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Kerik Could Face Tough Grilling During Confirmation Hearing

Former Police Commissioner, Tapped as Homeland Chief, Is Member of Taser Board

DEBORAH SOLOMON / Wall Street Journal 10dec04

[More on: Kerik | Taser ]

 

Bernard Kerik's up-by-the-bootstraps life story and his work after the Sept. 11 terror attacks made him a natural candidate to be secretary of Homeland Security. But the former New York City police commissioner may face tough questions at his Senate confirmation hearing next year if Democrats zero in on Mr. Kerik's police past and tenure as a well-paid corporate director.

One area of interest is likely to be Mr. Kerik's ties to Taser International Inc., the Arizona maker of stun guns that has been selling its devices to law-enforcement agencies around the world. Taser has sold 110 devices to the Homeland Security Department, and analysts say they expect the company to seek additional business whether or not Mr. Kerik is confirmed.

Mr. Kerik, who is on the board of Taser, recorded a profit of more than $4.4 million last month when he exercised company-issued stock options. The transactions, reported in the New York Post, came as Taser stock was skyrocketing as a result of a government-authored report, parts of which were released on Oct. 18, that Taser said concluded its technology was "generally effective without significant risk."

On Nov. 11, Mr. Kerik exercised options, buying shares at prices ranging from 29 cents to $7.21 a share (adjusted for a subsequent stock split) and selling them for $25.66 a share.

Taser shares continued to rise until Nov. 26, when a New York Times report questioned whether the government's study had, in fact, found Taser's product safe. That sent Taser shares, adjusted for a split, down 7% to $23.50. The stock has since rebounded and yesterday in 4 p.m. trading stood at $26.21, up 22 cents, on the Nasdaq Stock Market.

Mr. Kerik wasn't alone in his good timing. The entire Taser board, and several executives, sold significant stakes valued at more than $90 million from Oct. 18 to Nov. 26, according to Securities and Exchange Commission filings.

The government-sponsored study was released only partially in October and a fuller version is expected to be out within the next several months, according to a military spokesman. The study was done by the Human Effects Center of Excellence, a group established by the Air Force Research Laboratory and the Joint Non-Lethal Weapons Program.

In a news release Taser executives said the study "re-affirms the life-saving value of Taser technology." The Air Force lab released a more muted statement late last month, saying that while overall results support the conclusion that Taser's stun guns are effective, there is "uncertainty in the results" because of "several key data gaps."

A Bush administration official familiar with the nomination said Mr. Kerik was aware that he was being considered for the post last month and decided to sell his stock because he knew if he were nominated and confirmed he eventually would be required to do so. The official didn't know whether Mr. Kerik, as a Taser director, had been privy to the findings of the government-sponsored report, but rejected the notion that Mr. Kerik sold shares because of any inside information. The Office of Government Ethics is in the midst of vetting Mr. Kerik, the official said.

Mr. Kerik couldn't be reached to comment and the confirmation process precludes him from talking to the media. His nomination was announced a week ago.

Taser has been struggling with questions about the safety of its products, which are intended to be used by military and law-enforcement officials as an alternative to lethal weapons. Taser said in a statement that its technology "saves lives every day."

Mr. Kerik, who joined Taser's board in 2002, exercised options on one other occasion, realizing a profit of $735,850 in November 2003.

Questions about Mr. Kerik's sale of Taser shares aren't the first his finances have raised. Mr. Kerik was fined $2,500 in February 2002 for using three New York City police officers to perform private research for his memoir, according to city records.

Mr. Kerik also filed for personal bankruptcy protection in 1987 when he was a 32-year-old police officer taking home $1,362 a month, according to federal court records. Mr. Kerik had mounting credit-card bills, loan repayments and other department-store tabs and, according to his bankruptcy petition, he listed debts totaling about $12,000. He was discharged from his debt in March 1988.

Mr. Kerik is a senior vice president at Giuliani Partners LLC, the consulting firm formed by former New York Mayor Rudolph Giuliani, and is chief executive of Giuliani-Kerik LLC, an affiliate of Giuliani Partners. Both firms offer expertise in security-related matters. Colleagues and associates say that if confirmed as Homeland Security secretary, Mr. Kerik would have to be very cautious in how he deals with former clients that do business with government and law-enforcement agencies.

--Robert Block, Kara Scannell and Gary Fields contributed to this article.

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