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Wednesday, September 29, 2010

Taser Wars: Stocks, Lies and Audiotapes

September 28, 2010
Sharon Weinberger, AOL News

Nonlethal weapons aren't normally considered a cutthroat business area, but documents filed in a lawsuit over the Taser stun gun suggest the stakes were high enough to set off an industrial espionage scheme worthy of Boris Badenov and Natasha Fatale.

The often-convoluted -- and at times comical -- back-and-forth is described in court filings related to a 2009 lawsuit.

Taser International, which sells the eponymous stun gun, sued James McNulty, an engineer and attorney, and Stinger Systems, another stun gun manufacturer. Among other allegations, Taser accuses McNulty and Stinger of trying to manipulate the price of Taser's stock.

The Taser stun gun is a nonlethal device that uses an electrical current to incapacitate its victim. Taser International markets several variants, including a popular law enforcement model that works by shooting two darts attached to wires.

McNulty, a longtime nemesis of the world's largest stun gun manufacturer, denies Taser's charges. He also has a few of his own accusations. In a recent court filing, McNulty claims Taser International concocted a scheme to have another stun gun entrepreneur make secret recordings in an effort to implicate him in the alleged scheme.

According to court documents, which include internal company e-mails detailing the plan, Taser directed Paul Feldman, then-president of the Raleigh, N.C.-based Law Enforcement Associates, to record more than half a dozen audio recordings of McNulty.

Law Enforcement Associates specialized in covert audio- and video-recording devices, according to the company's website. It was also at one point trying to enter the stun gun business.

Feldman, according to a statement filed by John Chudy, agreed to make the recordings because he believed Taser would invest in Law Enforcement Associates; a promise Feldman later felt Taser did not fulfill. Chudy, who had worked with Feldman's company on a stun gun, said Feldman had related the recording-for-investment story in a rambling phone confession about the ill-fated scheme.

McNulty first learned of the secret audio recording from other employees at Feldman's company, according to court documents. McNulty often provided them with generous Christmas gifts, like Movado watches. They warned him that Feldman was in touch with Taser and secretly recording him.

The engineer's dealings with stun guns predate Taser International; McNulty worked with John Culver, the original creator of the Taser, who later licensed the stun gun technology to Taser International. "I was a member of John Culver's research staff," McNulty told AOL News in an interview.

Over the years, however, McNulty has emerged as an uber-nemesis of the company, which has been a stock market darling for many years because of its rapid growth in the law-enforcement market. Taser International and McNulty have since engaged in a series of lawsuits and countersuits.

For both sides the legal battle appears to have become personal. In his court filings, McNulty refers to Taser's "crap sham stock" and accuses Feldman, who made the secret recordings, of "reptilian behavior."

For Taser, this sort of language is part of the problem.

"TASER seeks monetary damages and injunctive relief because of the defendants' ongoing plot to damage TASER through fraudulent and misleading press releases, defamatory 'whisper campaigns' to potential customers and investors of TASER, and the Defendants' use of lawsuits for marketing purposes, rather than as a vehicle for seeking relief from the Court," Steve Tuttle, the Taser spokesman, wrote to AOL News.

Taser's most public legal tangles have been with victims of its stun gun device. They have sued the company for wrongful death or injury, claims that the company has so far successfully defeated in the courts. But alongside those lawsuits over the safety of the Taser has been a series of legal battles, like the current one, fought with other makers of stun guns over patents and business practices.

The current allegations of secret recordings may be only the latest twist in the company's protracted legal battles, but it's a claim that Taser, in formal questioning, originally denied. "Taser did not develop or initiate a plan to make audio recordings of McNulty's conversation with with Mr. Feldman," Taser responded to one interrogatory.

Taser e-mails that Feldman obtained and submitted to the court tell a different story. Those e-mails appear to show Rick Smith, the CEO of Taser International, urging Feldman to get McNulty to implicate himself in plans to ruin Taser.

"Draw him out to boast of past misdeeds," Smith instructs Feldman in one e-mail.

"We can without doubt get the audio you want," Feldman replies to another e-mail.

McNulty referred questions about the litigation to court documents.

In a statement to AOL News, Taser spokesman Tuttle repeated the company's argument -- also made in court documents -- that Feldman acted of his own accord, and Taser only became involved in the recordings at a later date. "Mr. Feldman ... has testified, unequivocally in his recent deposition, that he did not record any conversations with Mr. McNulty at TASER's direction," Tuttle wrote in an e-mail.

Feldman, when reached by AOL News at home, declined to comment.

In his court filings, McNulty questions the legality of the audio recordings in Taser's possession, pointing out that some of the covertly made recordings may have violated wiretap laws, which differ from state to state. Whether legal or not, the e-mails about the recording paint a portrait of Taser as a company willing to resort to elaborate private espionage.

Taser CEO Smith in one e-mail writes the phrase, "SCRIPT OUTLINE," and goes on to describe how Feldman should solicit information from McNulty, including coaching Feldman to claim he was "afraid" of Taser. In an e-mail to Taser's general counsel, Doug Klint, Smith proceeds to outline what he thinks should be Feldman's question areas, including finding out information on journalists McNulty may be speaking to.

"Who else has he collaborated with, or caused to take action against TASER (media, analysts, etc.)," Smith wrote as part of the instructions for Feldman, according to the e-mail filed in the court documents.

Apparently audio recordings may not have been the only thing Taser was after. In another document submitted by McNulty, the general counsel asks Feldman whether he could be outfitted with a pinhole camera. "We would love to get the guy on video," Klint writes.

The message concludes with the signature line: "Protect the lives that matter most to you with the new TASER C2 Personal Protector."

In the meantime, the war between McNulty and Taser doesn't look like it'll end anytime soon. McNulty announced Monday in a press release that, as part of that lawsuit, he was countersuing with a new claim against Taser. He says the company was infringing on his patents for a new weapon that works using wireless ammunition shells, rather than darts attached to wires.

Wireless technology, McNulty says, could render the current generation of stun guns obsolete.

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