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SEC launches formal investigation of Taser

| Wednesday, Sept. 28, 2005

PHOENIX -- The Securities and Exchange Commission inquiry into stun-gun maker Taser International Inc. is now a formal investigation with an expanded scope, the company said Tuesday.

Shares tumbled 12 percent after the announcement.

The company had previously said the SEC was looking into claims Taser has made about safety studies for its stun guns and also has been looking into a $1.5 million, end-of-year sale of stun guns to a firearms distributor in Prescott. Some stock analysts have questioned the deal because it appeared to inflate sales to meet annual projections.

The formal probe is now also examining the possibility that outsiders acquired internal company information to manipulate the stock price, Taser said in a news release.

A formal investigation gives the SEC subpoena power to obtain documents and testimony.

"We recognize that this has been a difficult process for our employees and shareholders," Taser's chief executive, Rick Smith, said in the release. "We continue to make all efforts to assist the SEC in completing their investigation as expeditiously as possible."

Taser said it's cooperating with the investigation The company declined to say when the inquiry became formal, whether any Taser employees have been subpoenaed and, if so, what information any subpoenas sought.

An SEC spokesman said that as a matter of SEC policy, the agency would neither confirm nor deny any investigation.

Taser began marketing police stun guns in 1998 as a way to subdue combative people in high-risk situations. Now, more than 7,300 law enforcement agencies and military installations use them worldwide.

But critics say the stun guns have been used too liberally by police and have contributed to scores of deaths. Amnesty International has compiled a list of more than 100 people the group says have died after being shocked in scuffles with lawmen.

A letter published in the New England Journal of Medicine earlier this month suggested that officers who deploy Tasers also should consider carrying heart defibrillators. The letter was authored by two doctors at Children's Memorial Hospital in Chicago who documented a known case of ventricular fibrillation -- a potentially fatal heart arrhythmia -- in a teenager who was shocked with a Taser.

Shares of Taser fell 96 cents, or 13 percent, to close at $6.35 yesterday on the Nasdaq Stock Market, slipping below its 52-week range of $7.11 to $33.45.

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