Cerberus to sell investment in gun maker after Connecticut shootings

The Global and Mail, Sakthi Prasad, Reuters, Dec. 18 2012

Mourners are seen outside the funeral for Noah Pozner, 6, in Fairfield, Conn.,

Monday, Dec. 17, 2012. Pozner was one of 20 children killed in the Sandy

Hook school shooting. (Kevin Van Paassen /The Globe and Mail)

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U.S. private equity firm Cerberus Capital Management is selling its investment in gun maker Freedom Group, whose AR 15 rifle was used in a U.S. school massacre last week, following pressure from a major investor.

The California State Teachers’ Retirement System (CalSTRS) said on Monday it was reviewing its investment with Cerberus in the wake of Friday’s shooting in Newtown, Conn., which claimed 27 lives, including 20 school children.

CalSTRS, the second largest pension fund in the United States, had invested $751.4-million with Cerberus by the end of March 2012, according to its website.

Cerberus said on Tuesday it would hire a financial adviser to sell its interests in Freedom Group and return the proceeds to investors.

The private equity firm expressed shock and grief at the killings, while adding Freedom Group was not responsible.

“We do not believe that Freedom Group or any single company or individual can prevent senseless violence or the illegal use or procurement of firearms and ammunition,” it said.

In total, 28 people died in the incident, including the gunman, who turned the gun on himself when he heard police approaching.

Cerberus bought firearms maker Bushmaster in 2006 and later merged it with other gun companies to create Freedom Group, which reported net sales of $677-million for the nine months ended September, up from $565-million the same time a year ago.

Founded in 1992 by Stephen Feinberg and William Richter, New York-based Cerberus has over $20 billion under management and shares its name with a mythical three-headed dog which in Greek mythology guards the entrance to the underworld.

Besides Cerberus, a few other private equity firms also have stakes in firearms companies. Sciens Capital Management, for example, jointly owns small arms maker Colt Defense.

In an opinion piece published on Monday in Slate magazine, former New York Governor Eliot Spitzer said pressure should be stepped up on the owners of gun companies, like Cerberus, to change the way they operate.

“It is time to determine pension fund by pension fund who has invested in Cerberus and bring pressure on those investors either to get out of Cerberus or have Cerberus change the way it runs the gun industry,” Mr. Spitzer wrote.

Popular New York Times columnist Andrew Ross Sorkin, in an opinion piece that was critical of private equity investments in arms makers, took exception to the fact that Freedom Group and other notable gun manufacturers had not commented on the tragedy.

Both opinion pieces were published before Cerberus’s announcement.

Cerberus said the Newtown tragedy was a “watershed event” that has raised the national debate on gun control “to an unprecedented level.”

However, it added the firm was responsible for only investment decisions it makes on behalf of its clients and does not play the role of “statesmen or policy makers.”

“It is not our role to take positions, or attempt to shape or influence the gun control policy debate. That is the job of our federal and state legislators,” it said.

U.S. lawmakers have not approved a major new federal gun law since 1994, and a ban on certain semi-automatic rifles known as assault weapons expired in 2004.

The massacre has led President Barack Obama and some congressional leaders to reconsider what has been a largely hands-off approach to gun control in recent years.

The percentage of Americans favouring tough gun regulations rose significantly after the mass killings at the Connecticut school, a Reuters/Ipsos poll said on Monday.

A man holding a Bushmaster rifle at the 135th NRA Convention 

in Milwaukee, Wisconsin, on May 19, 2006 (AFP/File, Jeff Haynes)

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