Glock: The Rise of America's Gun

by Paul M Barrett

  Jannuzzo had brought an armful of corporate files with him to the Glock home. He dropped these on the kitchen table and threatened that unless he received a sizable severance payment—something in the millions—he would expose the company’s unflattering secrets. By this time, Jannuzzo knew quite a lot about Charles Ewert and the network of shell companies constructed to lessen Glock’s tax liabilities. He also knew about the A-Team’s investigation, which had turned up evidence linking Ewert and the Glock affiliate in Panama with the notorious Turkish financier Namli. Did Glock want this dirty laundry hung out for the world to see?

  Gaston Glock was not used to being threatened. “Why are you doing this to me?” he demanded.

  Jannuzzo said he was through being pushed around. He had been running the company in the United States, where Glock, Inc., made most of its money, and now he wanted his rightful share of the profits.

  At this point, Glock stood up and left the room. Remaining with Jannuzzo in the kitchen was Peter Manown, the German-speaking American lawyer who handled Glock’s personal business in the United States. The next thing Jannuzzo and Manown heard was the racking of the slide of a semiautomatic handgun. Gaston Glock had loaded a round into the chamber.

  “Paul, did you hear that?” asked a rattled Manown.

  Jannuzzo didn’t seem scared. He patted his ankle, allowing Manown to see that he had a holster there and a pistol of his own. It might have been a scene out of a bad thriller, if not for the fact that the guns and the clashing egos were real.

  Gaston Glock returned to the kitchen with a black plastic pistol grip protruding above his belt. “I didn’t know if we were going to have a shootout at the O.K. Corral, or what,” Manown said later.

  There was more shouting and some finger-pointing, but in the end, neither man pulled his gun. Jannuzzo scooped up his files and left, bellowing at Glock: “You’re history!”

  Word of the row in Gaston Glock’s kitchen naturally spread through the gun industry. Jannuzzo’s friend Richard Feldman heard about it directly from Gaston Glock. The Austrian called Feldman, a Glock consultant. “Richard, Paul has gone crazy!” Glock said. “What is wrong with Paul?”

  “I was like, ‘Oy,’ ” Feldman recalled. “It was really about Monika more than anything else.”

  / / /

  Amorous rivalry doubtless played a role. Feldman also suggested that his friend Jannuzzo’s behavior in general had become erratic. On several occasions over the years, Jannuzzo had gotten drunk and passed out during trade shows or other industry gatherings. Once, hotel security found him late at night asleep under a banquet room table, his suit jacket and slacks folded neatly beside him, Feldman said. Another time, Jannuzzo blacked out in a hotel elevator and was discovered with the elevator doors bouncing against his outstretched legs. “As a result of this problem, I guess you’d call it, I don’t think he was always thinking at his best,” Feldman commented.

  And perhaps also weighing on Jannuzzo’s mind in 2003 was his anxiety over his role in some unconventional internal company financial dealings. He and Manown, it turned out, had been taking advantage of Glock’s sales success to supplement their paychecks beyond officially agreed-upon salaries and bonuses. While they were less ambitious in this regard than Ewert, the two Glock lawyers for some time had used a variety of accounting tricks to siphon company cash into their pockets.

  Asked years later during sworn testimony to explain his misdeeds, Manown offered this candid if illogical rationalization: “Glock is not Snow White. He’s got a lot of skeletons. He’s done, in my mind, a lot of things that are much worse than what Jannuzzo and I did. He makes roughly $200,000 a day—he personally. He spends money on mistresses, on houses, on sex, on cars. He bribes people. He’s just a bad guy. And with all this money laying around, he needed it like a hole in the head, and we just, you know, we let our greed and our ethical standards slip.” To underscore the point, he added: “It wasn’t like we were stealing from Mother Teresa.”

  At the time he quit, Jannuzzo was hoping he could walk away without negative consequences. His attempt to squeeze his employer for a fat severance payment in exchange for keeping his mouth shut illustrated just how cocky Jannuzzo had become.

  Manown was a far less confident individual. He learned in fall 2003 that Glock suspected his lawyers in America of impropriety. Seized with fear and guilt, Manown descended into a paralyzing state of depression. Then he decided to come clean. Manown flew to Austria and confessed everything to Gaston Glock, begging not to be sent to prison. He admitted that he and Jannuzzo had skimmed money from company real estate transactions. They pilfered other funds, he said, by having Glock, Inc., pay phony insurance premiums to a bogus liability carrier they themselves created in the Cayman Islands. They routed tens of thousands of dollars that was not theirs to personal accounts. They did it because they thought no one would notice. “There was so much money flying around in this company,” Manown later said. “It was like Monopoly money.”

  Glock certainly did not absolve Manown, but he suggested a deal. In exchange for a degree of lenience, the lawyer would tell all, repay what he could to the company, and help ensnare Jannuzzo. Manown agreed.

  Gaston Glock had his outside lawyers bring Manown’s tale of fraud to the authorities in Cobb County, Georgia, where Glock, Inc., was a prominent corporate citizen. Local prosecutors debriefed a chagrined Manown, and eventually he was permitted to plead guilty to low-level embezzlement charges. He received a notably light sentence: no time behind bars, ten years probation, and surrender of his law license. He turned over $650,000 to Glock in restitution. There was no press conference, sparing Manown public embarrassment.

  / / /

  As with the investigation of Ewert, the Cobb County probe of Manown shed light on matters that Gaston Glock could not have wanted anyone to know about. For one thing, Manown told prosecutors, Glock, Inc., had arranged illegal political campaign contributions—with the approval of Gaston Glock.

  Manown told the district attorney’s office that he and Jannuzzo had withdrawn tens of thousands of dollars from corporate bank accounts and distributed it to fellow employees and spouses with the understanding that the recipients would make individual donations to candidates favored by the company. As described, this activity, undertaken over a decade, would have been illegal for two reasons. Federal law prohibited Glock, Inc., as a foreign-owned entity, from making any direct contributions to US political campaigns. Using employees as fronts did not make the donations legal. Indeed, disguising corporate contributions by breaking them up and funneling them through third parties constituted a separate crime.

  The contribution conspiracy was not a rogue operation, Manown told prosecutors under oath. “This was all done … with Mr. Glock’s blessing.” He detailed how he withdrew money from a Glock account in increments of $9,000, “so it would stay under the reporting radar of the bank,” referring to the federal anti–money laundering rule that requires banks to report to the US Treasury any cash withdrawal of $10,000 or more. Purposely evading the cap is yet another federal crime.

  Federal campaign donation records show that from 1991 through 2004, Glock employees made more than one hundred individual contributions to congressional candidates, worth a total of at least $80,000. Manown kept a handwritten ledger enumerating some of these transactions. A November 1, 2000, entry shows $60,000 designated for “Bush election campaign per GG and PJ 4 RF.” It appears that “GG” stood for Gaston Glock, “PJ” for Paul Jannuzzo, and “RF” for Richard Feldman, the company consultant. It is not clear what happened to that $60,000. (Feldman said he knows nothing about it.)

  Among the congressional recipients of Glock employee donations were Representatives Bob Barr and Phil Gingrey and Senator Saxby Chambliss—all Georgia Republicans. Those three beneficiaries of Glock largesse said that they were unaware of unlawful contributions, if any had been made. Chambliss’s office said in 2009 that, just to be on the safe side, it would return all Glock-affiliated don
ations from that period.

  / / /

  The Glock Monopoly money flowed in other, even less likely, directions. One was the promotion of Jörg Haider, the right-wing anti-immigrant Austrian politician from Carinthia. Having earned a reputation for pro-Nazi sympathies, based on his comments praising Hitler and SS officers, Haider traveled in the United States during this period, seeking to repair his public standing. Glock introduced the politician to Richard Feldman over dinner at Canoe, a fashionable Atlanta restaurant. At Glock’s behest, and with Glock money, Feldman arranged transportation and hotel accommodations for Haider in New York in 1999 and 2000. “Glock urged me to help Haider overcome some of the [image] problems,” Feldman told me.

  In Austria, Glock continued to deny that he backed Haider. The industrialist sued both an Austrian newspaper and a politician there for describing him as a supporter of Haider, and the litigation had the desired effect: The Glock-Haider relationship thereafter received little attention in Austria or anywhere else.

  The following January, Feldman arranged for Haider to attend a banquet in New York that marked Martin Luther King’s birthday. The Austrian sat on the ballroom dais with other dignitaries. Various Republican notables also attended the King dinner, including New York mayor Rudolph Giuliani, then running against Hillary Clinton for an open seat in the US Senate. When she learned that Giuliani had shared the dais with Haider, Clinton used the juxtaposition to condemn her opponent. “Mr. Haider’s record of intolerance, extremism, and anti-Semitism should be a concern to all of us,” she wrote in an open letter to the World Jewish Congress. Haider, she noted, had “spoken positively” of Hitler’s employment policies, referring to former “Waffen SS members as ‘men of character’ and concentration camps as ‘punishment camps.’ ” The New York media eagerly amplified Clinton’s message. Giuliani, who ultimately dropped his Senate bid, complained that he had been blindsided and did not know who Haider was.

  / / /

  Even with Peter Manown’s confession, Gaston Glock did not immediately go after Jannuzzo for embezzlement. After quitting the company and marrying Monika Bereczy, Jannuzzo spent several years spiraling downward without Glock’s help. His drinking got worse. His driver’s license was suspended for a DUI bust. Business ventures did not pan out. And his temper turned violent.

  Shortly after midnight on August 26, 2007, the Atlanta police received a 911 hang-up call from the Jannuzzo-Bereczy residence in the upscale Prado neighborhood. Officers dispatched to the scene found Bereczy, who had made the abortive 911 call, outside the house with “a large gash on the left side of her forehead, cuts on her left ear, and bruises on her face, hands, upper and lower arms, neck, and both legs.” Bereczy said she and Jannuzzo had fought, that he was inside, and he had “many weapons.” When Jannuzzo opened the front door, he insisted everything was fine. “Mr. Jannuzzo was bleeding from a large gash on the back of his head, was slurring his speech, and had an odor of alcoholic beverage emanating from his person,” the incident report stated. Police handcuffed and arrested him.

  Bereczy said an argument had escalated and that her husband had “punched her in the forehead, opening a wound from a previous beating, and pushed her in her chest, causing her to fall backwards and hit her head on the armoire.” She threw a lamp at him. In the ambulance, Bereczy told emergency workers: “He is going to kill me for this. I am a dead woman.”

  Police found seventeen guns in the house, including an AR-15 semiautomatic rifle and a Remington shotgun. Jannuzzo’s ex-wife, Karen Dixon, “stated that when she was married to him, he was very violent. She also stated that it was only a matter of time before this happened,” the police report said.

  Despite the harrowing bloodshed, Bereczy did not press charges. Jannuzzo, soon released from custody, was never prosecuted for the attack. As happens surprisingly often after domestic abuse, the couple stayed together. But Jannuzzo’s troubles with the law were not over.

  In late January 2008, police returned to Jannuzzo’s home and arrested him again, this time for stealing from Glock. Acting through his American attorneys, the gun maker had urged Cobb County authorities to use Peter Manown’s confession, combined with company documents, to prosecute Jannuzzo. “The implications were that approximately $5,000,000 had been embezzled from the Glock Group by Mr. Manown, Paul Jannuzzo, and others,” according to a Smyrna Police Department investigative report. The formal indictment of Jannuzzo, filed in May 2008, referred to the theft of far smaller amounts, but sums that could not be written off as incidental withdrawals from the petty cash drawer.

  Prosecutors claimed, for instance, that Jannuzzo and Manown had pocketed $177,000 in payments to the phony Cayman Islands insurance company they created. The pair allegedly skimmed another $98,633.80 from a company bank account in Atlanta. And in September 2001, Jannuzzo had a law firm holding Glock funds pay a $16,000 bill for custom cabinetry installed in his home, according to the indictment. All told, prosecutors accused Jannuzzo of having a hand in the theft of more than $300,000. For good measure, the indictment said that Jannuzzo stole a single handgun from his former employer. The pistol—not a Glock—was among the weapons confiscated from Jannuzzo’s house the evening he was arrested for beating his wife.

  / / /

  I caught up with Jannuzzo in June 2009. He had been released on bail, pending trial, as the wheels of criminal justice were turning slowly in Cobb County. He was not in good shape. He had gained weight, and his face looked puffy. Rather than the neat business suits I recalled when he was flying high with Glock, he wore rumpled trousers and a Hawaiian-style short-sleeved shirt. His wife, Monika, had moved to Holland to take a job there, he said. He was traveling back and forth to Europe, but now was short on money. His car was in the shop, and he could not afford to pay the repair bill.

  We met at a noisy downtown restaurant in Atlanta, along with my Business Week colleague Brian Grow, who lived in the city. Echoing Manown’s “Monopoly money” theme, Jannuzzo described financial practices within the company as unorthodox in the extreme. He said he and Glock first discussed reimbursing company employees for political contributions as early as 1993. “He would say, ‘How are we doing? What do the candidates look like? Do we need to make some contributions?’ ” Glock, he added, knew “100 percent” that disguising donations in this manner violated US law.

  He admitted that he and Manown had routed corporate funds to themselves. Some of that money flowed with Glock’s approval into the shadow political contributions, Jannuzzo said. He blamed Manown for devising other stratagems, such as the payments to the fake liability insurance company in the Caymans. Jannuzzo insisted that if it appeared that he, too, had embezzled, that was only because he had followed Manown’s lead. “Take care of this for me,” he quoted Manown as telling him, implying that he had been more of a passive player.

  Jannuzzo offered a plausible description of how Gaston Glock, with Charles Ewert’s assistance, had set up the system of shell companies to shelter Glock, Inc., profits from taxation in the United States. He handed us a copy of a whistle-blower filing he had submitted to the Internal Revenue Service. “Gaston Glock owns 100% of Glock Inc., a firearms manufacturer in Smyrna, Georgia, through various subsidiaries,” the filing began. “He has organized an elaborate scheme to both skim money from gross sales and to launder those funds through various foreign entities. The skim is approximately $20.00 per firearm sold.” Multiplied by hundreds of thousands of guns a year, according to Jannuzzo, the amount insulated from US taxes came to $9 million or $10 million annually.

  As far as Jannuzzo was concerned, he was being persecuted by his former employer. If Glock wanted to play rough, Jannuzzo planned to fight back. Exposing Glock’s practices in Business Week was part of the fight.

  It was a compelling story: the murder attempt in Luxembourg, the shell companies, the salvos of fraud allegations, and, all the while, Glock’s overwhelming commercial success. In September 2009, my editors at the magazine put the feature on Glock on the
cover with the headline GLOCK’S SECRET PATH TO PROFITS . A sub-headline elaborated, “It’s the largest supplier of handguns to law enforcement in the US. But behind its success lies a troubling tale of business intrigue.” The IRS was investigating Jannuzzo’s allegations, the article reported, and had interviewed the wayward lawyer.

  / / /

  Glock, Inc., responded with indignation to Jannuzzo’s accusations. Company executives refused to sit for interviews and said that Gaston Glock would not talk. But in response to written questions, Carlos Guevara, Jannuzzo’s successor as in-house counsel, stated the company’s position in a letter. “GLOCK has acted lawfully and properly throughout its history,” Guevara said, noting that he had been authorized to speak on behalf of Glock, Inc., and Gaston Glock personally. On the one hand, Guevara argued, “the GLOCK companies are exceptionally well-run and managed.” On the other hand, he added, Ewert, Jannuzzo, and Manown, three of Gaston Glock’s top lieutenants, were enmeshed in civil and criminal proceedings accusing them of major fraud, deception, and, in Ewert’s case, murderous violence.

  If that is “exceptional management,” one shudders to imagine what shoddy management looks like. Guevara did not acknowledge any inconsistency. “GLOCK,” he wrote, using the all-capital-letter style the company favors, “was able to withstand the damage inflicted by a few bad apples years ago.

  “GLOCK’s tax filings and reporting are accurate,” he continued. “GLOCK underwent a series of comprehensive governmental audits going back to 1988, the last being in 2005 in Austria and 2006 in the United States.… No audit has ever resulted in findings of tax fraud in any jurisdiction.” I asked about the concerns raised by the company’s own internal investigation about the connection between Reofin International, the Panamanian Glock affiliate, and the Turkish financier Namli. “To the extent your questions imply that GLOCK has, or is, involved with a banking institution in Turkey or Turkish Republic of Northern Cyprus, GLOCK has never had such a relationship.” The question, of course, had been whether Reofin, which was owned by Gaston Glock, had ever had such a relationship.