Guns and hospitals may seem an unusual pairing in an investment portfolio, but not for Cerberus Capital Management.
The New York investment firm that controls the Steward Health Care System hospital chain in Boston also owns the company that makes the semiautomatic rifle that Adam Lanza used to kill 20 children and six adults at Sandy Hook Elementary School in Newtown, Conn., last Friday.
Cerberus is one of the most powerful forces in the gun business. It owns Freedom Group Inc., a Madison, N.C., company that is the nation’s largest seller of firearms and the number two seller of ammunition. Freedom, according to its annual report, sold 1.1 million long guns and 2 billion rounds of ammunition that generated $775 million in sales last year.
Together with its gun brands, from Bushmaster to Remington, Freedom is a major contributor to the National Rifle Association and the fight against gun control, according to the Violence Policy Center, a Washington group that tracks corporate funding of gun advocacy.
Freedom’s chief executive, George Kollitides, worked previously for Cerberus, where he focused on buying companies in the firearms and defense businesses for the firm. Described as a “lifelong hunter, shooter, and firearms enthusiast” on the company’s website, he is also a trustee for the NRA Foundation and serves on several of the group’s committees.
Kollitides led the charge to acquire Bushmaster Firearms Inc. from Windham, Maine, native Dick Dyke in 2006. The gun used in the Newtown shootings, a Bushmaster .223 semiautomatic rifle, contained a 30-round ammunition clip that allowed the gunman to fire continuously inside the school.
That same model Bushmaster was also used in the 2002 Washington sniper shootings, in which 10 people were killed, according to published reports.
A federal ban on certain assault rifles and magazines holding more than 10 rounds expired in 2004, eliminating restrictions on the sale of weapons capable of inflicting mass casualties within seconds. President Obama and gun control advocates have pushed to reinstate the ban — a move the NRA has opposed.
Dr. Robert D. Sege, director of ambulatory pediatrics at Boston Medical Center and coauthor of a policy statement on gun control by the American Academy of Pediatrics, said he strongly favors reinstituting the assault weapons ban. If Cerberus is not working for laws to make guns and the community safer, he said, “At the very least it calls into question the overall aims of Cerberus Capital.”
Sege noted, “We as a society need to understand that these aren’t toys, that they’re lethal weapons and they need to be kept out of the hands of people who can’t handle them.”
An executive at Cerberus did not return requests for comment Monday, and Ralph de la Torre, chief executive of Steward Health Care, was traveling and unavailable to comment, a spokesman said. An official from Freedom Group could not be reached for comment.
Cerberus is a private equity firm that invests in troubled businesses. It has in recent years had ownership stakes in automaker DaimlerChrysler and in GMAC, General Motors’ finance arm, and in real estate investments since the financial crisis. It is named after the three-headed dog of mythology that guards the gates of Hades.
When Cerberus created Steward in Boston, by acquiring the former Caritas Christi hospitals, de la Torre conducted a public relations tour to present Cerberus as the best hope for saving a cash-strapped community hospital group. The Catholic hospital group includes St. Elizabeth’s Medical Center in Brighton and Carney Hospital in Dorchester.
While Cerberus’s wooing of the local hospital group was highly public, its amassing of gun companies was less well known. Last year, rumors were circulating so loudly in the gun community that Democrat George Soros was the financial backer of the Freedom Group that the company felt compelled to publicly deny it.
“Further, as Cerberus is a privately owned corporation, run by sportsmen, shooters, and firearms enthusiasts, we can say with great sincerity and certainty that George Soros will never be a part of the Freedom Group family of companies,’’ Kollitides said in the statement at the time.
If new gun controls are proposed in the wake of the Newtown tragedy, Freedom and Cerberus will have much at stake. In the past, company executives have said in earnings calls that when “political rhetoric heats up,” the furor typically dies down quickly.
But this week, gun critics expressed outrage that a company could both own hospitals and gun makers. “How can you promote good health and unrestricted access to deadly weapons at the same time?” said John Rosenthal, a Boston developer and cofounder of Stop Handgun Violence. “It’s clear to me all they care about is the profit motive.”Beth Healy can be reached at email@example.com.
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