Gun manufacturers thrive on turmoil. For Glock, the American military response to 9/11 proved a bonanza. At the Pentagon, Beretta retained the main contract to provide handguns to the army, but elite US military units with the authority to choose their own small arms gravitated to the Glock.
Jim Smith, a veteran of Delta Force, the army’s premier special-operations unit, explained that highly trained commandos considered the Austrian-made gun more dependable. Most commandos carry handguns as well as rifles; conventional infantry fighters usually are issued only rifles. Smith spoke of the Glock with clipped reverence. “We put it in the sand, in water, extreme heat, fired thousands of rounds,” he said. “Pull the trigger, it fires. Reliable.”
I met Smith at a small arms trade show in Germany. After retiring from Delta Force, he started a consulting business in Texas where he tutored corporate executives, police SWAT officers, and even some Army Rangers. The Rangers were frustrated that their unit, though elite, was still issued Berettas, he said. They wanted what the secretive Delta Force carried.
After the invasions of Afghanistan and Iraq, US authorities outfitting local security forces turned primarily to the Glock. The American government bought more than 200,000 of the Austrian pistols for distribution to Afghan and Iraqi police, national guardsmen, and soldiers. Spread over several years, those sales came on top of the company’s routine cash flow from police and commercial business.
The rush to award contracts and ship pistols caught American manufacturers unprepared. When they learned that Glock had cornered the post-9/11 market in the Middle East, some objected angrily. “As a US taxpayer and a US manufacturer, I am greatly offended that my tax dollars are being used to buy foreign weapons for the Iraqis when there were US companies that could have supplied that product,” Robert Scott, Smith & Wesson’s president, protested. Three members of Congress announced investigations of Glock’s procurement coup. The indignation drew media attention but had no substantive effect.
On the ground in Iraq, US military officers praised the Glock. “My personal opinion is that the Iraqi people respect power, and power is an AK-47 or a Glock nine-millimeter gun,” Captain Kevin Hanrahan of the Eighty-ninth Military Police Brigade told the Los Angeles Times . Hanrahan oversaw Baghdad police stations west of the Tigris River. Some Iraqi officers had abandoned their posts, he added, because they “were outgunned and outmanned” by insurgents. He sounded like an American police chief in the late 1980s.
Whether or not they instilled confidence in the Iraqi authorities, US-supplied Glocks definitely became hot items on the Baghdad black market. “The Americans gave us Glocks without registering the serial numbers and without receipts,” a former policeman named Yasser told Agence France-Presse. When Yasser quit his unit, he sold the Glock he had been given to “a friend” for $800. The American military eventually lost track of some 190,000 small arms in Iraq, including 80,000 pistols—mostly Glocks, according to US congressional investigators. Insurgents appreciated a reliable weapon as much as anyone else, and the Glock became standard among Sunni militants who attacked Americans.
The story was much the same in Afghanistan. Large numbers of Glocks furnished to local army units simply vanished. Whoever ended up with its pistols, Glock prospered from the Bush administration’s global war on terror, just as it had from the earlier domestic war on drugs.
But Glock’s impressive sales figures were accompanied by intensifying disarray within its corporate ranks. It was almost as if selling pistols no longer required the close attention of the company’s top executives. The Glock sold itself.
In February 2003, Paul Jannuzzo once again collided with the NRA, this time as a result of an appearance on 60 Minutes . The CBS newsmagazine broadcast a segment on “ballistic fingerprinting,” a digital technology that allows investigators to link bullet casings from shootings to suspected crime guns. NRA leader Wayne LaPierre told 60 Minutes that the method, which matches the unique marks guns make on spent casings, was unreliable and would facilitate confiscation of weapons from law-abiding owners.
Less hasty to dismiss ballistic fingerprinting, Jannuzzo said in a separate interview that Glock had a pilot program under way with the government. “It has been expensive,” he said. “It slows production. To make certain that we’re getting the right cases to the right serial number, at this point, we now go through test-firing the guns twice.” Still, Glock would consider contributing information to a national database to aid police, if one were put together. “The people who right now are saying there is no use for it,” Jannuzzo said, “that it’s an intrusion upon our freedom, have arbitrarily drawn a line too soon.”
Characteristically, Jannuzzo positioned Glock as an independent-minded friend of law enforcement—but without making any concrete concessions to new regulation. His ambiguity did not mollify activist gun owners. Glock was inundated with demands for Jannuzzo’s head. Perceived apostasy against NRA gospel required excommunication. And sure enough, within the space of a few weeks, Jannuzzo announced that, after twelve years at Glock, Inc., he would step down as chief operating officer, general counsel, and, for all practical purposes, the US gun industry’s best-known executive.
Second Amendment websites lit up in celebration. “Glock Exec Resigns Because of Us!!!” proclaimed one contributor to a gun discussion group on TheHighRoad.org. “We got pissed, we made calls and wrote letters, the guy resigned,” agreed a colleague. “A message was sent here. And someone heard it loud and clear. Sell us out, and sell your last handgun.”
In fact, Jannuzzo’s departure involved even more drama than the online rabble-rousers assumed. Since the July 1999 attack on Gaston Glock, executives throughout the company had been looking over their shoulder—and with good reason. Private eyes hired by Glock combed company documents, scanned e-mail, and even conducted physical surveillance, ferreting out evidence of financial misbehavior.
As if this did not create sufficient tension, romantic jealousy heightened apprehension in the American subsidiary. Jannuzzo had split with his second wife and become involved with Monika Bereczky, Glock’s human resources manager. Bereczky, the former hotel concierge, had remained an object of the owner’s affection. Unaware of Jannuzzo’s relationship with her, or, more likely, indifferent to it, Glock continued to flirt with the much younger Bereczky. He routinely put his arm around her waist in public, she said, or suggestively grabbed her thigh while she was chauffeuring him to appointments. Jannuzzo, who had a temper to start with, took offense when his employer treated Bereczky as a plaything and, in Jannuzzo’s view, implicitly encouraged others to gossip about her sex life. On one occasion, when an Austrian-based Glock executive referred to Bereczky as a loose woman in Jannuzzo’s presence, the combustible American jammed a lit cigar into the visitor’s forehead. A bigger blowup seemed inevitable.
In the wake of the 60 Minutes episode, and with personal antagonism mounting, the explosion finally came. One morning, Jannuzzo drove to Gaston Glock’s residence in Atlanta. He had decided to get out. With no preliminaries, Jannuzzo announced to his employer that he was quitting. Bereczky was leaving with him, Jannuzzo added. At that moment, she was cleaning out her office in Smyrna.
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 donations 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.
On the topic of political contributions, Guevara asserted: “GLOCK has never authorized (and would never authorize) any act that would violate United States campaign finance laws. Manown and Jannuzzo stole over $500,000 of GLOCK money for themselves and then labeled it as political contributions to hide their crimes. In any event, we conducted our own due diligence, which revealed that Manown’s … statement that GLOCK money was spread to employees to make political contributions is entirely false (except as to Manown and Jannuzzo).… With respect to the allegation that GLOCK contributed $60,000 to the 2000 presidential political campaign, the evidence shows that Manown stole this money from GLOCK and transferred it to Cayman Island accounts controlled by Manown and Jannuzzo.”
Guevara concluded by questioning the origins and trustworthiness of the facts in my article. “GLOCK believes that you have been provided false information by some unreliable sources, including convicted felons,” he wrote.
Putting it charitably, the company and its counsel appeared to miss the point. On the central events that made life within Glock so colorful, there was little dispute: Someone tried to kill Gaston Glock. His top financial lieutenant, Ewert, was convicted of having hired the hit man. Glock endorsed this theory of the crime, and it was Glock who accused Ewert of trying to take control of his company. In the United States, Glock’s senior executive, Jannuzzo, and a longtime lawyer, Manown, were implicated in stealing from the company—again, with much of the evidence coming from Glock itself. Other evidence came from Manown, who provided prosecutors with a detailed confession.
The important thing is not precisely how much money Jannuzzo and Manown devoted to illegal political donations versus how much they allegedly hid in the Cayman Islands or simply stuffed into their wallets. What is remarkable is that the company operated at all amid such bedlam and that its vital American subsidiary continued to produce healthy profits under such dubious stewardship. That the polymer pistols still managed to flow from the factory and sell throughout the United States and the world—despite the executive chaos—was one of the greatest tributes to the intrinsic quality of Gaston Glock’s creation.