Taser set to change marketing, state says

Robert Anglen
The Arizona Republic
Sept. 28, 2005 12:00 AM

On the same day Taser International confirmed federal regulators are investigating the company, Arizona's attorney general said the stun gun manufacturer has agreed to change the way it markets its gun.

Attorney General Terry Goddard's office said Tuesday that Taser has offered to increase product warnings, change some of its broad claims of safety and limit the use of the word "non-lethal."

"Our primary concern has been Taser's safety claims that we felt may have understated the risks of serious harm," Goddard said in a statement to The Arizona Republic. "We are encouraged that the company has agreed to make many changes that reduce or qualify these claims. We are now reviewing these proposed changes."

Scottsdale-based Taser has armed nearly a fifth of America's law enforcement agencies with the electric stun guns. Company officials contacted Tuesday said they did not wish to comment on the marketing changes or on any meetings with Goddard's office.

His office has been looking into Taser's safety claims since January, when the U.S. Securities and Exchange Commission said it was launching an informal inquiry into Taser's safety claims and into a sale last year that bolstered company earnings at the end of the quarter.

On Tuesday, Taser disclosed that the SEC had turned its informal inquiry into an investigation that will give federal regulators subpoena powers.

Taser has known about the investigation for a least a week. It disclosed the probe in a news release after being questioned Monday by The Republic. Taser's disclosure had an immediate impact on Taser stocks, sending the price of shares to their lowest level since November 2003.

Taser Chief Executive Officer Rick Smith said Tuesday that the company will cooperate with federal regulators.

"We recognize that this has been a difficult process for our employees and shareholders," Smith said in a prepared statement. "We continue to make all efforts to assist the SEC in completing their investigation as expeditiously as possible."

Smith also said the SEC is expanding its investigation, examining the possibility that internal documents have been leaked to unspecified parties in an attempt to manipulate Taser's stock price.

"We are hopeful that the expanded SEC investigation will address all pertinent issues," Smith said.

For months, Taser officials have maintained that they did nothing wrong. In January, Smith predicted the federal inquiry would come out in the company's favor.

The SEC's action is the latest challenge for the company, which has seen sales of its popular stun gun slow this year after a number of deaths that left police agencies across the country rethinking Taser purchases and, in some cases, taking the gun off the street.

Goddard's office said Taser's proposed marketing changes include an 18-point "product warning" that stresses the Taser should be used only by trained individuals and acknowledges the gun's potential danger.

In a memo to Goddard's office, Taser agreed to change the ways it promotes its gun in both training materials and on its Web site. Among those changes:

• Minimizing the use of the term "non-lethal" to describe the weapon. As part of its proposal, Taser also has agreed to include a disclaimer that the company is taking the term "non-lethal" from the Department of Defense and does not mean the weapon can't be fatal.

• Acknowledging much more prominently that the stun gun can be dangerous.

• Changing the way it uses the term "safe." A description that describes the stun gun as a "safer, effective device" will be changed to "safer use-of-force alternative."

• Limiting medical claims. Materials that say "medical experts confirm Taser is safe" will be changed to "medical experts confirming the lifesaving value of Taser technology."

• Changing descriptions that suggest Taser is harmless. Materials that say Tasers "leave no lasting after-affects" will be changed to "are more effective and safer than other use-of-force options."

One of Taser's chief critics, Amnesty International, said the changes suggest more scrutiny is being given to the firm.

"Amnesty has long held that there have been a number of very serious questions about the safety of this product that remain unanswered," Amnesty spokesman Edward Jackson said. "Now, it seems like the tide is turning and more and more credible bodies are weighing in on the issue."

Jackson said he is concerned that changes to Taser's marketing should have been made long before the weapon was put into the hands of police officers.

A Taser, which resembles a plastic gun, uses electricity to override the nervous system and incapacitate a suspect.

It normally works by firing two darts from distances of up to 21 feet.

Although the company has repeatedly said its stun guns have never caused a death or serious injury, The Republic has linked them to 18 deaths and to the injuries of several police officers. The officers say the injuries occurred when they were shocked during mandatory training exercises.

Since 1999, there have been at least 144 deaths following police Taser strikes in the United States and Canada.

Of those, medical examiners cited Tasers as a cause of death in four cases and a contributing factor in 10 others. In four other cases, medical examiners said Taser could not be ruled out as a cause of death.

Taser has gone from a family business to the nation's largest supplier of stun guns. It has armed nearly 8,000 U.S. police agencies with Tasers and has made millions for investors.

But news of the initial SEC inquiry caused stock prices to drop in January and resulted in a flurry of shareholder lawsuits.

Last year, Taser stock rose 361 percent and split three times, peaking in November at more than $30 a share.

On Tuesday, stock prices fell to $6.35.

When the SEC inquiry was first announced, Taser President Tom Smith said regulators questioned the release of a statement in 2004 touting an independent Defense Department study that purportedly found Tasers were safe.

Taser's statement seemed to increase stock prices just before executives and directors sold $68 million in shares in November.

When the full Defense Department study was released this year, it was revealed that Taser was involved in nearly every aspect of the study, raising questions about its independence. In addition, government researchers involved in the study said they never looked at safety.

Smith said the SEC was also looking into the sale of 1,000 consumer model stun guns to a Prescott firearms company. Taser announced the sale on Dec. 20, just 11 days before the end of Taser's quarter. The sale appeared to help the company meet its projected earnings.