SEC probe to look at safety of stun guns
Published: Saturday, January 8, 2005 at 6:01 a.m.
Last Modified: Friday, January 7, 2005 at 10:23 p.m.
PHOENIX - Federal authorities have launched an inquiry into claims Taser International Inc. has made about safety studies for its stun guns. Its shares plunged more than 14 percent in morning trading Friday.
The Securities and Exchange Commission also is looking into a $1.5 million, end-of-year sale of stun guns by Taser International to a Prescott firearms distributor that some stock analysts have questioned because it appears to inflate sales to meet annual projections.
"We're confident that this is going to come out in our favor," Taser President Tom Smith said late Thursday in announcing that it was cooperating with the SEC informal inquiry. An informal inquiry is a step below a formal investigation, where regulators have subpoena power.
Smith added that the Scottsdale-based company stands by its safety statements and the recent sale.
Friday on the Nasdaq Stock Market, Taser shares fell $4.90, or nearly 18 percent, to $22.72. They traded as high as $33.45 a share just last month.
Recent investigations by several newspapers have raised serious questions about the stun gun's safety record and about Taser's reports to shareholders.
Although Taser has repeatedly said its stun guns have never caused a death or serious injury, reports in The Arizona Republic have linked the stun gun to 11 deaths and to several injuries involving police officers.
"We feel very confident that the statements that we've made surrounding the safety of our products are supported with the safety studies," Smith said.
However, questions about safety have already caused some police departments around the country to back off purchases of Tasers.
Some medical experts believe Taser shocks may exacerbate a risk of heart failure in cases where people are agitated, under the influence of drugs or have underlying health problems. Human rights advocates want law enforcement to stop using Tasers until scientific evidence can show they don't kill.
Last week, a Scottsdale investment analyst raised questions about the sale of 1,000 new consumer stun guns and other products to the distributor Davidson's Inc. that Taser announced on Dec. 20.
"It's a deal that could maybe make a quarter," said Rob Miceli, analyst with the Scottsdale firm Gradient Analytics Inc. "Anytime we see something like that it bears further investigation."
Davidson's has done business with Taser since 1999 and company CEO Bryan Tucker said there was no pressure from Taser executives to complete the deal before Taser's quarter and year end.
Taking a closer look AT A GLANCE
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