Sunday, September 13, 2009

Sebastian on Glock

On his wonderful blog, Snowflakes in Hell, Sebastian makes an interesting observation about the Business Week cover story on Glock that came out the other day.

It raises some questions about the business structure and profits of Glock, but I’m not sure what they are describing is illegal.

I very well may have missed something or misunderstood, but it seems to me the Business Week article is rife with allegations of not only intrigue and the usual dirty shenanigans that go on in business, but plenty of illegal activity as well.

Among the Glock-related material the IRS allegedly is examining: boxes of invoices and memos provided by the company's former senior executive in the U.S., Paul F. Jannuzzo. Once one of the most prominent gun industry executives in America, Jannuzzo said in a federal complaint he filed last year that Gaston Glock used his companies' complicated structure to conceal profits from American tax authorities. "[Glock] has organized an elaborate scheme to both skim money from gross sales and to launder those funds through various foreign entities," Jannuzzo alleged in the sealed May 12, 2008, IRS filing, which BusinessWeek has reviewed. "The skim is approximately $20.00 per firearm sold," according to the complaint. Glock's U.S. unit, which generates the bulk of the company's sales, has sold about 5 million pistols since the late 1980s, Jannuzzo estimates in an interview.

Jannuzzo is currently being prosecuted by the Cobb County District Attorney's Office for siphoning corporate money into a Cayman Islands account. Jannuzzo, who left the company in 2003, claims he's the victim of a vendetta.

In the U.S., Jannuzzo and another former Glock executive, Peter S. Manown, have claimed that for years they distributed company funds to their wives and Glock employees with the understanding that the money would be donated to congressional candidates—an apparent violation of U.S. election law.

The Glock company seems to have more than its share of intrigue and internal turmoil. Beginning in 1987, the Austrian industrialist had employed Charles Ewert to head up the sales end of the business.

Ewert, a mustachioed Luxembourg resident now in his late 50s, it turns out was a purveyor of shell companies: paper corporations that can be used to shield income from taxation—sometimes legitimately and sometimes in questionable ways. Ewert designed a network of shells to lessen the gun empire's exposure to product liability and potential taxation, according to documents filed with the Luxembourg court.

Perhaps those questionable ways were within the letter of the law, but one wonders about the integrity of Mr. Ewart when it turns out he tried to have Mr. Glock killed.

Over time, Ewert transferred ownership of some of the Glock-affiliated shells to himself, according to Luxembourg court judgments. Suspicious of Ewert, Gaston Glock sought an explanation in July 1999. On the afternoon of a meeting scheduled at Ewert's office near the tony Rue Royale in central Luxembourg, Glock was attacked in an underground garage. The hit man, a former professional wrestler and French Legionnaire named Jacques Pecheur, bashed the businessman on the head with a rubber mallet, a technique apparently aimed at making it look like the victim had fallen down and fatally injured himself. Glock, physically fit from daily swimming—often in the frigid lake abutting his home near Klagenfurt, Austria—fought back. When police arrived, they found Glock bleeding from gashes to his skull. Pecheur, 67, was unconscious.

Luxembourg investigators found Ewert's business card in Pecheur's car and determined that the two had met at a gun range in Paris in 1998. Both were convicted of participating in a conspiracy to kill Glock. Pecheur received a sentence of 17 years, Ewert 20.

My overall reaction to this story is to have admiration for Gaston Glock. His rise to prominence in the international gun manufacturing business is impressive as is his personally beating off a would-be assassin. But to say "I’m not sure what they are describing is illegal," as Sebastian did, I just don't understand.

The Business Week article is a chronicle of illegal activity, granted it's the kind that many big businesses engage in, but it's certainly illegal.

What's your opinion? Is there a problem with American law enforcement doing business with a shady company like Glock? Or is that beside the point, the point being their product is superior and that's all the clients need be interested in?

I'm sure Sebastian can explain what he meant, but why do you think he would defend the Glock company like that? Is the pro-gun position to give the benefit of the doubt to gun manufacturers even in the face of all those allegations? Do you think the dirty dealings which may go on within the manufacturer's company somehow taint the consumers of the product, the gun buying public in this case?

What's your opinion? Please leave a comment.


  1. American law enforcement and American government in general does business with a lot of shady companies. This wouldn't be the first one.

    Almost all of the pro-gun posters I've seen on the internet are major apologists for guns in general. They'll excuse anything if a gun is involved.

    So, in keeping with the comments you will get, "Glock is an amazing company."


    Jannuzzo has a big axe to grind with Glock. Remember why he was fired? He admitted on 60 minutes that GLOCK was cooperating with the ATF on a database of all guns.


  3. Sadly, the main outcome of this will likely be an increase in the cost of Glocks, which are already sold at a rather huge profit margin. With all of the preferential treatment government agencies can get for purchasing their goods, I doubt much would come of the investigations, even if proven true.

  4. Let me be sure I have this right: the "crimes" of which Glock are being accused (in the court of public opinion, where the burden of proof is, well . . . nonexistent) are nothing more than tax "crimes"? In other words, they're accused of skimming money that the feds have ruled that they should be skimming instead?

    To be honest, it's a little tough for me to decide for whom I have less sympathy--the tupperware gun corporation, or the federal behemoth.

  5. What cj said. The "laws" Glock is alleged to have broken do not comport with the natural law, and therefore cannot bind in conscience, but can only be given force by force. Compliance is tactical, not obligatory, and if someone can figure out how to starve Leviathan, don't expect me to be upset about it.
    Anonymous at 11:13 am must have forgotten about the fairly recent history of Smith & Wesson. American gun owners ran S&W into bankruptcy after their deal with the Clinton claque; the company ultimately was sold to a much smaller firm in the western U.S., who succeeded in turning it around.

    Gun owners weren't any too thrilled with Bill Ruger either, upon a time, and if you want to get beyond politics (and could use a chuckle), search on the phrase "H&K: Because you suck, and we hate you" sometime.

  6. Another thing: if you want to better understand Sebastian's point of view, wouldn't it make more sense to ask him, rather than whomever happens to decide to comment?

  7. Ken and Beowulf, Did you have the same comments about Bernie Madoff? Were they nothing more than "tax crimes and skimming money" to you?

    It seems to me like you're defending the Glock company in a way you wouldn't for some non-gun entity.

  8. Mike, that's pathetic. If your assertion were any more orthogonal to fact or reason, you'd be Markadelphia. What Bernie Madoff did was to engage in fraud in the course of voluntary exchange, and he got what he had coming. Fraud is a form of aggression. Aggression by one against another is impermissible in a free and just society. That is the natural law. Positive law is another matter entire. Taxation compels you to involuntary servitude (because the state will ultimately kill you if you don't pay), forcing you to work for someone else at the direction of the state (as they redistribute the funds taken from you by force) before you work for your own family.

    Note also, by the way, that Madoff got away with it as long as he did with the connivance, or at least benign neglect, of the government. Absent the fiction of regulation, people would need to be -- and in fact would be -- a lot more attentive to their due diligence.

    Do people deserve a return on their money without risk. They. Do. NOT. Interest-bearing accounts assume risk; that's why they pay interest. Government intervention to remove risk from interest-bearing accounts creates moral hazard, leading to increasingly imprudent behavior. After all, the taxpayer is waiting to pick up the tab!

    It seems to me you're cherry-picking facts and/or assuming facts not in evidence to support your magical-thinking weltanschauung.

  9. Is Glock accused of running a ponzi scheme defrauding thousands of people, including robbing some of their life savings? My mistake--I thought they were merely accused of illegally hiding their own money, in order to protect it from the leviathan government's legal theft.

    If you don't see the obvious, enormous, and fundamental difference between the two, I can't help you.

  10. Note also that while the two topics are dissimilar, Mike's spin on the stories are just as dissimilar!

    Remember, Mike thinks that, Like Michael Vick, Madoff got a bad rap, and white collar criminals shouldn't serve in prison.

  11. The comparison to Madoff was stupid, I admit.

    My idea about the Glock company though is that what they were getting up to was a good bit more than hiding a little money from the taxman. These guys were stealing from each other, stealing from the boss, creating shell companies no one was supposed to know about, skimming a few bucks off each gun sale and sending it to the islands, not to hide it from the government but to hide it from each other.

    Then, of course, as if that's not shabby enough, one partner tried to have the boss killed.

    A nest of vipers is what they are. And it's amazing that you try to defend them. That was the point of my post, questioning Sebastian's remark that there was nothing illegal going on.

    I can't imagine any of you guys defending those kinds of business ethics, except for the fact that they make one of your favorite little playthings.

  12. Who's defending?

    If they broke the law, they broke the law. I'm not a tax attorney, so I'll leave it at that.

    As a gunnie I'm near 100% they have violated no gun laws.

    Honestly I wouldn't loose any sleep about glock personally. They make a decent gun at a reasonable price. I think they're a bit bulky, heavy, and have some very questionable cost-saving measures in them (like their cheap plastic sights, and their cheap plastic guide rods), they have an odd grip angle that doesn't point naturally for me, so even if I could easily buy one in Mass, I wouldn't bother.

    I fail to see anybody defending their actions of tax sheltering (tho some are suggesting the tax system is crappy...I'd agree with that).

    And you complain about us putting words in YOUR mouth.

  13. The comparison to Madoff was stupid, I admit.

    So why make the comparison--did you think that we are too stupid to notice, and call you on it?

    . . . except for the fact that they make one of your favorite little playthings.

    "Little playthings"? And on what do you base your accusation that those of us who comment here play with guns, rather than treat them with the respect appropriate for tools that can wound or kill (and every once in a great while--about 70,000 times per year in the U.S., or 70,000 times per, say, 250 million guns, or .028% of guns per year--are used or misused to wound or kill)?

    As for "defending" Glock, as Weer'd Beard asked, who is doing that? If it makes you feel any better, though, I've never owned a Glock, and probably never will. Decent, effective sidearms, but not really my cup of tea.