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Friday, March 18, 2005

Stun Gun Maker Gave Stock Options to Active-Duty Cops Moonlighting As Master Trainers

March 18, 2005
Beth DeFalco, Associated Press

By Beth DeFalco, AP

CHANDLER, Ariz. - Taser International Inc. openly credits its use of active-duty police officers as trainers as a major ingredient in the company's meteoric rise to become the No. 1 seller of stun guns.

And like a lot of other cash-strapped startups, early on Taser offered some of those officers stock options as an incentive.

But with the Scottsdale-based company now under state and federal investigation over safety claims and accounting issues, questions have arisen about whether the officers' moonlighting represented a conflict of interest, particularly when their own departments were buying stun guns.

Jim Halsted is one example.

Halsted was a police sergeant in this town southeast of Phoenix when the police chief tapped him to make a presentation to the city council on March 27, 2003.

During the meeting, and as Taser's president looked on, Halsted touted the benefits of arming Chandler's entire patrol squad with Taser stun guns.

"No deaths are attributed to the (Taser model) M26 at all. That's absolutely incredible," Halsted is seen saying in a video of the presentation. "We put a Band-Aid on that person. There is no injury."

The council approved the $193,000 purchase of an additional 300 Taser guns and related equipment that same day, adding to a small number of stun guns it had already bought.

At the time, Halsted was one of four active-duty police officers granted stock options for serving on Taser's Master Instructor Board, which oversees Taser training programs.

In May, after 17 1/2 years with the Chandler police, Halsted quit to become Taser's Southwest regional sales manager.

A city councilwoman who set in motion a conflict-of-interest investigation the day after Halsted's sales pitch said it wasn't clear to her from the presentation that he got a paycheck from the company. And Halsted never mentioned the stock options to the acting police chief or when he went before the council.

The inquiry ultimately found that Halsted hadn't violated any conflict of interest laws. But just because no laws were broken doesn't mean Halsted acted ethically, said Marianne Jennings, a business ethics professor at Arizona State University.

Chandler's City Council should have known about the stock options, she said. "They might have made the same decision anyway, but they deserved to know."

Halsted told The Associated Press that he wasn't trying to hide anything: "They knew I was compensated as a trainer," he said of the City Council. "I clearly stated it (during the meeting) because I didn't want there to be any controversy or question. The extent of the compensation was irrelevant."

The investigation looked into Halsted's holdings and found that at the time of the presentation, his wife and children owned 462 shares of Taser stock. After three stock splits, those shares are now worth more than $70,000.

Halsted had also personally been granted options for 750 shares of Taser stock. After the splits, that stock would have been worth about $300,000 when Taser shares were trading at their 52-week high of $33.45 on Dec. 30. The stock now trades around $13 a share.

Taser had also given Halsted a five-day trip for two to Hawaii valued at $3,770 as a reward for training more officers to become Taser instructors than anyone else in 2001.

Taser defends the use of off-duty police officers as trainers, noting that police are allowed to moonlight for security companies and other private corporations as long as they follow their department's disclosure rules.

"Utilizing off-duty law enforcement officers to train other officers is standard industry practice," said Taser spokesman Steve Tuttle. He mentioned Armor Holdings _ which makes police batons and body armor _ as a company that also uses off-duty police as trainers.

But Taser is unique in that it pretty much has a lock on the stun gun market.

Since Taser began marketing police stun guns in 1998 as a way to subdue combative people in high-risk situations, more than 7,000 law enforcement agencies worldwide as well as the U.S. military have bought them.

But the safety of the weapons, which shoot darts 25 feet that deliver 50,000-volt jolts for about 5 seconds, has increasingly been questioned. According to Amnesty International, some 93 people have died after being shocked with the weapons, which can also be used like cattle prods.

In recent weeks, after several deaths that followed Taser shocks, some police departments have suspended Taser use to re-examine guidelines on their handling and/or await better data on health risks.

Tuttle says the company has roughly 300 "Master Instructors" worldwide who train other officers to become instructors and who conduct demonstrations at interested police departments. He said Taser pays about 35 of them on a per-session basis.

Tuttle said the company has not granted stock options to training board members since 2003. Citing privacy concerns, Taser declined to identify the other active-duty officers who were granted stock options.

Halsted isn't the only master instructor to leave his department and join Taser after accusations of a possible conflict of interest.

Sgt. Ron Bellendier quit the Minneapolis police department _ he's now Midwest regional sales manager for Taser _ in December after questions surfaced about his relationship to Taser.

Bellendier was the point man on Tasers for his department, which said he was involved in stun gun purchasing decisions even as he worked for Taser as a master instructor.

Bellendier told the AP that his decision to leave the department had nothing to do with the Taser flap, and that he submitted retirement paperwork before the controversy.

"I was only being paid when I instructed other officers," Bellendier told The AP. "It wouldn't have mattered if the department bought 5,000 Tasers, I wouldn't have gotten anything out of it."

Other master instructors, including several who served on the training board, have gone on to work for Taser in officer training and sales positions.

Taser has said that a total of 11 "consultants," which include master instructors and members of the training board, were granted stock options as part of their compensation package.

In addition to Halsted and Bellendier, former Sacramento police SWAT team member Sgt. Rick Guilbault went to work as Taser's director of training.

Guilbault served on the master instructor board with Halsted, although it is unclear whether he also received stock options. He did not return calls seeking comment and Taser would not disclose whether he was offered the options.

Louie Marquez, a retired Austin, Texas, police officer is a master instructor. Marquez said he still serves on the board but declined to answer questions about stock options.

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