Glock: The Rise of America’s Gun (33 page)

We met at a noisy downtown restaurant in Atlanta, along with my
Business Week
colleague Brian Grow, who lived in the
city. Echoing Manown’s “Monopoly money” theme, Jannuzzo described financial practices within the company as unorthodox in the extreme. He said he and Glock first discussed reimbursing company employees for political contributions as early as 1993. “He would say, ‘How are we doing? What do the candidates look like? Do we need to make some contributions?’ ” Glock, he added, knew “100 percent” that disguising donations in this manner violated US law.

He admitted that he and Manown had routed corporate funds to themselves. Some of that money flowed with Glock’s approval into the shadow political contributions, Jannuzzo said. He blamed Manown for devising other stratagems, such as the payments to the fake liability insurance company in the Caymans. Jannuzzo insisted that if it appeared that he, too, had embezzled, that was only because he had followed Manown’s lead. “Take care of this for me,” he quoted Manown as telling him, implying that he had been more of a passive player.

Jannuzzo offered a plausible description of how Gaston Glock, with Charles Ewert’s assistance, had set up the system of shell companies to shelter Glock, Inc., profits from taxation in the United States. He handed us a copy of a whistle-blower filing he had submitted to the Internal Revenue Service. “Gaston Glock owns 100% of Glock Inc., a firearms manufacturer in Smyrna, Georgia, through various subsidiaries,” the filing began. “He has organized an elaborate scheme to both skim money from gross sales and to launder those funds through various foreign entities. The skim is approximately $20.00 per firearm sold.” Multiplied by hundreds of thousands of guns a year, according to Jannuzzo, the amount insulated from US taxes came to $9 million or $10 million annually.

As far as Jannuzzo was concerned, he was being persecuted by his former employer. If Glock wanted to play rough,
Jannuzzo planned to fight back. Exposing Glock’s practices in
Business Week
was part of the fight.

It was a compelling story: the murder attempt in Luxembourg, the shell companies, the salvos of fraud allegations, and, all the while, Glock’s overwhelming commercial success. In September 2009, my editors at the magazine put the feature on Glock on the cover with the headline
GLOCK’S SECRET PATH TO PROFITS
. A sub-headline elaborated, “It’s the largest supplier of handguns to law enforcement in the US. But behind its success lies a troubling tale of business intrigue.” The IRS was investigating Jannuzzo’s allegations, the article reported, and had interviewed the wayward lawyer.

Glock, Inc., responded with indignation to Jannuzzo’s accusations. Company executives refused to sit for interviews and said that Gaston Glock would not talk. But in response to written questions, Carlos Guevara, Jannuzzo’s successor as in-house counsel, stated the company’s position in a letter. “GLOCK has acted lawfully and properly throughout its history,” Guevara said, noting that he had been authorized to speak on behalf of Glock, Inc., and Gaston Glock personally. On the one hand, Guevara argued, “the GLOCK companies are exceptionally well-run and managed.” On the other hand, he added, Ewert, Jannuzzo, and Manown, three of Gaston Glock’s top lieutenants, were enmeshed in civil and criminal proceedings accusing them of major fraud, deception, and, in Ewert’s case, murderous violence.

If that is “exceptional management,” one shudders to imagine what shoddy management looks like. Guevara did not acknowledge any inconsistency. “GLOCK,” he wrote, using the
all-capital-letter style the company favors, “was able to withstand the damage inflicted by a few bad apples years ago.

“GLOCK’s tax filings and reporting are accurate,” he continued. “GLOCK underwent a series of comprehensive governmental audits going back to 1988, the last being in 2005 in Austria and 2006 in the United States.… No audit has ever resulted in findings of tax fraud in any jurisdiction.” I asked about the concerns raised by the company’s own internal investigation about the connection between Reofin International, the Panamanian Glock affiliate, and the Turkish financier Namli. “To the extent your questions imply that GLOCK has, or is, involved with a banking institution in Turkey or Turkish Republic of Northern Cyprus, GLOCK has never had such a relationship.” The question, of course, had been whether Reofin, which was owned by Gaston Glock, had ever had such a relationship.

On the topic of political contributions, Guevara asserted: “GLOCK has never authorized (and would never authorize) any act that would violate United States campaign finance laws. Manown and Jannuzzo stole over $500,000 of GLOCK money for themselves and then labeled it as political contributions to hide their crimes. In any event, we conducted our own due diligence, which revealed that Manown’s … statement that GLOCK money was spread to employees to make political contributions is entirely false (except as to Manown and Jannuzzo).… With respect to the allegation that GLOCK contributed $60,000 to the 2000 presidential political campaign, the evidence shows that Manown stole this money from GLOCK and transferred it to Cayman Island accounts controlled by Manown and Jannuzzo.”

Guevara concluded by questioning the origins and trustworthiness of the facts in my article. “GLOCK believes that
you have been provided false information by some unreliable sources, including convicted felons,” he wrote.

Putting it charitably, the company and its counsel appeared to miss the point. On the central events that made life within Glock so colorful, there was little dispute: Someone tried to kill Gaston Glock. His top financial lieutenant, Ewert, was convicted of having hired the hit man. Glock endorsed this theory of the crime, and it was Glock who accused Ewert of trying to take control of his company. In the United States, Glock’s senior executive, Jannuzzo, and a longtime lawyer, Manown, were implicated in stealing from the company—again, with much of the evidence coming from Glock itself. Other evidence came from Manown, who provided prosecutors with a detailed confession.

The important thing is not precisely how much money Jannuzzo and Manown devoted to illegal political donations versus how much they allegedly hid in the Cayman Islands or simply stuffed into their wallets. What is remarkable is that the company operated at all amid such bedlam and that its vital American subsidiary continued to produce healthy profits under such dubious stewardship. That the polymer pistols still managed to flow from the factory and sell throughout the United States and the world—despite the executive chaos—was one of the greatest tributes to the intrinsic quality of Gaston Glock’s creation.

T
he city of Charlotte, North Carolina, is friendly territory for gun owners. When the NRA comes to town, a Second Amendment celebration breaks out. Add Sarah Palin to the mix, and you get a glimpse of Tea Party heaven. “The most famous moose-hunting mom in America,” the master of ceremonies called Palin at the May 2010 annual meeting of the NRA in Charlotte. The keynote speaker, surrounded by enormous video images of her gleaming smile and chestnut hair, brought an audience of ten thousand at the Time Warner Cable Arena to its feet. “It is so great to be here with you
bitter clingers
,” Palin declared, making a sly dig at President Obama. During a 2008 campaign fund-raising event, he had foolishly disparaged “bitter” conservatives who “cling” to guns and religion. The NRA would never let him forget it.

Wearing a flattering black dress and a large jade crucifix, Palin reminded even dispassionate listeners how effectively she can deliver a prepared speech. “No need to load up the teleprompter,” she said, reading from a teleprompter. “I’ve got everything I need written on the palm of my hand.” The “lame-stream media,” she continued, “are trying to portray us Tea Party Americans as being violent or racist or rednecks.” She
waited a beat before adding: “Well, I don’t really have a problem with the redneck part of it!”

When not faced with pesky media questions, Palin makes the Red State case pithily. “Gun ownership is at an all-time high; violent crime is near a thirty-year low,” she noted. “The anti-gun groups, they don’t deal in common sense.” The crowd in Charlotte signaled agreement with one standing ovation after another.

A few blocks away from where the nighttime political rallies were held, tens of thousands of NRA members patrolled a vast exposition floor populated by marketers of rifles, revolvers, pistols, shotguns, muskets, flintlocks, and ammunition of every conceivable caliber; bowie knives, binoculars, bullet-casing art, body armor, blood-clotting gauze, and freeze-dried bison burgers; crossbows, slingshots, paintball launchers, paper targets (human-shaped and abstract); pup tents, deer blinds, duck lures, bear whistles, varmint guns, and vacuum-packed ostrich jerky; Civil War regalia, Nazi medals, survivalist literature, earplugs, hearing aids, trigger locks, and liability insurance.

Out of the scores of promotional booths, only one—the black-and-silver walk-in display for Glock—had a line fifty strong waiting to take pictures with its spokesperson. The days of gun shop owners ogling buxom Sharon Dillon were long gone. Glock years earlier had begun hiring R. Lee Ermey, a Marine drill instructor turned actor, to draw attention at public events. Best known for his bravura performance as a sadistic sergeant in the movie
Full Metal Jacket
(1987), Ermey more recently has hosted
Lock ’N Load
, a cable-television show
devoted to weapons. Now in his sixties, he presents an idealized picture of a brush-cut retired marine: leathery, trim, and ramrod straight. Hour after hour, “Gunny,” as everyone calls him, shook hands with men, gave chaste kisses to their wives, and patted children on the head. The annual NRA conclave draws more couples and families than the uninitiated might guess.

Several young soldiers mentioned that they had just returned from service overseas.

“Hoorah!” Gunny responded.

“Glock rocks!” exclaimed one skinny fellow in hunting camouflage.

“Damn right, son,” Gunny answered.

The Glock sales staff, wearing pressed chinos and black-and-silver company shirts, looked on with obvious satisfaction.

I walked the expo floor with Cameron Hopkins, the former editor of
American Handgunner
and a paid blogger for the NRA website. A compact man whose hobby is hunting antelope and buffalo in Africa, Hopkins has marketed guns and ammo professionally for nearly four decades. “You could say that Glock changed the entire market,” he commented. “Every major manufacturer in handguns you see here has its version of the Glock—XD, Smith & Wesson, Taurus, the smaller ones—all of them. It’s a Glock world when it comes to handguns in America.”

Over the years, the look-alikes had come up in quality, Hopkins said. Other companies now offered variations in ergonomics and trigger mechanics that made their guns slightly different from the Austrian pistol. And some manufacturers,
such as Smith & Wesson, sold a wider array of handguns, including updated versions of the traditional revolver. But when it came to modern high-capacity pistols, they were all still following Glock’s lead.