Published on Friday, December 10, 2004 by the San Francisco Chronicle
Security Nominee got Rich on Tasers
Kerik's Relationship with Stun-Gun Firm Earned Him Millions
by Eric Lipton
WASHINGTON -- Just five years ago, Bernard Kerik was facing lawsuits from a condominium association and bank over delinquent payments owed on a modest New Jersey condo he then owned. Today, he is a multimillionaire, the result of a lucrative partnership with former New York Mayor Rudolph Giuliani and an even more profitable relationship with a stun-gun manufacturer.
If he is confirmed to the post of homeland security secretary for which he was nominated by President Bush last week, he will oversee an enormous department that does business with some of the companies that helped make him wealthy.
The list of income sources that transformed the former New York City police commissioner into a wealthy man is a diverse one, including a best- selling autobiography, speeches around the United States and service on corporate boards. Kerik even sold the rights to make a feature film about his rags-to-riches life to Miramax.
But it is the relationship Kerik has had since the spring of 2002 with Taser International, a Scottsdale, Ariz., manufacturer of stun guns, that has by far been the biggest source of his newfound wealth, earning him more than $6.2 million in pre-tax profits through stock options he was granted and then sold, mostly in the last month.
Kerik benefited largely because the company has enjoyed an extraordinary surge in its stock. Stock options that were worth very little at the time became extremely valuable, in part because of the sales pitch that Kerik made on the company's behalf to other police departments.
The sales driving Taser's growing profits come mostly from local and state governments. But while Kerik has served on the company's board, it has made an aggressive push to enter markets either regulated or controlled by the federal government, most notably the Department of Homeland Security. A White House spokesman said Kerik would resign from the board and sell his remaining stock if confirmed.
At one point, Kerik referred Taser executives, seeking more federal business, to a Customs and Border Protection official of the Homeland Security Department, according to the company president.
"Anyone in a federal law enforcement position is a potential customer," said Thomas Smith, president and co-founder of Taser International, who said he had hired Kerik because of his prominence as New York's police commissioner. "And we are going to continue to go after that business."
Kerik declined, through a spokeswoman, to discuss his work for Taser. Although he is required for at least one year to recuse himself from decisions involving his former clients or partners, that will not prohibit the Homeland Security Department from doing business with those companies. A White House spokesman said Kerik would adhere to "the highest ethical standards" and ensure there are no conflicts of interest.
In 2002, Taser International sought to significantly expand its sales to law enforcement agencies, and it needed a high-profile former public official who could serve as a spokesman for its product, said Smith. Kerik, he added, was the perfect candidate, having served as both corrections and police commissioner. Kerik's role working alongside Giuliani on Sept. 11, 2001, had also earned him a national reputation, particularly in the law enforcement world.
From the moment he joined Taser's board in May 2002, Kerik became one of Taser's chief spokesmen before police officials.
Kerik also defended the guns against criticism that their use had contributed to the deaths of suspects who have been fired upon by police.
Amnesty International said there had been 74 Taser-related deaths in North America since 2001 and called for a suspension on the use of the device until its safety was further investigated. An Air Force laboratory that conducted research on the guns said last month that it could not determine whether they were safe, in contrast to statements from Taser that the laboratory had found its weapons generally safe and effective.
The Taser publicity campaign has been an enormous success. More than 6, 000 police departments and prisons today use Tasers, compared with only a handful five years ago, and Taser International's sales have climbed from $6.9 million in 2001 to about $68 million this year.
Kerik will have to be approved by the Senate before he takes control of the Homeland Security Department. Several members of the Senate Committee on Government Affairs, which must approve his nomination, declined to comment when asked about Kerik's private sector work.
© 2004 San Francisco Chronicle