement with Smith & Wesson.
Judges in Chicago and San Diego will hold hearings next month to decide whether to dismiss lawsuits filed by Chicago, Los Angeles and 11 other cities and counties in California.
Although government gun purchases weren't part of the March 17 agreement, President Clinton later suggested that Washington use its procurement policies "to send a clear signal that we appreciate what [Smith & Wesson] did."
Mr. Cuomo echoed that message when he joined with 28 local governments to form a Communities for Safer Guns Coalition. He noted that the communities have considerable economic clout -- their law-enforcement agencies buy between 20% and 30% of all the guns sold annually in the U.S. The coalition now numbers nearly 600 jurisdictions. Member communities have pledged to give strong consideration to Smith & Wesson when buying law-enforcement firearms.
But Smith & Wesson officials point to the July furloughs of its workers and say they have gained little from their favored-gun-maker status.
Industry Group Sues
Meanwhile, the threat of losing government gun business to Smith & Wesson led the National Shooting Sports Foundation, an industry trade group, and several manufacturers to file a lawsuit in April on grounds that the coalition plan violates the Commerce Clause of the Constitution.
In court papers filed in response to the lawsuit, several of the jurisdictions named as defendants point out that the officials who signed the pledge with Mr. Cuomo don't have the authority to change or direct the purchasing agreements of their law-enforcement agencies.
That also is the case in Mr. Cuomo's own agency. According to Paul Jannuzzo, vice president and general counsel for Glock, the company has sold about 70 firearms to HUD Inspector General offices in Seattle, Denver, St. Louis and Washington, D.C. He says the contracts brought in about $36,000. Michael Zerega, the HUD Inspector General's spokesman, said investigators within the office did buy the Glocks and "we will probably continue to purchase Glocks." He said his office operates independently of the rest of HUD. Ms. Abadinsky said the department's view has been "that when given a choice to buy a comparable gun at a comparable price that meets law-enforcement needs and procurement guidelines, the purchaser will go with the safer gun."
[This message has been edited by abruzzi (edited August 24, 2000).]
[This message has been edited by abruzzi (edited August 24, 2000).]
CAUTION -- PLACE HANDKERCHIEF NEAR TEAR DUCTS. THE BATF HAS DETERMINED THAT SUBSTANTIAL FLUID LOSS MAY CAUSE DEATH FROM LAUGHING. STIFF UPPER LIP SUGGESTED.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
August 24, 2000
Smith & Wesson's Gun-Safety Deal
With Regulators Fired Off Blanks
By GARY FIELDS
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- Smith & Wesson Corp.'s gun-safety deal with federal regulators appears to have misfired for the nation's largest handgun manufacturer.
The company's chief executive officer, Ed Shultz, signed a code-of-conduct agreement with the Treasury Department and the Department of Housing and Urban Development in March, promising to equip firearms with trigger locks and accept an unusual level of government oversight into the way the company does business.
For the company, a unit of Britain's Tomkins PLC, the agreement was supposed to allow an escape from government lawsuits being filed against the industry, but Smith & Wesson is still a defendant in all but one of the cases.
--------------------------------------------------------------------------------
Backfire
Things haven't gone as planned for Smith & Wesson since reaching a gun safety agreement with federal regulators.
March 17 - S&W announces a gun safety deal with the Treasury and HUD in exchange for dismissal from government gun lawsuits.
March 22 - HUD Secretary Cuomo suggests federal, state and local governments give preferential treatment in their gun purchases to S&W.
April 19 - Gun manufacturers sue Mr. Cuomo and other officials saying they've imposed rules violating free trade.
Also in April - Parent Tompkins PLC draws up plans to sell S&W to concentrate on core businesses.
In June - New York City and Philadelphia sue S&W and other gun makers. S&W later dropped from Philadelphia suit.
July 3 - S&W furloughs workers for a month due in part to drop-off in gun orders.
July 20 - Senate Appropriations Committee moves to bar the White House from giving S&W preferences because of the gun safety deal.
--------------------------------------------------------------------------------
Meanwhile, promises of preferential treatment in government gun purchases -- a reward for the company's commitment to gun safety -- have been slow to materialize. In fact, even though HUD Secretary Andrew Cuomo is the Clinton administration's point man on the matter, HUD's Inspector General's Office recently bought guns from Smith & Wesson rival Glock Inc.
Expanded Furlough
Fallout from the agreement, and the resulting drop in business, forced Smith & Wesson to expand its normal one- or two-week summer employee furlough to more than three weeks last month.
HUD has kept its commitment that its 3,200 local housing authorities wouldn't name Smith & Wesson as a defendant in any class-action gun-violence lawsuits they might file. But those authorities haven't filed such actions against any other gun manufacturer either.
The result, said one Smith & Wesson official, is that the company has gotten little, if any, advantage from signing the agreement. "Smith and Wesson is a long way from being satisfied," said the official. "So we've been a leader. Well, what has it got us?"
A senior Treasury Department official involved in the pact said that the company's dour view is understandable, but he noted the agreement is still intact. "Some days it's a step forward and other days, it's a step back," the official said.
In signing the agreement, Smith & Wesson clearly aimed to cut its losses. Mr. Shultz, who declined to be interviewed for this article, noted at the time that the $100 million sought in the suit brought by the city of Boston eclipsed his company's combined profit in the past decade. He also said the legal costs of getting even one of the lawsuits to trial could be $1 million.
To avoid potentially catastrophic losses, Mr. Shultz agreed the company would take a number of actions, such as developing and producing a technologically advanced gun that can only be fired by authorized users.
Individual Consent Decrees
What didn't get much attention was the requirement that Smith & Wesson enter into individual consent decrees with each jurisdiction that accepted the code of conduct before the company could be dropped as a defendant in a lawsuit.
At the press conferences that have followed, Mr. Cuomo and others have touted that 19 jurisdictions have dropped Smith & Wesson from their lawsuits.
But in fact, the company remains a defendant in each case until it signs the consent decrees with those cities and counties. The individual governments have each made their own demands in the decrees, and in the midst of complex negotiations, not one has been signed. "The entire affair may have been trumpeted too much and prematurely," said Georgetown University law school professor Paul Rothstein. "At this point, the agreement ... is really just an agreement to agree."
HUD spokeswoman Sandi Abadinsky says the fact that the consent decrees haven't been filed doesn't mean the agreement has failed. "We are committed to moving forward on this and to promote the safer manufacture and distribution of guns. Smith & Wesson is our partner in this," she said.
Smith & Wesson's national counsel, Jeff Nelson, says the company is working with the various jurisdictions to enter into the consent decrees, but he has no timetable for when that might happen.
Still Vulnerable
Robert Pugsley, a law professor at the Southwestern University School of Law in Los Angeles, says what all of the discussions mean is that Smith & Wesson is still vulnerable. "Until the ink dries on those decrees, Smith & Wesson is as much a clay pigeon as all of the manufacturers who didn't sign the agreement," he said.
Just what the company's exposure to damages will be is a matter of debate, Mr. Pugsley says. Judges have dismissed the actions by Cincinnati, Miami-Dade County and Bridgeport, Conn., primarily on the grounds that the plaintiffs couldn't show direct injury from guns. The rulings all have been appealed.
Lawsuits in Atlanta, Detroit, Boston and Cleveland have made it over that first hurdle. In New Orleans, the lawsuit was moving forward but is now frozen, as the two sides await a Louisiana Supreme Court ruling; the court must determine if two laws passed in 1999 and applied retroactively to New Orleans's 1998 lawsuit are constitutional. One law prohibits cities, counties and other municipalities from suing the gun industry. The other amended the state's product-liability law to exempt the gun industry.
Daniel Abel, one of the lawyers handling the case for New Orleans, says he thinks the city will win, but he can't say when. Until then, the city can't consider whether to join in the agreement with Smith & Wesson.
Judges in Chicago and San Diego will hold hearings next month to decide whether to dismiss lawsuits filed by Chicago, Los Angeles and 11 other cities and counties in California.
Although government gun purchases weren't part of the March 17 agreement, President Clinton later suggested that Washington use its procurement policies "to send a clear signal that we appreciate what [Smith & Wesson] did."
Mr. Cuomo echoed that message when he joined with 28 local governments to form a Communities for Safer Guns Coalition. He noted that the communities have considerable economic clout -- their law-enforcement agencies buy between 20% and 30% of all the guns sold annually in the U.S. The coalition now numbers nearly 600 jurisdictions. Member communities have pledged to give strong consideration to Smith & Wesson when buying law-enforcement firearms.
But Smith & Wesson officials point to the July furloughs of its workers and say they have gained little from their favored-gun-maker status.
Industry Group Sues
Meanwhile, the threat of losing government gun business to Smith & Wesson led the National Shooting Sports Foundation, an industry trade group, and several manufacturers to file a lawsuit in April on grounds that the coalition plan violates the Commerce Clause of the Constitution.
In court papers filed in response to the lawsuit, several of the jurisdictions named as defendants point out that the officials who signed the pledge with Mr. Cuomo don't have the authority to change or direct the purchasing agreements of their law-enforcement agencies.
That also is the case in Mr. Cuomo's own agency. According to Paul Jannuzzo, vice president and general counsel for Glock, the company has sold about 70 firearms to HUD Inspector General offices in Seattle, Denver, St. Louis and Washington, D.C. He says the contracts brought in about $36,000. Michael Zerega, the HUD Inspector General's spokesman, said investigators within the office did buy the Glocks and "we will probably continue to purchase Glocks." He said his office operates independently of the rest of HUD. Ms. Abadinsky said the department's view has been "that when given a choice to buy a comparable gun at a comparable price that meets law-enforcement needs and procurement guidelines, the purchaser will go with the safer gun."
[This message has been edited by abruzzi (edited August 24, 2000).]
[This message has been edited by abruzzi (edited August 24, 2000).]
