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A Gun Deal’s Fatal Wound

As a landmark pact to control gun sales falls apart, Smith & Wesson
takes the hit
Under the gun: the Smith & Wesson Model 686, a symbol of the Old West

By Matt Bai
NEWSWEEK

Feb. 5 issue – For more than 50 years, George Romanoff’s family has
been selling Smith & Wessons: .357 revolvers with hardwood handles, sleek
pistols forged from blue and stainless steel.

SMITH’S VAUNTED HANDGUN line was easily the biggest seller at Romanoff’s
Pittsburgh-area store, Ace Sporting Goods-until last March. That’s when the
149-year-old gunmaker signed a stunning agreement with the Feds to get out
from under lawsuits, promising to impose strict new rules on all its
dealers. Now those who wanted to keep selling Smith guns would have to keep
computerized records of every sale and store all their guns-not just
Smiths-in some kind of vault. And they’d have to limit their customers to
one gun every two weeks.
Romanoff was about to kick off a weekend sale-up to $50 off on Smith &
Wessons-but he had to cancel it because his customers were furious over
Smith’s surrender to the enemy. To them, the new recordkeeping alone sounded
like a first step toward a police state, and Smith was the government
stooge. Since then, sales of the company’s pistols have been so slow that
Romanoff has slashed his inventory by a third. Now Smith & Wesson, reeling
from a consumer boycott, wants him and other dealers to go along with a
scaled-back version of the agreement. But Romanoff says there’s no way he
can keep selling Smiths if he has to accept the company’s terms. Like his
customers, he feels betrayed by Smith & Wesson’s sellout; at the same time,
it’s as if he’s turning his back on an old friend. “If Smith & Wesson goes
under, it will be an extremely sad day for our industry,” he says. “It’s
like a nail in our coffin.”

POWER IN THE GUN WORLD
The government’s celebrated pact with Smith & Wesson was supposed to
bring the secretive gunmakers to their knees, much like the assault on Big
Tobacco. But a year later, the deal is all but dead-and the nation’s largest
handgun maker faces real questions about its survival. Analysts say its
sales lag behind the rest of the struggling industry by at least 20 percent.
“This is a critical time for us,” says Ken Jorgensen, Smith’s spokesman. “We
need the dealers to sign this in order to go on and do business.” How the
deal became a disaster says a lot about power in the gun world-power that
the people who buy guns wield over the people who make them. The Feds were
sure that other gunmakers would follow Smith’s lead, but the rest of the
industry ran for cover instead. Smith & Wesson, meanwhile, ran face first
into a gun lobby at the height of its power, and a gun culture hostile to
change. “They entered into an agreement that was silly,” says the NRA’s Bill
Powers. “Sooner or later you’ve got to pay for the mistakes of the past, and
they’re paying for them.”

A shifting political landscape didn’t help. When Smith & Wesson
signed the deal, the Clinton administration was threatening its own suit to
force gunmakers to change their ways, and there were cries for new gun laws
on Capitol Hill. It didn’t last. The gun lobby played a key role in electing
George W. Bush, and its leaders expect him to oppose more restrictions. The
gunmakers, meanwhile, are hoping Bush will do what he did in Texas: sign a
law blocking any city from suing the industry. The gun war remains hard
fought, but the momentum has shifted.
Smith & Wesson’s nightmare began in a Hartford, Conn., hotel room
with a handshake between two uncommonly tenacious men: Andrew Cuomo, Bill
Clinton’s Housing secretary, and Ed Shultz, then Smith & Wesson’s CEO.
Newsweek.MSNBC.com

More than 30 cities had sued the gun industry for the costs of violence on
their streets. Cuomo had brashly stepped into the legal swamp, hoping he
could be the guy to force concessions from an obstinate industry. Most
gunmakers refused to negotiate. But Shultz, a plain-spoken farmer and
onetime Army sergeant, figured Smith’s legal bills would soon surpass its
income. His British parent company, Tomkins PLC, wanted to get Smith out of
the courts so it could sell the company.
Shultz and Cuomo talked in personal terms. “I have two 5-year-olds
and a 3-year-old, and I have a gun in my home,” Cuomo told Shultz. “If you
can make me a safer gun, I’ll buy it.” Shultz agreed to do that-and more.
The 25-page pact was so sweeping that lawyers for the cities feared until
the last minute that Shultz would back out. Once Smith signed, the
assumption was that other gunmakers would inevitably follow the leader.
Cuomo had no plans to take the Smith deal to a judge to enforce it
immediately; he’d wait for other gunmakers to sign on first.
It would prove to be a long wait. In the gun world, where any small
step toward new restrictions is seen as a giant leap toward tyranny, the
deal exploded like buckshot. Shultz had expected a backlash, but nothing so
visceral. The NRA immediately faxed ferocious alerts to its 3 million-plus
members, calling Smith a British-owned traitor to the Bill of Rights. It was
an election year, and Smith & Wesson had just given the gun lobby its
rallying cry. Irate customers overwhelmed the switchboard at Smith’s
Springfield, Mass., headquarters and deluged Shultz with venomous e-mail.

POUNDED FROM ALL SIDES
Soon Smith was getting pounded from all sides. In a business where
Smith controlled more than a quarter of an ever-shrinking handgun market,
competitors couldn’t resist piling on. Brazilian-owned Taurus started giving
away an NRA membership with every new gun, just to underscore its commitment
to gun rights. Meanwhile, two new cities brought lawsuits against Smith &
Wesson, despite pleas from the administration to leave Smith alone.
Those who tried to help Smith made matters worse. Two states, New
York and Connecticut, launched antitrust investigations against the other
gunmakers, accusing them of trying to run Smith out of business. Their
lawyers sprayed subpoenas up and down New England’s Gun Valley, which only
served to make Smith & Wesson look like a government witness in a mob case.
By midsummer, Shultz had to close his plant for an extra two weeks
and was planning to lay off 120 workers. Shultz told Cuomo he’d have to kill
the deal if another gunmaker didn’t sign on soon. Desperate for another
ally, Cuomo set his sights on Glock, the nation’s leading supplier of cop
guns. Glock’s general counsel, Paul Jannuzzo, had been in on the original
negotiations but had passed on the deal at the last minute.
Now Cuomo took the extraordinary step of leaning on Glock’s foreign
owner instead. He had one of his aides call the U.S. ambassador in Vienna,
Kathryn Walt Hall, who’d been a major contributor to the Democratic Party.
She then took a message to 72-year-old Gaston Glock-Europe’s answer to
Samuel Colt. Hall told the wealthy gun baron that Cuomo wanted to see him
alone: no lawyers. Glock was “polite but noncommittal,” Hall recalls. He was
willing to see Cuomo, perhaps, but not until his next trip to the United
States in November. For Cuomo, that was too late.
The deal came undone, and, in a sense, so did the men who negotiated
it. Cuomo and the Democrats were turned out of office, in part because gun
owners felt deeply threatened. Shultz, meanwhile, left Smith & Wesson in
September. Smith still hasn’t given up on settling the lawsuits, however.
With the federal deal officially abandoned by both sides, Smith has reached
what it calls a “less onerous” version of the agreement, this time with the
city of Boston. It’s expected to become binding in February, which means
that other cities can join if they want to, and any dealer nationwide who
wants to sell Smith guns will have to abide by the new terms. But some large
dealers say they can afford to drop Smith & Wesson; the name has lost its
aura in the gun world, and customers aren’t clamoring for its revolvers the
way they used to. Smith & Wesson may yet reclaim its place as a proud symbol
of the Old West. For now, it remains the unforgiven.