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Bribery probe costs Smith & Wesson $2m

Gun maker, SEC settle overseas case

The Springfield gun maker Smith & Wesson Holding Corp. has agreed to pay $2 million to settle civil charges by federal regulators that it bribed foreign officials to sell firearms in other countries.

The Securities and Exchange Commission on Monday said Smith & Wesson violated the Foreign Corrupt Practices Act by making improper payments as it sought to sell guns overseas to police and military groups from 2007 to 2010.

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In 2008, the SEC said, the gun maker hired a third-party agent in Pakistan to help win a sale with a Pakistani police department. Smith & Wesson officials authorized the agent to provide more than $11,000 worth of guns to Pakistani police officials as gifts and to make additional cash payments to them.

Smith & Wesson ultimately won a contract to sell 548 pistols to the Pakistani police for a profit of $107,852, the SEC said.

The company also approved improper payments to agents working on contracts in Turkey, Nepal, and Bangladesh, but the sales were never made, the SEC said.

“This is a wake-up call for small and medium-size businesses that want to enter into high-risk markets and expand their international sales,” Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit, said in a statement.

Smith & Wesson, one of the largest US gun manufacturers, made the settlement agreement without admitting or denying the findings in the case. But it agreed to pay back $107,852 in profit plus $21,040 in interest, along with a $1.9 million penalty.

The company said the SEC case stemmed from a Department of Justice investigation of the same matter in 2010 that was later dropped.

In its annual report, filed with regulators in June, Smith & Wesson disclosed it had been under investigation by Justice officials and had been subpoenaed to produce documents. Its former vice president of sales was arrested at an industry conference in Las Vegas, one of 22 people in the gun and military equipment business ensnared in an FBI sting operation.

The Smith & Wesson executive was among those indicted. But the cases were ultimately dropped, and the company was not charged.

Smith & Wesson’s chief executive, James Debney, said in a statement, “We are pleased to have concluded this matter with the SEC and believe that the settlement we have agreed upon is in the best interests of Smith & Wesson and its shareholders.’’ He added, “Today’s announcement brings to conclusion a legacy issue for our company that commenced more than four years ago, and we are pleased to now finally put this matter behind us.” Debney has been chief executive since September 2011.

The nation’s top securities regulator said Smith & Wesson was looking to break into new markets overseas during the period of the sale in Pakistan. From 2007 to 2010, the company’s international sales staff aggressively sought to attract new business by offering, authorizing, or making illegal payments, or by providing gifts meant for government officials in Pakistan, Indonesia, and other countries, the SEC said.

As part of the settlement, the company must report to the SEC on its compliance efforts for two years.

Smith & Wesson shares closed at $13.57, down 9 cents.

Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.
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