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Boston dissolve s&w consent degree

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#1 ·
Well, heck, I'm confused again. The "Gun Tests" that I got today had this piece of news:

"Consent Degree Dissolved. On April 8, following the city's decision to drop its lawsuit against other members of the firearms industry, Boston and the Boston Public Health Commission agreed to dissolve the Consent Degree signed on March 1, 2001, with Smith & Wesson."

Maybe I've missed it, but I don't remember ABC, CBS, NBC, CNN or even the local Cedar Rapids, Iowa Gazette giving this the usual headline, front page treatment.  And as I said, I may have missed it, but I don't think it got back page treatment either. Well, balanced news sources such as they are, somebody must have fogotten to tell them?

Dan
 
#2 ·
http://www.masslive.com/busines....sn.html


No longer under the gun
Sunday, May 12, 2002

By WILLIAM FREEBAIRN

Robert L. Scott, president and chief executive officer of Smith & Wesson, is shown last month on the stairs at the company's Springfield headquarters near a portrait of Daniel B. Wesson, one of the company's founders

What a difference a year makes.

One year ago, Smith & Wesson was a company in deep trouble, its sales slumping and customers feeling betrayed by its gun safety and distribution deal with the government.

Dealers were ready to defect if the deal was implemented, but the company was bound by a court order to enforce the restrictions or face huge fines.

Enter a small Arizona gun lock company named Saf-T-Hammer Corp., which made an improbable bid to buy Smith & Wesson from its British owner Tomkins plc as the Springfield company lay suffering from largely self-inflicted wounds.

On May 11, 2001, Saf-T-Hammer, a company with five employees, had bought the nation's second-largest handgun manufacturer.

One year later, Smith & Wesson is once again popular with its customers, has seen sales boom and is no longer governed by the court deal signed by previous management.

"It's been a remarkable year for them," said Russ Thurman, editor of Shooting Industry magazine in San Diego. "Very few companies have weathered the battering Smith & Wesson has taken and survived, let alone turned around."

At the center of the story is Robert L. Scott, a former vice president at Smith & Wesson during the 1990s who returned with the new buyers to head the company. As he marked his one-year anniversary as the company president and chief executive officer yesterday, Scott could look back on a year of major changes for the firm.


The company has reversed a slide in sales that has been estimated at between 40 and 50 percent.

Smith & Wesson has been welcomed back into the gun industry fold, and Scott himself recently earned one of the industry's highest awards.

The company has been released from the unpopular strictures of a Boston court decree imposing limits on its dealers.

The firm has reported two consecutive quarters of profitability, following the first losses in decades in late 2000 and early 2001.

Although the company let go almost 100 people in the past 18 months, it has recently rehired some workers and is working overtime shifts this month to keep up with demand.
The crisis at Smith & Wesson was the result of events dating back almost a decade. The gun business was booming in the early 1990s, but a series of events was soon to shake the business.

With gun-related violence on the rise, gun control proponents launched a new strategy to try to attack the problem. Victims of crimes sued gun manufacturers, ultimately without much success.

Then, in 1998, the city of New Orleans filed a lawsuit against gun manufacturers seeking to recover some of the social costs of gun violence. The city, assisted by the Washington-based Center to Prevent Handgun Violence, said gun-makers were not being responsible in their design and distribution of guns.

More and more cities joined in filing lawsuits, until by decade's end 32 local governments had sued.

Scott, who had joined the company in 1989 as vice president of sales and marketing, saw the raft of lawsuits against his employer escalate. Around 1997, he was selected to head an initiative to increase the company's contract manufacturing, where Smith & Wesson made metal components for automobile and motorcycle manufacturers, among others.

Scott left Smith & Wesson in 1999 for an Arizona company that planned to capitalize on safety concerns by making and selling gun trigger locks and other firearm safety equipment. He was offered the presidency of Saf-T-Hammer Corp., a small publicly held company.

"It was an opportunity to try something from concept to reality," Scott said.

As the costs of defending the lawsuits soared, Smith & Wesson's president at the time , L.E. "Ed" Shultz, struck a secret deal in early 2000 with representatives of the Clinton administration who were working with the cities suing the industry. In exchange for agreeing to a strict code of conduct for itself and its dealers, Smith & Wesson would be released from most of the lawsuits.

The deal, announced by the White House on St. Patrick's Day, was immediately denounced by gun enthusiasts who considered Smith & Wesson to be giving up constitutional rights to bear arms.A consumer backlash began that affected Smith & Wesson sales immediately.

Scott, in Arizona, watched in surprise the announcement of the deal between Smith & Wesson and the Clinton administration. While he said he supported efforts to negotiate an end to the lawsuits, which were bleeding gun companies dry, he was surprised by the extent of the deal. "It was very severe," Scott said.

He understood that customers, most of whom had strong views on the Second Amendment, would turn on Smith & Wesson. And the requirements the agreement imposed on dealers were even more troublesome to the company.

Many dealers said they could not agree to the new rules, which would have required them to store Smith & Wesson guns differently, to stop selling Smith & Wesson handguns at gun shows that did not require background checks before a sale and meet other requirements.

In addition, the deal required Smith & Wesson to continue to make safety improvements in its weapons and pursue technology that would allow only an authorized user to fire a handgun.

Sales dropped by at least 40 percent by late 2000, and some industry observers including Thurman believe the decline may have been closer to 50 percent. It went from being the nation's largest handgun maker to No. 2 for calendar year 2000.

"I was watching from afar, and it was a painful thing to see," Scott said.

By mid-year, Tomkins made it clear that it wanted to sell the gun company, which no longer fit in with the firm's focus on non-consumer products.

Scott and Saf-T-Hammer Chairman Mitchell Saltz met in October 2000 with representatives of Tomkins, and by January, Tomkins had decided to negotiate seriously with Saf-T-Hammer.

Scott said Tomkins had an interest in selling to a publicly held company that would have the best chance of keeping Smith & Wesson going. One of Tomkins' concerns was that it be as insulated as possible from liability in the pending gun lawsuits.

"If there was a huge judgment, there was some fear that it would become a judgment against Tomkins," Scott said.

So Tomkins included restrictions on how Saf-T-Hammer could use the cash in Smith & Wesson's bank accounts, limiting its use to operational expenses.

Saf-T-Hammer paid $15 million for Smith & Wesson. In the end, when traditional financing fell through, the Arizona company arranged to borrow the entire purchase price.

The $5 million downpayment was borrowed from a Washington state businessman with a background in precision machining. Colton Melby loaned the money for one year in exchange for the right to buy a large number of shares at 40 cents each.

The company stock (OTC: SMWS) closed the day the sale was announced last year at $1.16 and has risen to over $2.50 in recent sessions.

Melby recently converted the loaned money into a 30 percent stake in Smith & Wesson Holding Co., the new name for Saf-T-Hammer.

The remaining $10 million for the purchase was borrowed from Tomkins itself. That one-year loan was repaid recently with the proceeds of a long-term loan from Banknorth Group.

The deal to buy Smith & Wesson closed on May 11, 2001, a Friday, and the following Monday Scott and others from Saf-T-Hammer were at the Springfield plant. One of the first actions was to let go 45 people, most of them salaried employees.

"We simply couldn't afford them any longer," Scott said.

It was a smaller company than he had left, but Scott was glad to be back at Smith & Wesson, this time in the driver's seat.

Over the coming months, the company was welcomed by industry figures, dealers and customers at several trade shows. For the National Rifle Association show last spring, the firm had buttons made saying "American-made, American-owned" that proved popular with gun owners.

Gun people were willing to give Scott a chance, even though he was not publicly able to repudiate the deal with the Clinton administration and a subsequent consent decree reached with the city of Boston to settle the lawsuit there.

Scott and other company executives showed patience with the unpopular deals the company had signed, Thurman said.

"He wasn't shoved and pushed into making extraordinary statements that people wanted him to make, and say 'We're not going to abide by this,'" Thurman said.

Scott began negotiating to get Smith & Wesson out from under the Boston consent decree, which carried the weight of law and could be enforced if Boston went to court.

"We inherited those agreements, we couldn't just ignore them," he said. "There were penalties in the Boston agreement . . . I could have been in jail, the company could have been fined hundreds of thousands of dollars."

Company lawyers met with their counterparts in Boston and explained that the consent decree could put the company out of business. They shared sales figures with the Boston lawyers, Scott said, and negotiations began to change the deal.

"If the consent decree had not been modified significantly or eliminated . . . the company as we know it could not survive," Scott said.

Even with the decree in place, sales were rising at Smith & Wesson.

Last fall, sales of guns nationwide took off, which many people said was a reaction to the tragedy of the Sept. 11 attacks.

"We already saw the trend before that," Scott said. "It probably sped the trend up for us."

The company reported strong sales through October, a traditionally good month, and November. In March, it said it turned a profit for the quarter ended Jan. 31.

At the same time, the company and Boston lawyers were close to a deal to change the consent decree. In April, just before a scheduled trial in the case against all the gun manufacturers except for Smith & Wesson, Boston suddenly announced it would drop the lawsuit.

The city said it believed gun companies were making better efforts to produce safe guns, and gun control supporters pointed to Massachusetts' toughest-in-the-nation gun laws.

But Scott said he believes the back-and-forth with Boston lawyers contributed to the decision of the city to drop its lawsuit and, days later, withdraw the Smith & Wesson consent decree entirely.

"In a non-adversarial way, they were able to better understand how the industry worked."

News of the end to the consent decree was gratifying to dealers and customers alike.

Gun dealers were relieved they would not have to agree to many of the restrictions included in the Boston court agreement. The consent decree would have required all Smith & Wesson dealers to lock handguns made by the company in safes at night and provide additional safety training to their workers.

In many respects, Smith & Wesson was back where it had been before the March 2000 agreement.


Scott said he is satisfied with the turn-around at the company, but believes it is a feeling best shared with the team at the gun company. "Yes, I get satisfaction, but hopefully everyone working at Smith & Wesson gets that satisfaction from what has occurred."

The company still faces obstacles. It owes $30 million to Tomkins, part of an intra-company debt from Smith & Wesson to its former parent firm.

While the stock price has risen, it still does not meet the requirements for being listed on a major stock exchange like the Nasdaq. The shares trade on the over-the-counter bulletin boards, which limit the interest by institutional investors and the ability to buy and sell large quantities of the stock.

And dozens of lawsuits against Smith & Wesson remain alive. In fact, a new suit was filed in March by Jersey City, N.J.

Scott said he believes most of the court rulings and appeals are going the industry's way, and more states have approved laws preventing such suits by cities. "I'm optimistic," he said of the future.

Smith & Wesson hopes to use its size and its access to capital to make some new partnerships, such as a deal earlier this year to be the exclusive distributor for a line of video observation equipment for police made by a Vermont firm. "There are two or three other similar projects," Scott said.

The company also hopes to capitalize better on its brand name, which is famous worldwide. "We can look at the Harley-Davidson model to see what can be done as far as extension and support," Scott said.

The company already sells a line of bicycles aimed at law enforcement as well as branded clothing and even food products bearing their famous logo.

The company could also buy up small firms that would never have interested giant Tomkins.

The industry will survive the lawsuits and increasing regulation that it faces, Scott said. "We're very bullish. This industry tends to survive thick and thin, and ups and downs."



© 2002 UNION-NEWS. Used with permission.


Copyright 2002 Masslive.com. All Rights Reserved.
 
#3 ·
Contender,

As my wife says, I don't get out very much, but have corrected that by adding the "Union News" to my news folder!

It was a good article and I'm particularly surprised by the reported co-operation of the Boston lawyers. Hopefully the progress continues -- and with reduced expense of needing defense lawyers.

At the risk of both showing my age and being a little corny, I remember a cartoon figure (good figure too&#33<!--emo&;)--><img src="http://beartoothbullets.com/iB_html/non-cgi/emoticons/wink.gif" border="0" valign="absmiddle" alt=';)'><!--endemo--> that had a magic golden lasso that when placed around an individual, would make the lassoed person tell the truth. Sure would be nice to lasso some of the city officials that have and are sponsoring the lawsuits. And if Linda Carter is too busy, maybe we could borrow the lasso? We'd have some pretty embarrassed officials!

Dan
 
#4 ·
I believe this is a pretty bold step for Smith, I read about it on their website some time ago, but with much of the Clinton era deal in place, S&W is still able to be awarded law enforcement contracts without going through the competitive bid process.  How much did this bleed their "brothers in arms"?  Forgive and forget is a nice notion, but I'm not at that stage yet.  S&W owes the industry and the shooting public an honest apology, regardless of who has taken the reigns since.  I had seriously considered buying one of the new 625 45Colt mountain guns, but had rather give send my money to a company that has the backbone to stand up to the next Bill Clinton.  Sorry to rant, Smith has taken some really positive steps, when all this is behind them maybe I'll reconsider.

Trust is something that has to be earned.  Never in my wildest dreams would I have expected Smith to sign that agreement in the first place.  I've owned several S&W handguns, I don't anymore.  They can earn the trust back, but it'll take awhile.  You fool me once, shame on you... you fool me twice, shame on me.
 
#5 ·
For a number of the years I worked for a multi-national company, I had the opportunity to visit hundreds of companies, large and small. Many of these companies were troubled, business wise. Not once do I remember an instance where the hard working employees, those people out on the floor and shuffling paper in the offices, were the cause of the problems, rather they were at the mercy of a few upper management decision makers. I'd suggest S&W is such a company, with honest, hard working people trying to make a good product and put food on the table, in spite of the dumb decision of one or two leaders.  Maybe I'm wrong, but I'd like to think of them as working people with calluses on their hands, kids in school, house payments to make, and sick at heart for the betrayal of their previous management. If I can buy a good product from people like that without fostering a negative impact on our ability to buy, own and carry guns, then I feel I'm not letting other folks (the shooting community) down and am giving them a fair shot. I know I'm not smart enough to know if I'm correct, but time will tell.

Dan
 
#6 ·
Hey DOK,
I agree with you about the folks on the line.  They are obviously talented, hard-working, skilled employees that really care about the product they turn out as evidenced by the great quality of S&W firearms.  I worked in a mid sized R&D shop for about 5 years under a multi-national corporation also where the management (I would never call them LEADERS) were the worst imaginable.  No matter the skill or care of the employees (some of the best people I've ever had the pleasure of working with) bad decisions were made, and I felt unethical.  I could not stomach that and nearly all of us left.  I left after several meetings where, we as the employees, approached management and did everything we could to change their mind.  After about a year of pleading, then demanding, I left.  Yes, I do still have a few friends that continue to work there and through new management, they are barely hanging on, but the rest of the industry is sour towards them some 20 years later.  Until Smith completely denounces the non-competitive bid process and quits taking unfair advantage of the rest of the manufacturers the fire stills burns.  The process was secured by the deal with the Clinton Administration and Smith can walk away from that portion at any time.  Will they?  When they pull themselves up by their own bootstraps and the playing field levels, then my attention will turn back to their fine products.  I'm guessing law enforcement and possible military contracts are a huge percentage of all gun manufacturers markets.  All manufacturers pursue these contracts aggressively, well at least the majors.  How close did it get through seeing S&W secure these contracts to the rest of the industry following suit because the contracts were never let?  If that would have happened, how much would your favorite handgun cost now and how many safety devices would we have to unlock, switch off, turn on or button push to fire a single round?  I admit, this is emotional for me not only because I feel S&W didn't act in the shooting public's best interest, but that they are still conducting business unethically.  There is a right and wrong in this world and I won't support something I feel is wrong.  If I had been a employee of S&W, I would have immediately looked for another job, management almost sent them under, their future was anything but secure and they were working for what I would have perceived as an unethical company.  I realize all of Smith's employees could not have found another job, with the market being as it is, but many lost their jobs anyway.  Life is not always fair and each and everyone of us that work in the corporate atmosphere or work for someone else face the very same situation.  How close did the rest of the industry's employees come to receiving their pink slips from the information S&W leaked to the former administration and through their unfair practices?  Not just one company but the entire industry?  We already have enough gun-control influence so-called safety devices that have degraded the quality and shootability of new firearms today with the ridiculously heavy trigger pulls, safeties on exposed hammer rifles, locks with keys to allow a handgun to fire and such.  I can't and won't support a manufacturer that continues to make it worse.  If Bill Ruger and the rest of manufacturers had not had the backbone to stand up and say no, we won't follow S&W's lead, where would we be now?

Lastly, through this deal with the Clinton administration and America's oldest(?) and best known handgun manufacturer, how did the non-shooting public perceive the other manufacturer's in the industry?  "Surely if S&W did this it must be reasonable, so the rest must be extremists and not care about the safety of the public."  Is this kind of damage easily reversed, in today's media?  I think we've been dealt a blow that we may never recover from, at least PR wise.



<!--EDIT|alyeska338|May 25 2002,10:23-->
 
#7 ·
Alyeska338,
              I understand how you feel. I was extremely PO'ed when S+W signed with the Clinton communists administration. I too wanted to get rid of anything associated with S+W, and planned on boycotting them. I wanted them to go down the tubes. Then I realized this was a double edged sword. If everyone boycotted them, and they(S+W) went out of business, who ultimately wins ? The gunowners of America, with one less place to purchase handguns ? The Anti's, with smug looks on their faces, getting what they ultimately wanted in the first place ? I don't know ?

                You raised some valid points. Hopefully, the new administration has taken note. I personally don't want S+W to go out of business. For that matter, I'd like to see other new gun manufacturer's come to fruition. So, tick off a liberal, and buy a gun from any of the current maufacturers. Unfortunately, our numbers are dwindling(gunowners,hunters), and we need to pull together. We need to involve our children in the shooting sports. If one link of our chain fails, we are weakened as a whole.

                   Just a thought. Not trying to upset anyone.(except maybe an anti-gunner, or their new misnomer, pro-gun safety people)

                             Jeff
 
#8 ·
cast-n-blast,
Point well taken.  I don't want to see Smith go under either, quite the contrary, I would like to see them prosper but only if they start supporting the rest of the industry and not selling out.  This first step is indeed one in the right direction.  They may be at the door but have yet to turn the key, at least in my opinion.  Until the key is turned and the door opened (by going through the competitive bid process among other things), I'm not at the point of personal reconcillation with them.  That is just my view, I won't harbor ill feelings against anyone who thinks otherwise, its just a personal view of mine.  I'd much rather send my hard earned dollars to a company that is fully playing by the rules and supporting not only the shooting public but also the industry as whole (yes, their competitors).  I don't have a lot of money to go spending on guns each year and when the money is spent alot of deliberation takes place.  Ruger, Colt, Winchester, and the rest have earned more respect and gratitude from me than others.  Given this, I'd rather give the few pennies I can to my friends than someone I feel not as trustworthy.
 
#9 ·
alyeska338 said:
cast-n-blast,
Point well taken. ?I don't want to see Smith go under either, quite the contrary, I would like to see them prosper but only if they start supporting the rest. ?Given this, I'd rather give the few pennies I can to my friends than someone I feel not as trustworthy.
With the exception of getting rid of the 2 S&W guns (i got them before the agreement) I do have (that's cutting my nose to spite my face type of thing), Before I actually get another S&W again they are going to have to do quite a lot to gain my trust again. Like alyeska I won't condem those that do buy a S&W but they are going to have to do a lot more than just kissing the butts of A bunch of anti gun Yankee politicians to get out of the Clinton Agreement.

This story is nice and they are starting to get better at S&W but they have a long way to go before they do get anymore of my money.
 
#10 ·
You're way behind the curve on this OLD thread, BB -

S&W has undergone a complete change out of ownership and outlook. New owners are all American, have nullified all the previous agreements between the company and the various government agencies, including Boston.

You may once again buy and own with pride a Smith & Wesson product.
 
#11 ·
kdub said:
You're way behind the curve on this OLD thread, BB -

S&W has undergone a complete change out of ownership and outlook. New owners are all American, have nullified all the previous agreements between the company and the various government agencies, including Boston.

You may once again buy and own with pride a Smith & Wesson product.
No, I'm not Behind the times. after reading the poste article They haven't done enough. Instead of kissing the butts of the Boston lawyers they should have fought them in federal court to get out fron under theagreement win lose or draw. After all they are selling a legal product. Just because S&W is under new management doesn't mean a darn thing to me. The last ownership screwed up the reputation of S&W. I will not automatcally trust the new mamgement just because they are new and americam After all there are plenty of Americans that want to take our guns away. The new management has to prove they deserve my trust and my money. They still have a long way to go on that account.
 
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