MITCHELL 1 LAW OFFICES, P .C . Robert Mitchell (AZ 011922 ) 2 Anchor Centre One, Suite 122B 2210 East Camelback Roa d 3 Phoenix, Arizona 85016 Tel : [phone] Fax : [phone] Liaison Counsel for Plaintiff and the Clas s 6 BERNSTEIN LIEBHARD & LIFSHITZ, LLP 7 Mel . E . Lifshitz Keith M. Fleischman 8 Timothy J . MacFall 9 Joseph R . Seidman, Jr . Stephanie Beige 10 Russell M . Iger Jeffrey Lerner 11 10 East 40th Street New York, NY 10016 12 Tel : [phone] Fax : [phone] Lead Counsel for Plaintiff 14 and the Class 15 UNITED STATES DISTRICT COURT 16 FOR THE DISTRICT OF ARIZON A 17 No . C05-0115-PHX-SRB CLASS ACTION
In re : TASER INTERNATIONAL 18 SECURITIES LITIGATION 19 20 This Document Relates to : 21 ALL ACTIONS 22 23 2 25 26
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 193 4 DEMAND FOR JURY TRIAL
Lead Plaintiff Eli Wilamowsky ("Plaintiff'), on behalf of himself and all others similarl y situated, by his undersigned attorneys, upon personal knowledge as to himself and his own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted b y
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and through his attorneys, which included, among other things, interviews with former employees o f TASER International, Inc . ("TASER" or the "Company"), review of the public documents and announcements made by Defendants, Securities and Exchange Commission ("SEC") filings , Company press releases, and various scientific, medical, and safety studies and reports regardin g
5 6 7 8 9 May 29, 2003 and January 11, 2005, inclusive (the "Class Period"), seeking to pursue remedies 10 11 12 13 14 15 16 According to a posting on TASER's website, more than 7,000 police departments around the worl d 17 18 19 20 21 22 23 24 of TASER' s weapon systems due to the increasing incidence of death and se rious injury following 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
conducted energy weapons, alleges for his Amended Complaint, as follows :
NATURE OF THE ACTIO N 1 . This is a federal class action on behalf of purchasers of TASER securities between
under the Secu rities Exchange Act of 1934 (the "Exchange Act") . 2 . TASER develops, assembles and markets conducted energy weapons , or stun-guns, for use in the law enforcement, private security and personal defense markets . Throughout the Clas s Period, TASER reported meteoric revenue growth as the result of the increasing acceptance and us e of the Company's weapons, particularly its newest model, the X26, by law enforcement agencies .
have purchased TASER products . The Company' s success was based on its claims that its weapons could incapacitate dangerous , combative or high-risk subjects without any adverse long-term health effects. Indeed, TASER' s website states that "[t]he ADVANCED TASER provides for maximum safety for both the officer and the subject by bringing dangerous situations quickly under contro l before force escalates to lethal levels ." (Emphasis added) . 3 . During the Class Period, however, significant questions arose concerning the safet y
TASER device use . The Company vociferously defended the safety of its devices, citing variou s scientific studies that Defendants claimed established that TASER weapons were safe. Defendants '
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vigorous defense of the safety of its products was largely successful and the Company continued to report record revenues during the Class Period . As a result, in 2004 alone, TASER's stock rose 361% and split three times . Indeed , based on the purpo rted strength of TASER' s 2004 third quarter, Defendants revised its 2004 annual revenue growth projections upwards, from a 150% increase over
5 6 7 8 9 10 11 by Amnesty International, which called for a ban on the use of TASER devices pending further 12 research regarding their safety, as well as an announcement concerning the introduction o f 13 14 15 16 17 18 19 through mid-November 2004 . The insiders' concerns were well-founded as the delays and/o r 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
2003 to a 175% percent increase . 4. Unbeknownst to investors , however, du ring September 2004, TASER 's busines s started to slow due to concerns about its weapons' safety, endemic quality control issues, and th e weapons' performance . Moreover, TASER insiders were aware that the Company's business would be further adversely impacted by the imminent publication of a comprehensive, highly critical report
competing products . Based on the undisclosed information concerning lagging sales and the looming publication of the Amnesty Inte rn ational report, Company insiders, and va rious members of TASER' s Board - who had previously sold approximately $51 million of stock du ring a n undisclosed suspension of shipments in the first quarter of 2004 - engaged in massive insider sales, selling approximately $85 million worth of TASER stock in a two-week period at the end of October
cancellations of contemplated orders following issuance of the Amnesty International repor t dramatically increased . Indeed, TASER was only able to meet its 2004 revenue projections due to two suspect "eleventh-hour" sales : a December 20, 2004 sale of $1 .5 million worth of its new civilian model weapon to Davidson's Inc . ("Davidson's"), a distributor ; and the December 30, 2004 sale of $700,000 worth of products - which was accompanied by a handwritten note that stated , "Hope this will help outs i t i i "
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5. Shortly after the end of the fiscal year, the truth about the Company was revealed . On January 6, 2005, in a partial disclosure released after the market closed, the Company revealed tha t the SEC had initiated an inquiry regarding TASER's statements about the safety of its devices, a s well as the Davidson ' s transaction . As a result , TASER' s stock dropped almost 20% from a close o f
5 6 7 8 9 10 11 this final disclosure, TASER stock fell approximately 30%, closing at $14 . 10 per share on January 12 11, 2005, the first trading day after the issuance of the foregoing press release, compared to th e 13 14 15 16 17 18 19 20 6. TASER's primary products are the Advanced TASER M26 (the "M26") and 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
$27 .62 per share on January 6, 2005 (prior to the disclosure of the SEC investigation) to a closing price of $22 .72 per share on January 7, 2005 ( the first trading day following the disclosure of th e SEC investigation) . Then, on January 11, 2005, while attempting to explain away the highly criticized insider sales, Defendants disclosed that TASER's sales might be adversely impacted a s police departments evaluated the newly introduced devices of two competing companies . Following
closing price of $20.05 per share on January 10, 2005 . The massive fourth quarter insider sales directly preceded the above disclosures and the subsequent fall in TASER's revenues b y approximately 47%, from $19 .2 million in the fourth quarter of 2004 to $10 .2 million in the first quarter of 2005 . SUMMARY OF THE CLAIMS TASER's Busines s
Advanced TASER X26 (the "X26") . Both weapons utilize compressed nitrogen to fire two probe s up to 21 feet, at a speed of over 180 feet per second . These probes are connected to the TASER device by insulated wire . A five second electrical signal is transmitted through the wires to where th e probes make contact with the body or clothing . According to the Company's website, the electrical shock delivered by the M26 is 26 watts ; 1 .76 joules per pulse ; and 3 .6mA average current. TASER calls the electrical pulses delivered by the M26, TASER-Waves or T-Waves . The shock delivere d
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by the M26 causes the target to experience uncontrollable muscle contractions . As detailed in the Company's 10-K SEC filing dated March 4, 2004, "[t]he T-Waves temporarily overwhelm th e normal electrical signals within the body's nerve fibers, impairing subjects' ability to control their bodies or perform coordinated actions ."
5 6 7 8 9 10 11 stopping power" than the M26 "with the same margin of safety ." In its public filings, TASER 12 claimed that the X26 "uses a highly refined energy pulse that concentrates a small portion of energy 13 14 15 16 17 18 19 without firing the probes . 20 21 22 23 24 25 26 27 use of TASER devices by law enforcement. In addition, there were a growing number of reports o f 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
7. On May 30, 2003, TASER introduced the X26 with "Shaped Pulse Technology ." According to the Company's website, the electrical output of the X26 is 5 watts ; 0.36 joules per pulse ; and 2 .1 milliamps average current . Although the charge delivered by the X26 is less powerfu l than that of the M26, in the press release announcing the introduction of the device, the Company claimed that X26's "Shaped Pulse Technology" enabled the weapon "to achieve even greater
to first penetrate the barrier, while the majority of electrical charge is held in reserve, flowing freely through the barrier once the leading edge has been penetrated . " 8. The M26 and the X26 repeatedly cycle, delivering continual electrical shocks if th e trigger is continually depressed after firing. Both weapons can also be utilized as "drive" or "touch " stun guns, in which shocks are delivered directly from electrodes at the front end of each weapon ,
The Safety Controvers y 9. TASER has consistently represented that its weapon systems are a safe, "non-lethal " force option for law enforcement . For example, in its Form 10-KSB for 2003, TASER stated wit h respect to the X26, that "[t]he product design was completed, comprehensive medical safety testing was conducted , and the first weapons began shipping in September of 2003 ." (Emphasis added) . During the Class Period, however, an increasing number of deaths were reported following
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injuries to police officers who had been subjected to application of the TASER devices durin g training sessions . In total, eighteen wrongful death or personal injury lawsuits were filed agains t TASER in connection with the use of its weapons by law enforcement or during training exercises during the Class Period . As a consequence of the growing number of fatalities and injuries, the
5 6 7 8 9 10 11 delivery of electrical shocks . In their efforts to address the Company's increasingly vocal critics, 12 Defendants made materially misleading statements about the safety of its weapons, the adequacy of 13 14 15 16 17 18 19 unintended consequences ." Defendant Patrick W. Smith, the chief executive officer of TASER, 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Company's representations conce rning the safety of the TASER weapons systems came under increasing scrutiny . 10 . Critics charged that even if safe for healthy individuals, the electrical shock delivere d by the TASER weapons could cause fatal vent ri cular fib ri llation in certain "at risk" populations ; could result in fatal acidosis ; or could cause fatal respiratory complications as a result of the repeate d
the medical testing of its devices, and the findings of the various studies conducted . 11 . For example , to support its claims that the TASER weapons were safe, Defendant s repeatedly touted the findings of various scientific studies, such as the study conducted by th e Human Effects Center of Excellence ("HECOE") of the Department of Defense. In a press release , TASER said that the military study had found its guns "generally effective without significant risk o f
called the study "the latest chapter in a series of comprehensive medical and scientific studies which conclude that TASER technology is safe and effective ." TASER posted the initial HECOE repor t summary on the Company's website (an expanded summary of the HECOE report was published o n March 1, 2005 (the "March 2005 HECOE Report")) . 12 . As alleged more fully below, Defendants materially overstated the findings in th e HECOE study. In fact, according to The New York Times, at a symposium on non-lethal weapons ,
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the Air Force laboratory that conducted the HECOE study stated that it had actually found "that th e guns could be dangerous and that more data was needed to evaluate their risks ." Moreover, military officials asked Defendants to "tone down" their statements reading the findings of the HECO E Report .
5 6 7 8 9 10 11 12 2004" grant solicitation by the National Institute of Justice (the "NIJ") . Moreover, nothing 13 14 15 16 17 18 19 injuries sustained during TASER training . In the Company's public filings, for example, Defendant s 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
13 . Furthermore, Defendants failed to disclose that TASER had participated in, or funded certain studies and, therefore , such research was not independent. In their efforts to skew scientifi c research, TASER officials went so far as to try to participate in an ostensibly independent study without disclosing their affiliation with the Company . During the Class Period, Dr . Robert Stratbucker, TASER' s Medical Director, omitted any mention of his affiliation with the Company in the curriculum vitae he submitted in connection with the "Less-Lethal Technologies, Fiscal Yea r
submitted to NIJ indicated that Dr . Stratbucker had already conducted studies for TASER, or that he had already concluded that the weapons are safe, despite the fact that a $500,000 grant was awarded to specifically assess the safety of the TASER International TASER Energy Weapon . 14 . Defendants also made materially misleading statements during the Class Period i n order to minimize adverse publicity in the law enforcement community arising from police office r
falsely described one products liability action against TASER as resulting from a shoulder injury sustained by a police officer during training. In fact, that officer had sustained a T7 vertebra fracture as a result of the muscle contractions caused by a TASER device shock .
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Design and Manufacturing Defect s 15 . As the number of fatalities and the attendant controversy surrounding the safety of th e weapons grew, the investing public was unaware that the Company was also plagued by qualit y control problems due to design flaws and poor manufacturing processes that resulted in a steady
5 stream of defective product returns . As alleged more fully below, a key component of the X26 and 6 7 8 9 10 11 12 functions, including data concerning use of the device, and the devices' laser sight was not visible i n 13 14 15 16 17 18 19 20 sometimes caused the devices to deliver charges at frequencies far higher than that shown in th e 21 22 23 24 25 26 27 second fi ri ng cycle, it did not have greater stopping power than the M26 . The X26 delivered 1 9 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
the M26 was a circuit board manufactured by First Electronics, Inc . ("First Electronics") . According to a former supervisory employee of TASER, who was familiar with the manufacturing process fo r the X26 and the M26, the "unstable" design of the circuit board caused the devices to fail to fire, fir e intermittently, or fire repeatedly and uncontrollably (due to a failure in a component of the circui t board to shut-off) . In addition, the units did not accurately record data concerning the weapons '
sunlight. 16 . According to this, and other former employees familiar with the production process, problems in the manufacturing process caused additional problems with the X26 and the M26 . These former employees stated that the TASER weapons were primarily hand-assembled, and tha t the widespread use of unskilled workers on the production line often resulted in improper solderin g of components and other assembly defects . According to one former employee, these defect s
weapons' specifications, as well as other weapon malfunctions . 17 . In addition, during the Class Period, the law enforcement community becam e increasingly dissatisfied with the performance of the X26 . In public statements, the Company toute d the X26 as delivering greater stopping power than the older M26, despite its less powerful charge . In fact, because the X26 did not deliver a uniform number of pulses per second during the entire fiv e
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pulses per second for the first two seconds of the firing cycle . The pulse rate, however, dropped t o 15 pulses per second for the last three seconds of the firing cycle . Because of the lower number o f pulses per second during the last three seconds of the firing cycle, the X26 simply did not delive r greater stopping power than the M26 . According to a former TASER employee, there were a
5 6 7 8 9 10 11 12 endemic product defects and the issues concerning the effectiveness of the X26, during the Clas s 13 14 15 16 17 18 19 20 until in or about May 2004 . The Individual Defendants , as well as other Company insiders and 21 22 23 24 25 26 27 revenue growth for 2004 upward, from a 150% increase compared to 2003, to a 175% increase over 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
growing number of undisclosed complaints from law enforcement that the individuals hit with th e X26 were able to gain mobility after the first two seconds of the firing cycle . Tacitly acknowledgin g the validity of these complaints, in September 2004, TASER increased the weapon's pulse rate to 1 9 pulses for the entire five second cycle in order to maintain the immobilizing effects of the X26 . The Insider Sale s 18 . Despite the controversy involving the safety of the TASER weapons, as well as th e
Period , TASER consistently repo rted positive financial results because it held a vi rtual monopoly i n the conducted energy weapon market . Having bought out its only competitor in June 2003, TASE R had no competitors for most of the Class Period . Shortly after it began to ship, however, Defendant s became aware of a software defect with the Company's new X26 device . Thus, in the first quarter of 2004, TASER suspended product shipments while it attempted to rectify the problem . The Company did not disclose the existence of the problem, or the resulting suspension of shipments ,
members of TASER' s Board sold approximately $51 million du ring February 2004, after the suspension, but prior to any public disclosure of the problems with the X26 or the temporary halt o f shipments . 19 . Despite the first quarter suspension of shipments, sales of the X26 continued to climb . In fact, due to the purported success of the third quarter 2004, TASER revised its projected annua l
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2003 . While Defendants were issuing their favorable public statements, however, they were awar e that the Company's sales had actually started to slow in September 2004 due to the safet y controversy and widespread quality problems with the TASER devices . Moreover, Defendants soo n learned that the TASER's business prospects were about to substantially worsen .
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20. Several weeks before its November 30, 2004 publication, Defendants became aware that Amnesty International was about to issue a highly critical report on the safety of the TASE R devices . Citing the numerous incidents of fatalities and injuries repo rted following TASER use , Amnesty International recommended a moratorium on continued use of the weapons pendin g comprehensive safety testing . In addition, on October 21, 2004, Law Enforcement Associates announced that it had completed the housing design for its new stun weapon which had a projecte d
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launch date of March 2005 . Further, on November 15, 2004, Stinger Systems announced that it ha d
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entered the projectile stun gun market with the introduction of "The Stinger ." Both products were to compete directly with TASER's M26 and X26 weapons . While TASER had already successfully penetrated an estimated 20% of the domestic law enforcement market , Defendants knew that because of (i) the falsity of their statements conce rn ing the TASER weapons' safety ; (ii) the undisclosed design and manufacturing defects; and (iii) the undisclosed issues regarding the effectiveness of the X26, the emergence of competing products would have a calamitous effect o n
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the Company' s sales .
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CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
21 . Thus, shortly after Defendants announced the upward revision of the Company's projected 2004 revenues, Defendants Phillips W . Smith, Patrick W . Smith and Thomas P. Smith, a s well as numerous members of the TASER Board and other Company employees, engaged i n massive insider sales of almost 1 .7 million shares of TASER common stock, for proceeds of more than $85 million. Thus, insider and Board member sales during the Class Period totaled more than
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$120 million - approximately $40 million more than the Company's total revenues for all of 200 3 and 2004 . The Fall-Out from the Amnesty International Report and Product Defect s 22 . Shortly after the massive insider selling by TASER directors, officers and employees,
5 6 7 8 9 10 11 12 defects noted above, an increasing number of police departments postponed and/or cancelled order s 13 14 15 16 17 18 19 20 the exclusive distributor for the X26C for one year . The Company further announced tha t 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
on November 30, 2004, Amnesty International released its report entitled "Excessive and Letha l Force? Amnesty International's Concerns About Deaths and Ill Treatment Involving Police Use o f TASERs" ("Amnesty International Report") . According to the Amnesty International Report, more than 70 people had died in the United States and Canada after being shocked by either the TASE R M26 or X26 as of November 30, 2004 . 23. As a consequence of the safety issues cited in that repo rt, as well as the product
with TASER during the fourth quarter 2004 due to safety conce rns and in order to evaluat e competing products . The Suspect Fourth Quarter Transaction s 24. On December 20, 2004, TASER announced that it had entered into an exclusive . distribution agreement with Davidson 's, to market and distribute the TASER X26C Citizen Defens e System, a civilian version of its X26 weapon . Under the terms of the agreement, Davidson's will b e
Davidson's initial order was for $1 .5 million in products, including 1,000 X26Cs, which wa s expected to ship in the fourth quarter of 2004 . 25 . In addition, on December 30, 2004, the last business day of the fiscal year, a n unidentified distributor placed a $700,000 order for TASER products . There was a handwritten note on the purchase order that said "Hope this helps out! ! ! ! ! " 26. The Davidson's transaction and the $700,000 transaction were critical to th e
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Company because, as was subsequently disclosed after the end of the Class Period, without thos e eleventh-hour sales, TASER would not have met its fourth quarter and fiscal year 2004 revenu e projections . The Truth Emerge s
5 6 7 8 9 10 11 12 28. On January 11, 2005, after the market closed, the Company issued a press releas e 13 14 15 16 17 18 19 20 share on January 11, 2005, the first trading day after the issuance of the foregoing press release, 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
27. On January 6, 2005, after the market closed, TASER announced that the SEC ha d initiated an informal inquiry concerning the Company' s statements concerning the safety of it s weapons, as well as the Davidson ' s transaction . The price of TASER common stock dropped from a close of $27.62 per share on January 6, 2005 (p rior to the disclosure of the SEC investigation) to a closing price of $22.72 per share on January 7, 2005 ( the first trading day following the disclosure o f the SEC investigation) .
entitled "An Open Letter to Our Shareholders and Customers ." In that press release, Defendant Thomas P . Smith attempts, inter alia, to explain away the massive insider sales by the Individua l Defendants (without mention of the massive sales by other Company insiders) . Significantly, the press release also states, "[d]uring the first half of 2005, it is possible that we may see some delays in orders as agencies test and evaluate potential new entrants ." With that disclosure, all the artificia l inflation in the price of the Company's common stock was removed, as TASER closed at $14 .10 pe r
compared to the closing price of $20 .05 per share on January 10, 2005 . 29. In the Company's annual report filed with the SEC on Form 10-KSB on March 31 , 2005 , TASER acknowledged that the adverse publicity from the safety controversy surrounding it s devices, as well as the advent of competition in the conducted energy weapons market had adversely affected the Company' s business .
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1 2 3 4 the SEC [17 C .F.R. 240 .1Ob-5] . 5
JURISDICTION AND VENUE 30. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of th e Exchange Act [15 U .S.C. 78j(b) and 78t(a)] and Rule lOb-5 promulgated under Section 10(b) b y
31 . This Court has jurisdiction over the subject matter of this action pursuant to 28 U .S.C. 6 7 8 9 10 11 12 33 . In connection with the acts alleged in this Complaint, Defendants, directly o r 13 14 15 16 17 18 19 20 35. Defendant TASER is incorporated in Delaware and maintains its principal place o f 21 business in this District at 7860 East McClain Drive, Suite 2, Scottsdale, Arizona 85260 . 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
1331 and 1337 , and Section 27 of the Exchange Act [15 U .S .C . 78aa] . 32. Venue is proper in this District pursuant to Section 27 of the Exchange Act and 28 U.S.C. 1391(b) . Many of the acts charged herein , including the preparation and dissemination o f materially false and misleading information, occurred in substantial part in this District and TASE R conducts business in this District .
indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications, and the facilities of the national securities markets . PARTIES 34. Lead Plaintiff Eli Wilamowsky , as set forth in the certification previously filed wit h the Court and incorporated by reference herein, purchased the common stock of TASER at artificially inflated prices during the Class Period and has been damaged thereby .
36. Defendant Dr . Phillips W . Smith ("Dr . Smith"), served as the Company's Chairman of the Board of Directors and a director from 1993 until December 2004 . Dr. Smith also served as the Company's Director of Investor Relations . Dr . Smith is the father of Defendants Patrick W . Smith and Thomas P . Smith . 37. Defendant Patrick W . Smith ("Rick Smith"), served as Chief Executive Officer and a s
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a director of the Company since 1993 . He is a co-founder of the Company . 38. Defendant Thomas P . Smith ("Tom Smith"), served as President of the Compan y since April 1994 and as a director since 1993_ He is a co-founder of the Company . 39. Defendant Kathleen C . Hanrahan ("Hanrahan") served as the Company's Chie f
5 6 7 8 9 10 11 41 . Defendant Steven Tuttle ("Tuttle") served as Vice President of Communications and 12 was chief spokesman for Taser during the Class Period . 13 14 15 16 17 18 19 information concerning the medical testing of its weapons systems ; the Company's participation i n 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Operating Officer since November 2003 . Hanrahan joined the Company in January 1996 as an internal controls consultant and served as its controller from March 1996 to November 2000 and also served as the Company's Chief Financial Officer from November 2000 through May 2004 . 40. Defendant Daniel Behrendt ("Behrendt"), served as Chief Financial Officer of th e Company since May 2004.
42. The defendants referenced above in paragraphs 36-41 are collectively referred to herein as the "Individual Defendants ." 43 . During the Class Period, the Individual Defendants, as senior executive officers an d directors of TASER were privy to confidential and propri etary information concerning TASER, its operations, finances, financial condition, and present and future business prospects, including :
certain safety studies ; the findings made and conclusions reached in those studies; the relativ e effectiveness or "stopping" power of the M26 and the X26 ; the design flaws of the TASER devices ; the problems in the manufacturing process of the TASER devices ; the numerous returns of defectiv e products ; the decline in orders during the third quarter of 2004 ; and the facts and circumstances surrounding the Davidson's transaction . The Individual Defendants also had access to material , adverse, non-public information conce rning TASER. For example, Defendants Rick Smith and
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Hanrahan attended daily production meetings during which the manufacturing problems, desig n flaws, and defective products were discussed . Defendant Tom Smith also attended some of thes e meetings . Furthermore, Defendant Rick Smith was aware that the manufacturer of the circuit board s used in the TASER devices, First Electronics, had informed the Company that the circuit boards di d
5 6 7 8 9 10 11 third quarter of 2004 . Because of their possession of such information, the Individual Defendant s 12 knew or recklessly disregarded the fact that adverse facts specified herein had not been disclosed to , 13 14 15 16 17 18 19 of their status as senior executive officers and directors were "controlling persons" within the 20 meaning of Section 20 of the Exchange Act and had the power and influence to cause the Compan y 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
not function properly due to design flaws by TASER, and not manufacturing flaws by Firs t Electronics . In addition, Defendants Rick Smith, Tom Smith, Hanrahan, and Behrendt were aware of the massive number of defective products being returned because they were present when an extra room had to be built at the TASER manufacturing facility to store all the returned goods . Moreover, the Individual Defendants were aware that there was an undisclosed slowdown in sales during th e
and were being concealed from, the investing public . Moreover, the Individual Defendants, and other Company insiders, who were aware of the foregoing, sold massive quantities of their persona l holdings in the Company shortly before the end of the Class Period . 44. The Individual Defendants are liable as direct pa rticipants in, and as co-conspirators with respect to, the wrongs complained of herein. In addition, the Individual Defendants, by reaso n
to engage in the unlawful conduct complained of herein . Because of their positions of control, th e Individual Defendants were able to and did, directly or indirectly, control the conduct of TASER' s business. 45. The Individual Defendants , because of their positions with the Company, controlle d and/or possessed the authority to control the contents of its reports, press releases, and presentations
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to securities analysts, and through them, reached the investing public . The Individual Defendants were provided with copies of the Company's press releases and SEC filings alleged herein to b e misleading, prior to or shortly after their issuance and had the ability and opportunity to prevent thei r issuance or cause them to be corrected . Thus, the Individual Defendants had the opportunity t o
5 6 7 8 9 10 11 12 business , products, markets, management , earnings, and present and future business prospects, and 13 14 15 16 17 18 19 course of conduct that operated as a fraud or deceit on purchasers of TASER' s stock b y 20 disseminating materially false and misleading statements and/or concealing material, adverse facts . 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
commit the fraudulent acts alleged herein . 46 . As senior executive officers and/or directors and as controlling persons of a publiclytraded company whose securities were, and are, registered with the SEC pursuant to the Exchang e Act, and which were traded on the NASDAQ and gove rned by the federal securities laws, th e Individual Defendants had a duty to promptly disseminate accurate and truthful information wit h respect to TASER' s financial condition and performance , growth , operations , financial statements,
to correct any previously issued statements that had become materially misleading or untrue, so that the market price of TASER's stock would be based upon truthful and accurate information . Th e Individual Defendants' misrepresentations and omissions during the Class Period violated these specific requirements and obligations . 47 . The Individual Defendants are liable as participants in a fraudulent scheme an d
The scheme : (i) deceived the investing public regarding TASER' s business , operations, and management and the intrinsic value of TASER stock ; and (ii ) caused Plaintiff and the other members of the Class to purchase TASER' s stock at artificially inflated p rices. PLAINTIFF'S CLASS ACTION ALLEGATION S 48. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) on behalf of all those who purchased the stock of TASER during th e
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Class Period and who were damaged thereby (the "Class") . Excluded from the Class are Defendants, the officers and directors of the Company during the Class Period, members of thei r immediate families and their legal representatives, heirs, successors or assigns and any entity i n
4 which Defendants have or had a controlling interest . 5 6 7 8 9 10 11 proposed Class . Record owners and other members of the Class may be identified from record s 12 13 14 15 16 17 18 19 counsel competent and experienced in class and securities litigation . 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
49 . The members of the Class are so numerous that joinder of all members i s impracticable . Throughout the Class Period, TASER stock was publicly traded . While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained throug h appropriate discovery, TASER had approximately 59 million shares of common stock outstanding as of November 4, 2004 . Plaintiff believes that there are hundreds or thousands of members in th e
maintained by TASER or its transfer agent and may be notified of the pendency of this action b y mail, using the form of notice similar to that customarily used in secu ri ties class actions . 50 . Plaintiffs claims are typical of the claims of the Class, as all Class members wer e similarly affected by Defendants' wrongful conduct in violation of federal law that is complained o f herein . 51 . Plaintiff will fairly and adequately protect the interests of the Class and has retaine d
52. Common questions of law and fact exist as to all members of the Class an d predominate over any questions solely affecting individual members of the Class . Among the questions of law and fact common to the Class are : a . whether the federal securities laws were violated by Defendants' acts as alleged herein ; b . whether statements made by Defendants to the investing public during the Class Period misrepresented material facts about the business and operations of TASER; and
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c. to what extent the members of the Class have sustained damages and the proper measure of damages . 53 . A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable . Furthermore, as th e damages suffered by individual Class members may be relatively small, the expense and burden o f individual litigation make it impossible for members of the Class to individually redress the wrong s done to them. There will be no difficulty in the management of this action as a class action . SUBSTANTIVE ALLEGATIONS TASER' s Business 54. TASER describes itself is a market leader in providing advanced non-lethal device s for use in the law enforcement, military, private security and personal defense markets . Prior to
12 13 14 15 16 17 18 effective against motivated subjects ." As a consequence, TASER retained Dr . Robert A . Stratbucke r 19 in 1996 to conduct tests "to determine if [TASER] could make the device more effective . . . ." 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
1999, the Company's primary product was the AIR TASER device . The AIR TASER had a power output of between 5-7 Watts . According to the sworn deposition of Defendant Rick Smith , TASER's CEO, which was taken in the personal injury action entitled Powers v. TASER
International, Inc ., No . CV2003-013457, pending in the Superior Court of the State of Arizona, Maricopa County (the "Powers Action"), "[t]he [then] existing generation of Taser devices were no t
55. Dr. Stratbucker conducted the developmental tests on an anesthetized pig in 1996 . That testing led to the 1999 introduction of the M26 . The M26 was the first conducted energ y weapon to cause what the Company describes as electro-muscular disruption ("EMD") . Accordin g to TASER's website : EMD weapons use a more powerful 18 to 26 Watt electrical signal to completely override the central nervous system and directly control the skeletal muscles . This EMD effect causes an uncontrollable contraction of the muscle tissue, allowing the M-Series to physically debilitate a target
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1 2 3 4 5 6 7 8 9 10 11 12 56.
regardless of pain tolerance or mental focus . The ADVANCED TASER M-Series are EMD weapons specifically designed to stop even the most elite, aggressive, focused combatants . Rather than simply interfe ring with communication between the brain and muscles , the ADVANCED TASER EMD systems directly tell the muscles what to do : contract until the target is in the fetal position on the ground . According to the Company's sales brochure for the M26 : Upon firing, compressed nitrogen projects two ADVANCED TASER probes 15 or 21 feet (depending on ca rtri dge) at a speed of 180 feet per second . The probes are connected by thin insulated wire back to the M26 . An electrical signal transmits throughout the region where the probes make contact with the body or clothing . The result is an instant loss of the attacker 's neuromuscular control and any ability to perform coordinated action . ADVANCED TASER uses an automatic timing mechanism to apply the electri cal charge for 5 seconds . If the trigger of the M26 is continually depressed, it will continue to cycle and deliver the burst s continually . In addition, the M26 may be used as a "drive" or "touch" stun gun, delivering a n
13 electrical charge directly from two stun electrodes at the front of the weapon . In the drive or touch 14 15 16 17 18 19 20 claimed that it had 5% greater stopping power than the M26 because of its "Shaped Pulse " 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR -19VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
mode, the M26 does not cause an EMD response, but rather causes incapacitation through the infliction of localized pain . 57. At the start of the Class Period, on May 29, 2003, TASER introduced its most recent law enforcement conducted energy weapon , the X26 . The firing and touch stun features of the X2 6 are the same as the M26 . The X26 has a far lower power output - 5 Watts - however, the Compan y
technology: The Shaped Pulse is comprised of two pulse phases . The first phase, called the "Arc Phase" is optimized to generate a very high voltage to penetrate clothing, skin or other barriers . The "Arc Phase" is a very high voltage short duration pulse that can arc through up to 2 inches of clothing or barriers . Once the arc is created, the air in the arc is ionized and becomes a low impedance electrical conductor that conducts the second pulse phase into the body .
1 2 3 4 5 6 7 8
The second phase of the Shaped Pulse is the stimulation phase, or "Stim Phase ." The Stim Phase does not have to arc across a barrier , since this was accomplished by the Arc Phase. The Stim phase only has to flow across the highly conductive arc from the Arc Phase . Hence, the Stim Phase is optimized to provide maximum incapacitation for a human target while operating at super-efficient power levels . 58 . The M26 and X26 are sold exclusively to law enforcement , military, correction agencies and the commercial airline industry . Law enforcement agencies have used TASER's stu n guns as alternatives to using their firearms or batons to control dangerous or combative individuals . TASER' s products are promoted to the public and law enforcement agencies on the ground that the y
9 10 11 12 13 14 15 16 trainers . Military personnel are trained by TASER' s Chief Master Instructor . Approximately 150 o f 17 18 19 20 21 22 23 courses in 2004 and, as of December 31, 2004, has conducted a cumulative 1,006 training course s 24 during which it trained more than 17,700 individuals in the use of TASER products . 25 26 60 . The Company generates revenues from three different sources : (i) the sale of it s TASER' s master instructors conduct TASER device training classes on a regular basis. The maste r instructors are independent professional trainers , serve as local area TASER experts, and assist in conducting TASER demonstrations at other police departments within regions . On January 1, 2001 , TASER implemented a $195 charge for each training attendee. TASER pays master instructors a per-session training fee for each session they conduct . The Company conducted over 350 training can save lives in situations where police would otherwise use deadly force . 59 . Because most law enforcement, military and corrections agencies will not purchas e I new weapons until a training program is in place to certify all officers in their proper use, TASER offers a sixteen-hour class that certifies law enforcement and corrections agency trainers a s instructors . Certified instructors may undergo further training and become certified as maste r instructors . Master Instructors are authorized to train other law enforcement and corrections agenc y
27 I weapons systems ; (ii) the sale of replacement cartridges for its weapons systems ; and (iii) revenu e 28
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from training . TASER sells most of its products in the United States through its network o f approximately 28 law enforcement distributors . The Company also utilizes a small number o f military and international distributors, as well as engaging in direct sales with a small number o f customers . The Company's publicly repo rted revenue recognition policy is that TASE R
5 6 7 8 9 10 11 12 United States . In the Company's 2004 Form 10-KSB/A, filed with the SEC on May 23, 2005 , 13 14 15 16 17 18 19 storage facilities, are located in Scottsdale, Arizona . In 2003, TASER's devices were assembled 20 21 22 23 24 25 26 27 source of controversy . In Consumer Products Safety Commission ("CPSC") studies authored b y 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
"recognize[s] revenues when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, title has transferred, the price is fixed and collectability is reasonabl y assured . All of the Company' s sales are final and our customers do not have a ri ght to retu rn the product . " 61 . Throughout the Class Period, TASER consistently repo rted increasing revenue based on growing acceptance and use of its weapons systems by law enforcement agencies throughout th e
TASER reported that "[n]et Sales increased $43 .2 million , or 177%, to $67.6 million for 2004 compared to $24 .5 million for 2003 . This increase was due to the increased unit sales of the higher priced TASER X26 devices, and increased single cartridge sales associated with the wider-sprea d and continued use of TASER devices by law enforcement ." 62. The Company' s manufacturing and final assembly facilities , as well as its offices and
completely by hand . The Company states that it began to automate certain aspects of th e manufactu ring process in 2004 . TASER 's weapons utilize finished circuit boards and injectionmolded plastic components provided by outside vendors . The circuit boards are manufactured by First Electronics . The Safety Controvers y 63 . Since its introduction in the 1970s, the safety of electric stun weapons have been th e
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Ted Bernstein in the mid-70s, it was concluded that stun weapons less powerful than the M26 coul d be lethal depending on individual susceptibility . 64. In 1987, Dr . Gary Ordog published a paper on injuries and the use of conducted energy weapons . Dr. Ordog's study involved the review of 218 cases in one hospital between 198 0
5 6 7 8 9 10 11 12 65. On March 31, 1991, a study conducted by Dr . Ronald Kornblum and others, entitled 13 14 15 16 17 18 19 heart attack and TASER shock in one, and an undetermined cause in the last one ." 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
and 1985 . Dr . Ordog found mild rhabdomyolysis (the breakdown of muscle fibers) an d myoglobinuria (the release of muscle components into blood circulation) in a number of cases, bu t could not determine if that was due to drug abuse or stun gun use . Dr. Ordog also concluded that continuous application of electrical current could result in respiratory arrest. In three of the cases studied, the patients died and Dr . Ordog concluded that the stun gun "cannot be held solely responsible for their deaths ."
Effects of the TASER in Fatalities Involving Police Confrontation, was published in the Journal of Forensic Sciences . The study examined the records of 16 deaths connected with the use of th e earlier generation, pre-EMD inducing, taser stun guns in Los Angeles . That study concluded that "the taser in and of itself does not cause death ." The study found that 11 of the 16 deaths resulte d from an overdose of drugs. The other five were described as follows : "gunshot wounds in three ,
66. In July 1992, Dr. Terence B . Allen published a follow up discussion in the Jou rn al of Forensic Sciences, entitled Discussion of Effects of the TASER in Fatalities Involving Police
Confrontation . Criticizing Dr . Kornblum's findings, Dr . Allen concluded that "certain medica l conditions, including drug use and heart disease, may increase the risk that the taser will be lethal ." Further, Dr. Allen noted that 9 of the 16 deaths that Dr . Kornblum reviewed were "individuals wh o were alive and active, collapsed on tasering, and did not survive . In my opinion, the taser
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contributed to at least these nine deaths ." Specifically, in the one death that was attributed to a hear t attack and a taser shock, Dr. Allen concluded that the "death was an immediate and direct result o f the taser ." 67. On December 1, 1995, a Texas Corrections Officer, Harry Landis, died after a
5 6 7 8 9 10 11 The March 2005 HECOE Report describes the 1996 test, which was based on data provided b y 12 TASER . According to the March 2005 HECOE Report, the 1996 test was conducted with the AIR 13 14 15 16 17 18 19 spontaneously at cessation of stimulation . In all cases, both respiration and heartbeat returned t o 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
training exercise during which he was exposed to an electric shield, a stun device that emitted pulse s of electrical current to prevent prisoners from attacking guards . Landis' death was publicly reported in a 1996 article in Progressive magazine . 68 . As noted above, in 1996, TASER retained Dr . Stratbucker as a consultant to conduc t tests in an effort to make the then-current generation of conducted energy devices more effective .
TASER 34000 on a pig that was pre-medicated with atropine and sedated with Ketamine mixed wit h Xylazine . Dr. Stratbucker subjected the pig to various strength electrical charges using the AI R TASER . According to the March 2005 HECOE Report, Dr. Stratbucker found there was no ectopi c heartbeats and no evidence of myocardial injury resulting from the discharge of the TASER device . It further noted that while respiration was briefly arrested during some chest discharges, it returne d
normal within a few minutes according to Dr. Stratbucker . 69. In or about November or December of 1999, Dr . Stratbucker and Dr . W . McDanie l of the University of Missouri were retained by TASER to perform tests of the AIR TASER and th e M26 to determine if external application of the devices could cause ventricular fibrillation in dogs . That testing was done at the Cardiothoracic Surgery Center at the University of Missouri . That testing is also discussed in the March 2005 HECOE Report . According to that report, Drs .
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Stratbucker and McDaniel repo rted 16 discharges of the Air TASER and 192 discharges of the Advanced TASER (M26 Test Model) through electrodes in multiple configurations resulting in n o episodes of ventricular fibrillation . In 3 dogs implanted with a pair of separated 20-gauge spina l needles through the chest wall so that the sharpened point just contacted the beating heart, th e
5 6 7 8 9 10 11 compared the TASER 34000 and M26 to competing products manufactured by Tasertron . With 12 respect to the TASER 34000, the PSDB noted that there were product defects, such a s 13 14 15 16 17 18 19 and had highlighted the areas where further research may be required, particularly with high 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Advanced TASER caused no ventricular fibrillation with 13 stimulations . Dogs given sympathomimetic drugs and Ketamine, a close chemical relative of phencyclidine (PCP or ange l dust), also showed no adverse cardiac effect with repeated applications of the M26 . 70. In September 2002, the Police Scientific Development Branch (the "PSDB") i n Britain published a report entitled "PSDB Evaluation of Taser Devices ." In that report, the PSD B
malfunctioning laser sights and a recall for TASER' s rechargeable batteries, which demonstrate d that TASER had "either not tested all of [its] products and related equipment thoroughly enough, o r do not have a sufficiently rigorous quality control procedure in place . . . ." 71 . The PSDB report stated the Defence Science and Technology Laboratory ("Dstl" ) had produced an assessment of the medical implications associated with the use of TASER device s
powered models . The report specifically stated that among the areas of concern identified by Dst l during their initial assessment included : No objective scientific studies have been carried out to determine the magnitude and distribution of electric currents from tasers in the body . The manufacturer's explanations of the physiological mechanisms of incapacitation through use of the taser devices are speculative . The effect of taser devices on pacemakers or other implanted electrical equipment is unclear .
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The effects of tasers on the heart have not been thoroughly investigated . The experimental work previously carried out on animals was poorly designed. Certain substances or metabolic conditions may increase the susceptibility of the heart to arrhythmia e .g. pre-existing heart disease or use of recreational drugs . There is no experimental evidence that these factors increase the susceptibility of the heart to tasers sufficient to cause an arrhythmic event, however caution should be expressed regarding the use of tasers on excitable, intoxicated individuals . 72. The repo rt further stated that "[t]he epidemiological evidence for the safety of th e M26 Advanced Taser is certainly not as robust as that for the low-power devices. With the lack of substantial historical data of use and inadequate experimental evidence , the high -power Tasers
cannot be classed, in the vernacular, as "safe" . [Emphasis added .]
11 12 13 14 15 16 17 deploying this product." The authors qualified the report by noting that "[t]he Advanced Taser is a 18 new weapon that has only recently been deployed . We have not identified any material published in 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
73 . On April 27, 2003, a report entitled The Advanced Taser : A Medical Review, was published (the "Bleetman Report") . That report, authored by Anthony Bleetman and Richard Steyn , was paid for by TASER . In the preamble to the report, Anthony Bleetman described it as a "literature review describing the injury potential of the Advanced Taser product. I have been aske d to draw conclusions on the device's relative safety and to identify potential medical issues i n
peer reviewed medical literature on the medical effects of this new weapon ." 74. While the Bleetman Repo rt concluded that "[t]here exists no convincing evidenc e directly implicating Taser weaponry in deaths of subjects in over 25 years' experience in America, " it, nonetheless, cautioned that : The risk of harm might well be higher for using these devices on patients with pre-existing heart and neurological diseases . These risks are largely theoretical and have not been demonstrated in field application or laboratory testing to date . 75 . According to the deposition testimony of Defendant Rick Smith in the Powers
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Action, in or about May 2003, TASER was apprised that Maricopa County Sheriff's Deputy Samue l Powers claimed to have sustained a compression fracture of his vertebra during a training exercis e involving the M26, and had been provided with a videotape of the training exercise . 76. In November 2003, Samuel Powers filed a complaint in the Powers Action in th e
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77 . An article, dated February 10, 2004 in the Star Tribune: Newspaper of the Twi n
Superior Court of the State of Arizona, Maricopa County . In that products liability suit, the plaintiff Samuel Powers alleged, inter alia, that he sustained a compression fracture of the T7 vertebra durin g a training exercise while being subjected to a shock from an M26 . Powers claimed, among other things, that TASER had falsely represented to law enforcement agencies that its conducted energ y weapons, including the M26, were safe.
12 Cities, entitled, "Taser safety questioned after man's heart attack / The guns use a small enough jol t 13 14 15 16 17 18 19 20 21 22 23 24 25 26
78 . An article, dated March 13, 2004, in the Milwaukee Journal Sentinel , entitled "39
to be considered safe, their manufacturer says," stated : When officers see Taser guns at trade shows, company spokesman Steve Tuttle says the first question they always ask is whether a weapon that temporarily paralyzes a person with a 50,000 volt jolt of electricity can cause a heart attack. His short answer is no . But it's a safety issue that Taser International deals with nearly every time somebody is hurt or killed after a Taser incident involving law enforcement . The question was being asked again after an incident Friday in which Minneapolis police used the company's advanced Taser M26 to subdue a 40 year old man . The man, Ray Siegler, had threatened fellow residents at a group home for adults diagnosed with mental illness and suffered cardiac arrest shortly after he was shocked . He is in critical condition at Hannepin County Medical Center in Minneapolis . . . . While few studies have been done on their safety, Tuttle said the U .S. Air Force's Human Effects Center of Excellence will be conducting an independent study in April on the weapon and reviewing cases in which people died when it was used on them .
27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR -26VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
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Officers to Carry Stun Guns Milwaukee Police to use Tasers on a Trial Basis" reported : Thirty-nine Milwaukee police officers will begin carry ing Taser stun guns beginning Sunday, giving them what officials descri bed as another tool to stop uncooperative suspects and prevent officer inju ri es . . . . Questions have been raised about the device's safety . Around the country, suspects have been hospitalized after being shot with a Taser, and 41 have died, according to the company. All the deaths in which an autopsy has been completed have cleared the Taser as the cause , said Steve Tuttle, spokesman for Taser International Inc . He said most of the deaths are from drug overdoses . [Emphasis added . ] 79 . On April 6, 2004, CBS Evening News reported that at least 40 people have died afte r being hit with TASER' s stun guns . In one instance, a person died immediately after being stunned .
10 11 12 13 14 15 16 irritant dropped after stun gun introduced" described how suspects often have to be repeatedl y 17 tasered to subdue them : 18 19 20 21 22 The newspaper found : 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR -27VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Further, in November 2003, James Borden was shocked three times and died a short while later in prison . While Rick Smith claimed that no medical examiner's report attributed the cause of death t o the TASER's stun guns, the shock from a stun gun is listed as one of the causes of Mr . Borden' s death, along with a heart attack and drug intoxication according to the news report . 80. An Associated Press Alert - Ohio, dated April 10, 2004 , entitled "Use of chemical
Police use of chemical irritants has dropped 30 percent in the three months since officers started carrying stun gun, The Cincinnati Enquirer reported on Saturday . . . . But as more law-enforcement agencies start using them, questions are emerging about the Tasers' health effects .
[ . . .] One 5-second jolt from a distance often isn't enough . In many cases, officers fired their Taser more than once and used it in its secondary capacity, as a stun gun applied directly to the body. One man was fired at 12 times before officers were able to handcuff him . Loose or thick clothing can prevent the metal barbs from delivering the electricity.
81 . An article in The Macon Telegraph, dated April 25, 2004, entitled "Taser Death
Stirring Debate Macon Police Suspend Use Of Device After Death Of Houston Inmate," reported : 2 One Middle Georgia law enforcement agency has suspended the use of Taser stun guns, and another is taking a wait-and-see approach before using them, following the death of a second person shocked by Houston County sheriff's deputies . Tasers, which can temporarily incapacitate someone by delivering a 50,000volt shock, are normally used to stun and gain control of people who are not cooperating with officers . The manufacturer says the guns are safe, and many law enforcement officers say they are effective . But others have their doubts . There have been more than 40 in-custody inmate deaths in which a Taser was used since the stun gun was first introduced to law enforcement in 1998, but none has been attributed to the device, says the Taser manufacturer . Taser International also says its studies have found that the gun's shock, which temporarily overrides the central nervous system, cannot cause a heart attack. But Amnesty International USA says there have been no independent studies on the medical effects, and that use of the Taser should be suspended until such studies are done . The human rights organization also says there's a potential for abuse, mistreatment and even torture .
4
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But the Taser is not used everywhere in Middle Georgia : The Macon Police Department suspended the use of Tasers, which were assigned only to its Special Weapons Assault Team, on April 19 in light of the Houston County incidents, said Macon police spokeswoman Melanie Hoffman . The suspension is indefinite, pending the outcome of the GBI investigation of the most recent death, she said . The Fort Valley Police Department had considered the use of Tasers but backed off because of the numbers of deaths nationally, said Police Chief Jan Carey.
"We're waiting until the smoke clears to get a definitive answer on what's going on," Cary said . About 4,400 of the nation's 18,000 law enforcement agencies use Tasers, according to Taser International . Company spokesman Steve Tuttle said that in all of the 42 deaths, the Taser was found not to have caused the deaths .
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Most of the deaths were attributed to drug overdoses and/or heart failures, said Tuttle . But while the Taser may not have been named as the cause of the death, the medical examiner's findings were inconclusive or unavailable on the cause of death in three of the 42 deaths, and no autopsy reports were available on eight of the 42 deaths, according to summaries of the deaths and Taser use provided by Taser International . . . . 82 . In an article dated April 28, 2004, in PR Newswire Europe, entitled "Taser(R ) International, Inc . Responds to Media Sensationalism Regarding Alleged Taser Technology i n Custody Deaths / No Deaths Have Ever Been Directly Caused by Taser Technology to Date, " Defendant Rick Smith continued to tout the safety of the TASER devices based on the findings o f
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 and TASER . The test were conducted on 10 adult pigs, ranging in weight from 66 to 258 pound s 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
various medical examiners . Notably, however, Smith dropped TASER's former claim that no medical examiner had found a TASER weapon to be a contributory factor in any death . Instead , Smith's statement is much more narrowly circumscribed to reflect recent disclosures by The Maco n Telegraph that the medicals examiner ' s findings were inconclusive in three of the 42 deaths that occurred after a TASER device was used : Taser International, Inc ., a market leader in advance non-lethal weapon announced today that no deaths have occurred as a direct result of the use of its Taser technology products .
"In every single case the medical examiner has attributed the direct cause of death in the autopsy reports to causes other than the Taser device," said Rick Smith, CEO of Taser International, Inc . "In over a decade of use, our products have not yet been listed as a direct cause of death by any independent medical examiner or coroner . . . . [Emphasis added .] 83 . In 2004, another animal study was conducted at the University of Missouri by Dr . McDaniel, Dr. Stratbucker (who was now employed by TASER), Max Nerheim (TASER' s Chie f Electrical Engineer), and James E . Brewer . The tests were funded by the Office of Naval Research
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I and utilized a custom built device that matched the electrical discharge and waveform characteristic s I of the X26 . The test showed that ventricular fib rillation thresholds ranged from 15 to 42 times normal the normal output of the X26, with variation in the margin of safety related to body . 84. An article, dated May 22, 2004, in the Clarion-Ledger, entitled "Electric La w
5 6 7 8 9 10 11 12 13 14 15 16 17 "Glendale Cop Cleared In Taser Death / Drug Addict Died of Cardiac Arrest After Being Shocked, " 18 reported : 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Enforcement " described the on-going debate about use of TASER' s devices : Medical examiners in each case cited drugs, heart disease or cardiac arrest during a struggle as the causes of death, said Steve Tuttle, vice president of communications for Taser International . The electricity generated by the devices is not enough to impact cardiac tissue, Tuttle said . Most who have died after being Tasered have had drugs in their system, Tuttle said . That prompted Taser to test the devices on animals that had been injected with drugs, he said . Human rights group Amnesty International is calling for a comprehensive, independent medical study to show how Tasers impact drugged humans, said Ed Jackson, the group's media director. "Taser is engaging in behavior that borders on irresponsible by telling police officers around the country that these devices can't kill anyone," Jackson said . "In doing so, they are raising questions they can't answer."
85. An article dated June 12, 2004, in the Denver Rocky Mountain News, entitled
Arapahoe County prosecutors decided Friday that a Glendale police officer was justified in firing her Taser at least four times into a combative drug addict who died a short time later of cardiac arrest . Chief Deputy District Attorney Brian K . McHugh, who investigated the case, cited in a 27-page report the coroner's previous findings that Glenn Leyba suffered complete heart failure that was induced by a massive cocaine overdose.
However, District Attorney James Peters left the door open about whether the use of a Taser is completely nonlethal .
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In a letter to the police chief, Peters stated his investigators reviewed the literature concerning the effects of Taser . "Although the weight of the current medical evidence indicates that the use of a Taser is nonlethal and does not cause injury, we have learned that this perspective is not universal," Peters wrote . "Research and study (are) ongoing and (merit) additional evaluating and review as new information becomes available ." Taser International spokesman Steve Tuttle said Peters simply was playing it safe when he speculated about whether a Taser is 100 percent nonlethal . . . . 86. An article dated June 26, 2004 in the Las Vegas Review - Journal, entitle d "CORONER's INQUEST: Jurors rule Taser a factor in death," stated : Las Vegas police in the past nine months have armed officers with Tasers because the 50,000-volt stun guns are considered an alternative to lethal force. However, a jury at a coroner's inquest Friday ruled that the Taser an officer used seven times on a combative man under the influence of PCP contributed to his death in February . The Jury ruled that the death of 26-year-old William Lomax was excusable, and determined his cardiac arrest was causes by his drug use, officer Reggie Rader's repeated use of the Taser and the force three security guards used in subduing Lomax . "The combination of the force of the knee in his back , the Taser, his drug use and the restraining : They all played an equal role in this demise ," said jury forewoman Dana Johnson, 29, a stay-at-home mother . . . . Lomax, who was not armed, was acting erratically Feb . 20 at the Emerald Breeze Apartments, on the 900 block of West Monroe Avenue, when security guards at the complex asked whether he needed medical assistance, according to the guards' testimony . The security guards tried to subdue Lomax because they believed he might hurt himself or others, but they also couldn't handcuff the 5-foot, 8-inch, 240-pound Lomax because he was too strong and combative, they said . Rader arrived during the scuffle. He repeatedly warned the incoherent Lomax that he was going to stun him with the Taser . He then lifted the Taser to Lomax's neck and zapped him for three seconds, Rader told the jury . After the electric shock wore off, Lomax became combative again . After the second shock from the Taser, the security officers handcuffed Lomax . Bu t
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
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he continued to struggle by rolling back and forth and kicking, the security guards said. For a period of 20 minutes, Rader zapped Lomax a total of seven times for between two seconds and eight seconds each time, officer Tom Miller, a Taser training officer, told the jury based on readings taken from Rader's Taser .
Lomax stopped breathing and his heart stopped while he was being transported by ambulance to the hospital . [Emphasis added .] 87. On July 18, 2004, The Arizona Republic published an article entitled "Taser Safet y Claim Questioned ." In that article, the Republic reported "[t]o promote the guns' safety, Tase r officials created a special report detailing 42 cases of people who died after being shot by a Taser .
11 12 13 14 15 16 17 2004 . Instead , the Company relied on anecdotal information from police and media accounts t o 18 support its claims . According to the article, "[t]he company's report does not include details 19 20 21 22 23 24 25 article reported that "[m]edical examiners in three cases involving suspects who died in polic e 26 27 28
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They say the stun guns were cleared each and every time . `It is not Taser International that say s Taser is not to blame,' Taser Chief Executive Officer Rick Smith said in an April news release . `It i s the medical examiner's opinion in every single case across the country . "' 88. The Republic reported, however, that the autopsy reports that TASER had cited for years in support of its safety claims, had not actually been collected by the Company until Apri l
suggesting a Taser could have played a role in someone's death . The report also omits published findings of a medical examiner who concluded that electrical shocks from a Taser contribute d directly to the death of a man in an Indiana jail ." 89. The Republic further reported that based on its "review of autopsies and interviews with medical examiners [it] found Tasers have been linked to at least five deaths ." Specifically, the
custody cited Tasers as a cause or a contributing factor in the deaths . In two other cases, Tasers
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could not be ruled out as a cause of death ." Although he had touted the coroners' finding s previously, when confronted with the foregoing adverse findings, Defendant Rick Smith characterized the medical examiners as "generalists who don't have the expertise needed to analyz e deaths involving the stun gun . And they often `throw everything' into autopsy reports as a way t o
5 6 7 8 9 10 11 recurring theme was to get out the message that TASER' s weapons are not lethal . The article stated 12 that according to Mark Johnson , TASER' s government affairs manager, "[d]eaths might b e 13 14 15 16 17 18 19 that was because he was in a coma for a week until the life support [was] turned off. Siegler's son 20 21 22 23 24 25 26 27 28
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cover themselves so they can't be accused of missing something later on ." The article further reported: "There is no penalty for a coroner to be overly broad," Smith says . "These guys deal with the whole broad spectrum of what can go wrong in the human body . Am I going to expect that they are going to be right 100 percent of the time? No ." 90. The Republic article further reported that at TASER's annual tactical conference, a
temporally associated with Tasers but are not caused by the stun guns . . . . `That's a really important piece we have to sell to the media."' As an example of TASER's attempt to get its message out, th e Republic cited to the Company's description of the death of Raymond Siegler. According to the Republic, while referencing that death, TASER underscored that Siegler did not die until a wee k after he was shot by a TASER device . The Republic reported, however , that Siegler's son stated that
stated that Siegler went into cardiac arrest after being shot with a TASER weapon and life suppor t was only terminated after Siegler showed "low brain-stem activity ." 91 . On July 18, 2004 , The New York Times also published a comprehensive article, entitled "As Police Use of Tasers Soars, Questions Over Safety Emerge," that examined the safety o f the TASER devices . According to that article, since 2001, at least 50 people had died after bein g shocked by a TASER device . The article stated that while the Company claimed that these deaths
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resulted from drug overdoses or other factors, it has "scant evidence for that claim ." The articl e reported that in at least two cases, local medical examiners have said that TASERs were partl y responsible for deaths . The article further reported that the most comprehensive report of th e TASER devices' safety was a 2002 British Government report that concluded, "'the high-powe r
5 6 7 8 9 10 11 be dangerous to the heart . 12 92 . The New York Times article stated that the Company's research was presented to 13 14 15 16 17 18 19 crosses the safety threshold for those people . "Their testing scheme has not included the possibilit y 20 that there is a subset of the population that is exquisitely sensitive . . . . That alone means they have 21 22 23 24 25 26 27 28
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Tasers cannot be classified, in the vernacular, as "safe ."' The article further reported that a 198 9 Canadian study found that stun guns induced heart attacks in pigs with pacemakers ; a 1999 study b y the Department of Justice on a stun gun model less powerful than the M26 and X26 found that i t might cause cardiac arrest in people with heart conditions ; and that the Food and Dru g Administration had found that other electrical devices with a charge half as powerful as the M26 can
biomedical engineers who had no financial stake in, or other connection to, TASER, and were no t paid by the Times. The article reports that one engineer commented, "[o]verall, Taser ha s significantly overstated the weapon's safety . . . ." Dr. John Wikswo, a Vanderbilt University biomedical engineer reportedly stated that relatively small electric shocks can kill people whos e hearts are weakened by disease or cocaine use, but no one knows whether the TASER device s
not done adequate testing ." According to the article, Dr . Andrew Podgorski, a Canadian electrical engineer who conducted the 1989 study stated that "he was certain that Tasers were dangerous fo r people with pacemakers ." The article reported that Dr. Podgorski also said that more research i s needed to determine if other people are vulnerable and that "[s]hocking a couple of pigs and dog s doesn't prove anything ."
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93 . The Times article also quoted Dr . Raymond Ideker, an electrophysiologist and professor in cardiology division at the University of Alabama at Birmingham, who stated, "I don' t think there has been a definitive study saying that yes it can contribute to death or no it cannot ." The Times reported that Dr . Ideker also stated that TASER must test more animals and vary the shock
5 6 7 8 9 10 11 12 of people who died after being shocked with earlier model stun guns, stated that he was sure th e 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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they receive to find the gun's safety margin . The article stated that while the Company claims tha t the tests on dogs at the University of Missouri proved that the TASER devices are safe for peopl e who have used cocaine, it never tested animals dosed with cocaine . The Times reported that Dr. Wikswo stated that cocaine substantially increases heart attack risk and, because TASER devices ar e used on people who have used cocaine, that omission is a serious flaw . The article also reported that Dr . Terrence Allen, a former Los Angeles medical examiner who examined cases in the late 1980 s
weapons could be lethal . The article repo rt ed, "Taser is misrepresenting the medical evidence . . . ." 94. An article, dated July 22, 2004, in the Dispatch, entitled "Gilroy, Calif., police defen d safety of Taser stun guns" report ed that in five TASER device-related deaths , repeated charges had been used resulting in respiratory difficulties : Less than a month after city police officers began carrying Tasers on their daily rounds, a national controversy has erupted over whether the stun guns are capable of killing people .
According to Sunday's Arizona Republic, medical examiners found stun guns partly responsible for three deaths of arrestees : in Las Vegas in February, Indiana in November and Florida in 2002 - - although a second medical opinion overruled the Florida finding . In two other deaths in Los Angeles (2002) and Ohio (2001), examiners' autopsy reports did not rule out stun guns as a possible, partial cause of death .
The Arizona Republic reported that in each of the five alleged Taser-related deaths, the subject was tased multiple times : 11 in the Florida case and seve n
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in Las Vegas . In each of these, medical examiners said the repeated shocks made it hard for the man to breathe . Each man was also high on illegal drugs, including cocaine, methamphetamine and PCP . . . . [Emphasis added.] 95 . In July 2004, scientific advisers to the British government called the Defens e Scientific Advisory Council's Subcommittee on the Medical Implications of Less Lethal Weapon s ("DOMILL Study") to study available literature on the M26 and other lower-powered tasers . Notin g that there was only limited experimental research available concerning the M26, the DOMILL Stud y concluded that the M26 presented a low risk of death for healthy individuals, it could pose a greater
9 10 11 12 13 14 15 16 96. An article, dated August 6, 2004, in AP Alert - Arizona entitled "Report : Alabam a 17 18 19 20 21 22 23 24 25 26 27 28
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risk for certain individuals due to "potential[] adverse electrophysiological effects of the highe r current flow in the body, particularly in subjects who may have a predisposition to cardia c arrhythmias arising from drug use, pre-existing heart disease or genetic factors ." The study furthe r found that "drugs such as cocaine and pre-existing heart disease may lower the threshold for cardiac arrhythmias" and that "excited, intoxicated individuals or those with pre-existing heart disease coul d be more prone to adverse effects from the M26 taser, compared to unimpaired individuals ."
death linked to Taser" stated as follows : The 2002 death of an Alabama man was linked to an electrical shock from a Taser stun gun fired at him during a confrontation with police, a newspaper reported Friday. Clever Craig Jr., 46 died of a heart attack during an episode of delirium "following electrical shock from Taser while resisting arrest," Alabama regional medical examiner LeRoy Riddick reported in a June 28, 2002, autopsy. Craig's death is the sixth to be linked to the stun gun by The Arizona Republic, which has been reviewing autopsy reports from cases in which someone died following a police Taser strike . It marks the fourth case in which a medical examiner has cited Taser as a cause or a contributing factor in the death of a suspect in policy custody . In
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two other cases, medical examiners said the stun gun couldn't be ruled out as a cause of death . 97. As the number of medical examiners linking TASER device use to death grew , TASER mounted its own campaign to staunch the adverse publicity caused by such findings . An article, dated August 25, 2004 in AP Alert - South Carolina, entitled "Company denies pressuring coroner in stun gun-related death" reported : The president of Arizona-based Taser International denies that the company is pressuring a South Carolina coroner to reverse an autopsy finding in a stun gun-related death . William Teasley died Aug . 16 in a struggle with deputies at a detention center in Anderson County, S .C . County Deputy Coroner Charlie Boseman said his office and the hospital pathologist who conducted the autopsy received calls from Taser officials asking that the stun gun be excluded from the report .
"They didn't like us making that statement in our report," Boseman told The Arizona Republic. "They just wanted us to (cite) the underlying medical diseases ."
Boseman, who has been with the Coroner's Office for 34 years and has worked on hundreds of autopsies, said the cause of Teasley's death was cardiac arrhythmia due to health problems and the Taser shock . Tom Smith, president of Scottsdale's Taser International, said "it's too early" to challenge the findings in Teasley's case but he denies any attempt to pressure the coroner or change the autopsy. Taser officials called to answer any questions the coroner had about the stun gun, according to Smith . He said the company also sent representatives to South Carolina to assist in the investigation of Teasley's death, which is being conducted by the State Law Enforcement Division . [Emphasis added . ] 98. An article, dated August 26, 2004, in St. Petersburg Times entitled "Tampa officers receive taste of Taser's power," reported another case where a fatality followed the repeate d
application of the TASER device :
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Tampa police chief Steve Hogue says he's read "all there is to read" about Tasers, gun look-alikes that hit aggressive suspects with jolts of electricity instead of bullets . But not everything reported about Tasers, now used thousands of law enforcement agencies around the world, has been positive . Recent news reports raising questions about the stun guns' safety came just as Hogue's department began arming its officers with them .
Critics say Tasers haven't been tested enough on humans, and they point to people who have died after being shot with stun guns as proof They also say that because Tasers don't leave obvious marks on subjects, officers can abuse the weapons . . . . Orange county was sued in 2002 by the family of a man who died after his arrest, in which deputies shot him 11 times with a Taser . He stopped breathing after he was handcuffed and restrained facedown on a stretcher.
Dennis Cassidy, a Tampa cardiologist specializing in cardiac electrophysiology, said he's read studies on Taser - and he'd rather be shot with a Taser than a gun . "But to say definitively that they cause death, its unclear," he said . "And to say definitively that they're 100 percent safe, I can't say that either . " In St . Petersburg, police Chief Chuck Harmon has not been sold on Tasers, even as officers and their unions lobby for the weapon .
"I don't want to use a piece of equipment that ends up killing somebody," Harmon said . "How does it work with people with heart conditions, and how do we identify those people? There's still a lot of questions ." [Emphasis added.] 99. In September 2004, the British Columbia Office of the Police Complain t Commissioner issued an inte ri m report concerning TASER' s devices , entitled TASER Technology Review & Interim Recommendations . Based on their review of the data collected on TASER us e
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(the primary source of which was TASER), the authors of the repo rt recommended continued use o f
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the TASER weapons . While noting that it was believed that an electrical discharge of 70 amps wa s 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 But a number also stop short of declaring the Taser risk-free . 19 20 21 22 23 24 25 26 27 28
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necessary to cause vent ri cular fib ri llation , and that the TASER M26 delivered a charge of only 2 6 amps, the authors of the report also stated: Calculations and testing are generally done with respect to normal hearts . Many cardiologists and cardiac surgeons believe that patients with abnormal hearts such as those who had a previous heart attack, those with certain arrhythmias, those with "irritable foci" are much more prone to lethal arrhythmias than normal people . Laboratory testing sponsored by TASER International leads to the conclusion that the TASER is safe for use on those with pacemakers . Geddes "the father of the modern pacemaker" states in the medical Journal Lancet (2001 358 :687-688) : "Further research on what cardiac effect TASER . . .would have on people with Pacemakers is needed ." 100 . An article dated October 14, 2004 in AP Alert - Business entitled "HL: Medica l experts who question Taser research wary of labeling devices safe" stated as follows : Several medical and engineering experts warn that too little is known about what happens when people who are high on drugs or have heart problems are hit with Taser stun guns . . ..
Many medical experts hail the Taser as a preferable alternative to other means of controlling but not killing aggressive people, such as batons, pepper spray or guns that fire bean-bag bullets, all of which can cause injuries .
"I do not think that enough work has yet been done to be able to say unequivocally the Taser never causes harm," said Dr . Raymond Ideker, who conducts research in cardiac electrophysiology at the University of Alabama at Birmingham . . . . "I guess what is increasingly becoming of concern with respect to Taser is, how less-than-lethal are they?" said Alex Neve, secretary general for Amnesty International Canada. "As the number of deaths mount, that question has really come into sharp focus ." [ . . . ] Arizona-based Taser International rejects assertions there isn't enough research to proclaim the Taser safe . "I think that's rubbish," said company spokesman Steve Tuttle . "Because the studies indicate that the technology is safe . "
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1 2 3 4 5 6 The contraction causes by the Taser could damage muscle or bones . 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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Experts say more research is needed as to whether : Conditions such as heart disease or a genetic predisposition makes it easier for the Taser to induce an irregular heart rhythm that could cause death . Electrical stimuli are more likely to cause ventricular fibrillation and sudden cardiac death in someone who has taken cocaine .
The stun devices may affect the condition know as "excited delirium," a frenzied state characterized by violent behavior, unusual strength and endurance, severe perspiration and incoherent shouting . . . . Leslie Geddes, professor emeritus of biomedical engineering at Indiana's Purdue University, briefly served as a consultant to Taser, helping design a study involving pigs . It concluded the device wasn't powerful enough to induce cardiac arrhythmia in the animals . Still, Geddes is not convinced the effects of the Taser will always be benign . "If the heart is hyper-sensitive, if its sensitive to arrhythmias, it might just trigger an arrhythmia ." Geddes, who studied for years at Montreal's McGill University, says more needs to be known about what happens when someone with drugs in their system is Tasered. He also suggests a harder look at metabolic acidosis, a condition in which the ph balance of a person's body is out of kilter, a phenomenon that may be found in drug users who wind up in conflicts with police . Many of the Taser experiments to date "are really quite tame" because generally the animals are anesthetized for ethical reasons, thereby relaxing them and possibly skewing the effects, said John Wikswo, a professor of biomedical engineering, molecular physiology and biophysics at Vanderbilt University in Nashville, Tenn . "The animal studies are not necessarily representative of what would happen in a human being," he said .
"If you have a person who weighs 250 pounds, is high on cocaine, is out of control, is extraordinary agitated, has a high heart rate, I'm not sure whether injecting a drug in a pig that's anesthetized is going to adequately reflect that situation . . . ."
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Detailed studies, likely costing in the millions of dollars, should be conducted to further examine the effects of the Taser on the heart, said Andrew Podgorski, an electromagnetic specialist and president of ASR Technologies in Ottawa . . . .
In September the British government, following detailed evaluation of a 12month trial, announced the approval of Taser for police officers trained in firearms use . . . . However, a committee overseeing research in conjunction with the trial reaffirmed its position that "excited, intoxicated individuals or those with pre-existing heart disease could be more prone to adverse effects from the M26 Taser, compared to unimpaired individuals ." [ . . .] [Emphasis added .] 101 . In October 2004, the United States Department of Defense released the Report Summary of the HECOE Report. The Report Summary stated: Ventricular Fibrillation (VF) is not expected to occur in otherwise healthy adult populations, although data are too limited to evaluate probabilities for potentially sensitive populations or for alternative patterns o f exposure. No cases of VF have been reported in training or field exposure conditions . [Emphasis added . ] 102 . The HECOE Report was heavily touted by the Company . A press release issued on
15 16 17 18 19 20 21 22 23 24 25 26 the press release further stated "[t]he HECOE report summary concludes that TASER technology i s 27 28
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October 18, 2004, stated: a Department of Defense (DoD) study by the Human Effects Center of Excellence (HECOE) concludes that TASER technology is generally effective without significant risk of unintended results .
"The HECOE study is the latest chapter in a series of comprehensive medical and scientific studies which conclude that TASER technology is safe and effective" said Rick Smith, CEO of TASER International, Inc . "This study re-affirms the life-saving value of TASER technology and is consistent with the recent independent findings of researchers in the United Kingdom and Canada," stated Mr. Smith . [Emphasis added .] Although the Company acknowledged that the HECOE Report found that "data are too limited to evaluate probabilities for potentially sensitive populations or for alternative patterns of exposure, "
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not likely the primary factor in the cause of in-custody fatalities ." 103 . An article, dated November 6, 2004 in the Miami Herald, entitled "Miami Police Say Taser Didn't Cause Death of a Broward Man" reported : The gun's manufacturer, Taser International, says the [Taser] device is safe, though it has been criticized as unnecessarily brutal and not properly studied . Company spokesman Steve Tuttle pointed to studies done by the U .S . Air Force, the Victoria, Canada, police department and police authorities in the United Kingdom recommending Tasers as a safe option for police . Research Needed All three studies, however, recommended further research to determine when the Tasers might be dangerous to use . The Arizona Republic reviewed autopsy reports in 71 deaths following Taser use in the United States and Canada since 1999 . It found that medical examiners blamed the Tasers for two of the deaths and that the devices contributed to four others . [Emphasis added] . 104 . According to the deposition testimony of Defendant Rick Smith in the Power s Action, sometime after November 15, 2004, TASER learned that an o rthopedic surgeon, Stephen Brown, who had been retained by the Company in that case had concluded that Powers had sustained a compression fracture of the T7 vertebra as a result of being shocked with an M26 durin g a training exercise .
19 20 21 22 23 24 25 be generally safe, the Times reported that insiders took advantage of the price spike to engage in 26 massive insider sales. The Times further reported that "the Air Force laboratory that conducted th e 27 28
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105 . On November 26, 2004, The New York Times published an article, entitled "Claims Over Tasers' Safety Are Challenged ." The article stated "Taser International, whose electrical gun s are used by thousands of police departments nationwide, says that a federal study endorses the safet y of its guns, but the laboratory that conducted the research disagrees ." Noting that the price o f TASER stock had soared after the Company claimed that the HECOE Report found its weapons to
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study now says that it actually found that the guns could be dangerous and that more data was needed to evaluate their risks ." The Times reported that : The full study remains confidential, military officials say . But last week, after the symposium on less-deadly weapons in Winston-Salem, N .C., the Air Force laboratory that conducted the study said that it had not found Tasers were safe . The guns "may cause several unintended effects, albeit with estimated low probabilities of occurrence," the laboratory said . "Available laboratory data are too limited to adequately quantify possible risks of ventricular fibrillation or seizures , particularly in susceptible populations ." [Emphasis added. ] 106 . The article further reported that "[a]n Air Force scientist presented data at th e
9 symposium last week showing that repeated Taser shocks caused pigs to become acidotic - a 10 11 12 13 14 15 16 Dr . Jauchem said the shape of the X26's electric pulse had only a minor effect on the amount o f 17 18 19 20 21 22 23 The articled also reported that on November 5, 2004, an unarmed 12-year-old, who was playing 24 hooky, was felled by a Miami police officer using a TASER weapon . 25 26 27 28
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dangerous condition in which the pH of the blood drops . A 1999 study by the Justice Departmen t suggested that `deaths following Tasers' use may be due to acidosis .' People who have been hi t repeatedly by Tasers should receive medical monitoring, said Dr . James Jauchem, the Air Forc e scientist ." Finally, the article noted that Dr . Jauchem had called into question TASER' s claim tha t the stopping power of the X26 was because of its Shaped Pulse technology . According to the Times ,
muscle contraction it produced . 107. A November 27, 2004 United Press International article entitled "School Officia l Asks Police to Stop Taser," reported that the superintendent of Miami-Dade Schools, where police zapped a 6-year-old first grader in October, requested the police department "refrain from deployin g or discharging Tasers against elementary school students in Miami-Dade Public County schools."
108. On November 30, 2004, Amnesty International released its 93 page repor t documenting what it desc ri bed as abusive practices involving TASER' s weapons and challenging
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the adequacy of the research regarding the safety of the weapons . With respect to the growin g 2 number of fatalities that followed use of the TASER devices by law enforcement, the report states : Amnesty International is further concerned by the growing number of fatalities involving police tasers . Since 2001, more than 70 people are reported to have died in the USA and Canada after being struck by M26 or X26 tasers, with the numbers rising each year . While coroners have tended to attribute such deaths to other factors (such as drug intoxication), some medical experts question whether the taser shocks may exacerbate a risk of heart failure in cases where persons are agitated, under the influence of drugs, or have underlying health problems such as heart disease . In at least five recent cases, coroners have found the taser directly contributed to the death, along with other factors such as drug abuse and heart disease . As discussed below, the death toll heightens Amnesty International's concern about the safety of stun weapons and the lack of rigorous, independent testing as to their medical effects . This report includes a review by Amnesty International of information on 74 taser-involved deaths, based on a range of sources, including autopsy reports in 21 cases . Most of those who died were unarmed men who, whil e displaying disturbed or combative behaviour, did not appear to present a serious threat to the lives or safety of others . Yet many were subjected to extreme levels of force, including repeated taser discharges and in some cases dangerous restraint techniques such as "hogtying" (shackling an individual by the wrists and ankles behind their back) . The cases raise serious concern about the overall levels of force deployed by some police agencies as well the safety of tasers . [Footnotes omitted .] 109. The Amnesty International Report further noted that "[m]any of the deaths involve d 18 19 20 21 22 23 24 25 26 27 28
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4 5 6 7 8 9 10 11 12 13 14 15 16 17
individuals who had apparently high concentrations of drugs in their system or other risk factors fo r fatal arrhythmias." The report stated that while "[d]rug intoxication, sometimes combined wit h other factors, was overall the most common cause of death reported (although coroners' reports wer e still pending in many of the more recent cases)," nonetheless, it believed that that : questions remain about the role of the taser in at least some of the fatalities: whether the electro-shock could have exacerbated breathing difficulties caused by factors such as violent exertion, drug intoxication or use of other restraint devices, triggering or contributing to cardiac arrest . At least 15 of the victims had underlying heart disease which some medical experts believe may cause more susceptibility to electro-shock . Concerns have also been raised about the potential risk of adverse effects from taser currents in people under the influence of certain drugs .
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*
x
The short time lapse between taser use and cardiac or respiratory arrest in some cases also raises issues of concern, and in one case . . . the coroner noted a temporal link between the taser and cardiac arrest and said he was unable to exclude the taser use as a possible cause . In another case . . . . the coroner also may have indicated a link with the taser given his autopsy finding of cause of death to be : "cardiac dysrhythmia during an episode of excited delirium following electrical shock" . In several cases death was given simply as "sudden cardiac arrest", with no clear underlying cause s
Dr . Sidsel Rogde, an independent forensic pathologist who reviewed 16 autopsies for Amnesty International, also raised concern about a possible link between the taser and deaths, giving her opinion that it could not be ruled out as a contributory factor in at least seven cases . (It should be noted that the autopsy reports were not available to Amnesty International in three other cases where coroners reportedly found the taser played a role in the deaths . . . so these cases were not included in Dr Rogde's findings .). Dr Rogde also questioned the findings relating to drug toxicity in some autopsies, noting that high blood concentrations post mortem may reflect a redistribution of blood during, for example, resuscitation, and do not necessarily reflect toxic levels of drug concentration before death . There were also several cases in which death was attributed in the autopsy report to drug intoxication where the drug levels were not necessarily fatal . Dr Rogde stated : "In my opinion, death can be attributed to drug overdose only when other causes are excluded ." [Footnotes omitted .] 110 . The Amnesty International Report also reported that besides the risk of ventricula r
18 fib rillation, some medical experts believed that TASER' s weapons could cause fatal acidosis . Th e 19 20 21 22 23 24 25 26 27 28
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report described metabolic acidosis as "a condition in which the acid level within the blood is highe r than normal . . . If metabolic acidosis becomes severe, the person may develop : weakness ; confusion ; shock; heart problems such as arrhythmias ." The further report stated : There has been some discussion in the medical literature of the possible effect of tasers on metabolic acidosis - a potentially fatal disturbance of the body acid-base balance . Metabolic acidosis can occur in individuals who are severely agitated and this can lead to ventricular arrhythmia, especially in the presence of certain toxic drugs. Taser International has suggested that the taser is not only safer than many weapons but can actually work to prevent metabolic acidosis because it s
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instant incapacitation of the subject cuts short the duration of struggle and any dangerous build up of acid . However, one federal study suggested that "deaths following Taser use may be related to the ability of these devices to cause increased muscle activity and decreased breathing" and other studies have suggested that further research into the effects of tasers in acidosis is required . . . . As noted above, in several of the cases reviewed by Amnesty International, the deceased continued to struggle and exhibit agitated behaviour, sometimes after repeated stunning . An article on the effects of stun guns and tasers, published in the medical journal, the Lancet, in September 2001, addressed the risk of acidosis and ventricular dysrhythmias in people in states of severe agitation or physical aggression, particularly when under the influence of drugs such a s phencyclidine (PCP) or cocaine . The article noted : "The taser itself may affect acid-base balance by briefly increasing skeletal muscle activity and decreasing respiration ." The authors reviewed one earlier study in which three people (high on drugs) went into cardiac arrest between 5-25 minutes after being hit with tasers and stated: "By this time, taser-induced muscle contractions would no longer be present, and one would expect the individuals to be relaxing and able to breathe in a way that would compensate for a metabolic acidosis . Such may not be the case if the individuals remained agitated or were prevented from breathing freely." [Emphasis in original ; footnotes omitted] . 111 . As a consequence of its investigation, Amnesty International called for, inter alia, a morato rium on the use of TASER weapons until shown to be safe in independent , comprehensive, peer reviewed studies . 112 . A November 30, 2005 CBS News website article discussing the Amnesty International Report quoted Dr . Kathy Glatter, an electrophysiologist and assistant professor of medicine at th e University of California-Davis, as stating "[i]f I hit the heart or create electricity in the wrong time o :
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the (beat) cycle, it could send the whole heart into an electrical tailspin . . . ." 113 . On December 5, 2004, the Miami Herald published an article in which it reported tha t TASER stated that the "outcry after Miami-Dade police zapped two children with its stun gun unjustified - the company says it has the science to prove its weapon is safe for use on kids ." Th e
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Herald reported that TASER uses a chart in its training manual that shows that its weapons deliver an electrical shock that is well below the safety threshold that Underw riters Laboratori es ("UL") ha s determined to be safe for a two-year old . The article explained that TASER includes a line graph i n its literature that shows UL shock limits that will cause the heart to stop, noting that the safet y
5 6 7 8 9 10 11 engineer at UL who has done extensive study into electric shock injury . UL spokesman Paul Baker 12 stated that UL was not aware that its research was included in TASER's literature . He also stated , 13 14 15 16 17 18 19 research it conducted showed that the devices were safe even when used on subjects with a range o f 20 body weight below 70 pounds . The article, however, quoted Dr . McDaniels as stating "I don' t 21 22 23 24 25 26 27 28
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margin was calculated for humans between 2-75 years of age , and shows that the TASER weapons are well below that threshold . That shock limit, according to the Herald, is based on a 1939 U L study involving electrified cattle fences . 114 . The Herald reported that UL scientists questioned the application of their study t o TASER' s devices : "[i]t doesn ' t apply to that kind of product" said Walter Skuggevig , a research
"[w]e certainly don't want to give the impression that we put our label on this, that we certify this . We do not ." The article reported that UL studies assume that a single shock flows from the hand s through the feet, but that the TASER devices shock takes different routes through the bod y depending on where the probes land . 115 . According to the Herald, TASER also reportedly stated that the "McDaniels" anima l
know that I ever envisioned the use of this thing on small children . . . . I don't think anyone has ever tried to draw any inferences as far as use in children . . . The design of this device is fo r bad guys ." [Emphasis added.] 116 . Notably, the Herald reported that Gary Bowling, a training officer for the Putnam County Sheriff's Office said that he left a TASER seminar thinking UL endorsed TASER . "I trus t
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UL . . . I treat that chart as gospel " the article quoted Bowling as stating . The article further reporte d that when advised that UL had not actually endorsed the TASER devices, Bowling stated, "[t]hat chart's misleading . I looked at that and I thought UL had tested Tasers and put that dot on th e chart."
5 6 7 8 9 10 11 12 "encouraged him to do more research before buying the guns ." York also stated that he had 13 14 15 16 17 18 19 weapons . The article further reported that Fort Wayne had received an $86,000 federal grant , 20 21 22 23 24 25 26 27 28
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117 . On December 7, 2004, The New York Times reported that the Department of Justice had initiated a study of TASER's weapons in light of "new questions over their safety ." The Times reported that Rusty York, the Police Chief of Fort Wayne, Indiana, said that a Justice Department researcher contacted him to follow up on a local newspaper report that the city had decided to buy TASER devices after studying since 2003 . York stated that the Justice Department researcher aske d for information about the research . Significantly, York further stated that the researcher
independently decided to delay buying the TASER devices due to safety concerns . While the Department of Justice said it neither encouraged nor discouraged the purchase of the TASE R weapons, the Times reported that it said it had initiated a study regarding the weapons' effectiveness, financed a study at the University of Wisconsin regarding how electrical currents moved through th e body, as well as a study at Wake Forest to examine injuries caused by TASER devices and simila r
enough to purchase 83 guns . 118 . An article, dated December 8, 2004, in the Monterey County Herald, entitle d "Officers cleared in Taser death / Police actions reasonable self-defense" reported : Two Seaside police officers aren't to blame for the death of a 38-year-old Del Rey Oaks man who was shot with a Taser stun gun multiple times in August, according to a report released Tuesday by the Monterey County District Attorney's office .
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Dr . John Hain, who conducted the autopsy, cited the cause of death as ventricular arrhythmia due to methamphetamine intoxication . The district attorney's report also stated that the shocks from the Taser were listed as contributing factors in Rosa's death . . . . 119 . An article, dated December 9, 2004, in the New Orleans Times Picayune entitle d "Stunned and Confused," stated as follows : The popularity of Taser stun guns is soaring among local law enforcement agencies . In the past few years, sheriffs' offices in Jefferson, St . Tammany and St . Bernard parishes and police departments in New Orleans an d Westwego have all purchased the devices, which use 50,000 volts of electricity to immobilize people temporarily . These are powerful weapons, and they aren't risk-free. In June, Jerry Pickens of Bridge City died after Jefferson deputies shocked him as he stood in his driveway amid a domestic dispute . Last week, Jefferson deputies twice used a Taser to shock Patrick Fleming of Kenner after a traffic stop . He died two days later .
Critics have suggested that the devices may be particularly dangerous to children and people with heart conditions - - and that the indirect consequences of stun guns should be factored into calculations about their safety . For example, the Jefferson Parish Coroners office concluded that Mr . Pickens was killed not by the Taser but by his fall to the ground . Even so, such a fall is a predictable consequence of using a stun gun on a person who is standing upright . . . .
120. An article dated, December 9, 2004, in the Monterey County Herald entitled "Taser 19 20 21 22 23 24 25 26 27 28
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use must be backed by safety reviews," reported : Believing stun guns are being fired too often, Amnesty International wants officers to stop using Tasers until scientific evidence shows the weapons don't kill . In the United States and Canada, most deaths were related to heart problems, drug overdoses or asphyxiation, coroners ruled . Executives at Taser International, Inc. say Amnesty International's report fails to acknowledge their product's value, and their complaint is justified . Law enforcement officers put their lives on the line every day and deserve the best available protective devices . Last year, more than 57,000 officers were assaulted and 150 were killed in the line of duty .
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But Taser officials are on shaky ground when they claim that "independent reviews" of Taser technology by the U .S. and British government "clearly indicate" that the Taser technology is among the safest options available to law officers when using force is necessary . In fact, Tasers have been subjected to very little controlled research, and the company has done minimal research on the health effects of its product . The M26, its most powerful gun -- and the one used on Robert Rosa -- was tested on one pig in 1996 and five dogs in 1999 . Those studies were done by inhouse researchers, not independent scientists . "The few independent studies that have examined the Taser have found the weapon's safety is unproven at best," according to The New York Times . The most comprehensive report, by the British government, concluded "the high-power Tasers cannot be classed, in the vernacular, as "safe."
Tasers need further testing, and mass marketing is frighteningly premature. Instead of luring consumers, the company should focus on developing truly nonlethal weapons . . . . [Emphasis added] . 121 . On December 12, 2004, the Force Science News, the newsletter of the Force Scienc e Research Center of the Minnesota State University-Mankato, published an article highly critical o f
15 16 17 18 19 20 21 "really solid scientific research" is needed on human subjects, not animals "to help us bette r 22 understand when and how to use Taser devices . How do these really work? How does thei r 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR -50VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
the Amnesty International Report . In that article, Dr. Bill Lewinski, the Executive Director of the Force science Research Center and advocate of use of the TASER devices acknowledged tha t "`urgent rigorous, independent and impartial' research into the use and effects of electro-shoc k weapons should be vigorously pushed forward ." Lewinski, who opposed Amnesty International' s recommended moratorium on TASER weapon use, nonetheless, stated that there was no doubt that
application affect blood chemistry, cell damage and intra-muscular bleeding? How do yo u neutralize their effect after control is established? What do you do when things go wrong? We nee d to know these and other answers ."
122 . An article, dated December 26, 2004, in The Arizona Republic entitled "Officer's
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Injury Tied To Taser" published an article about the Powers Action : The makers of Taser electric stun guns say their claims of safety are backed by more than 100,000 police officers who have been shocked during training sessions without suffering a single serious injury . But a doctor working for Taser says a one-second burst from the stun gun was responsible for fracturing the back of a Maricopa County sheriff's deputy in 2002 .
Powers was the first person to file a product liability lawsuit against Scottsdale's Taser International, claiming that the shock during a mandatory training exercise forced him into medical retirement and has left him suffering permanent injuries .
The injury reports appear to contradict Taser's principal assertion of safety and may undercut one of the company's most effective sales pitches . The doctor's memo surprises and concerns police training instructors from Miami to Portland who have shocked their own officers during trainings and say this could lead them to re-examine how tasers are used . The memo also raises questions about Taser's reports to its shareholders . In repeated filings to the Securities and Exchange Commission, Taser says that Powers is alleging that he "injured his shoulder" and makes no mention of the fracture .
Phoenix lawyers John Dillingham and Tom Wilmer, who represent Powers, say law enforcement agencies have been bombarded by safety assurances from Taser and are buying thousands of stun guns in the belief they have never causes an injury or death . "This is not a problem with law enforcement . It's a problem with Taser," Dillingham says . "Police officers are brainwashed into thinking that the (stun) gun is safe . They are brainwashed into taking a hit during training and then to use it in the field anytime they want ."
Despite Taser's repeated claim that no officer has been injured, the company's November report to the Securities and Exchange Commission outlines three additional lawsuits alleging injuries during Taser training.
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
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Those alleged injuries include a muscle and nerve injury ; an arm and shoulder injury ; and a rotator cuff injury . Taser follows the description of each lawsuit with a line saying the case is without merit and has been turned over to the company's insurance carrier . "Powers' injury is not an isolated event," Dillingham says . "If you look into it nationwide, you will find ruptured disks, other fractures and injuries to other joints ." Babin, a 17-year law enforcement veteran in Slidell, La ., says he heard from a dozen police officers after posting a message on a police magazine Web site asking officers about injuries . "The most common injuries . . . were dislocations or spinal fractures, which would be consistent with the extreme jolt you experience," he says . Babin says he wanted to hear from other officers after finding his arms and legs covered in bruises following a Taser shock in May. Babin says another officer who attended his May 4 Taser training class suffered severe chest pains . He says doctors told the officer "the extreme shock began eating away skin tissue from the area around a previous surgery."
Babin says he still bears the scar of a Taser burn . After being shocked, he says, he developed an autoimmune condition that left his body attacking blood platelets . He says he was diagnosed with bone marrow disease that causes spontaneous bleeding and that doctors have been unable to rule out Taser as a cause .
I really believe officers need to be made aware of the potential danger before subjecting (themselves) to the training," he says . . . . Memo shocks trainer s But police training officers say they were not told about any significant officer injuries. None contacted about Powers' case were familiar with it. And they expressed concerns over Brown's evaluation . "I'm in disbelief," says Miami Police Sgt . Richard Gentry . "That's the first time I've heard anything like that . I will definitely be keeping my eyes open for that ." [Emphasis added .] 123 . An article, dated January 4, 2005, in the San Jose Mercury News entitled "Police
26 Shoot, Kill Men After Calls for Help / Incidents Occur in Pacifica and Redwood City" repo rted: 27 28
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A pair of confrontations with police Sunday left two San Mateo County men dead: one in Pacifica after being stunned with a Taser, the other shot to death in Redwood City after a Taser and other "less lethal" weapons failed t o subdue him, police said . In both cases, relatives had called 911 seeking help and police used Taser stun guns, which deliver a 50,000-volt charge through darts . Many police agencies have embraced Tasers as an effective and less lethal alternative to firearms, but the weapons are generating a nationwide debate about their safety . Families of both men - - 30 year-old Greg Salisbury of Pacifica, and a still unidentified 35-year-old in Redwood City - - bitterly criticized officers' actions in the deaths, which have sparked routine investigations by the county district attorney's office . . . . Samuel Walker, a professor of criminal justice at the University of Nebraska, said there is an urgent need for a national standard governing the use of Tasers, as well as for research on their physiological impact . "Are there particular medical conditions that pose certain risks?" he said . "we basically don't know anything, and that's a very dangerous situation ." Amnesty International recently released a report calling on law enforcement agencies to suspend their use of Tasers, which the group links to more than 70 deaths in the past four years . Taser International, a leading manufacturer of the weapons, insists that they are safe . . . .
124 . On January 10, 2005, The San Francisco Chronicle published an article entitle d
"Tasers Pose Potentially Lethal Danger To Heart, Doctor Warns ." In that article, the Chronicl e reported that "Dr. Zian Tseng, a cardiologist at the University of California, believes Tasers ar e potentially dangerous because a jolt of electricity, at just the right moment in the heartbeat cycle, can trigger ventricular fibrillation ." Noting that Dr. Tseng installs implantable electric defibrillators into the chests of heart patients who are at risk of sudden cardiac arrest, the article stated that he uses a
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precisely timed jolt to throw the hearts of his patients into ventricular fibrillation on a regular basis . According to Dr. Tseng, "[tjhere are vulnerable periods in the cardiac cycle, when shocks can caus e dangerous arrhythmias . . . ." The article quoted Dr. Tseng as further stating with respect to TASE R weapons, "I think they are dangerous . . . If you are shocking someone repeatedly, it becomes a bi t
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like Russian roulette . At some point, you may hit that vulnerable period ." The article further reported that "[c]ardiologists also know that the window in which a jolt of electricity can halt a heart expands significantly when a patient is treated with certain drugs, or when the body is flooded with the fear hormone, adrenaline . Patients with heart problems are also more vulnerable to th e
5 6 7 8 9 10 11 remaining cases are pending . 12 The Design Flaws and Manufacturing Process Problem s 13 14 15 16 17 18 19 20 departments delayed or cancelled orders for TASER' s products in order to evaluate the othe r 21 22 23 24 25 26 27 28
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condition." 125 . In addition to the Powers Action, during the Class Period, 13 other lawsuits were file d against TASER in which the plaintiffs alleged either wrongful death or personal injury in situations in which the TASER device was used by law enforcement officers or during training exercises . One case has been dismissed with prejudice, another case has been dismissed without prejudice and th e
126. While the public debated the safety of TASER's weapons, the investing public was unaware that the devices were plagued by design flaws and manufacturing process problems that caused massive product returns and weapon malfunctions during the Class Period . As alleged more fully below, in light of the safety controversy surrounding TASER's devices, these design flaw an d product defects adversely impacted the Company's competitive position . Thus, when it wa s announced in the fourth quarter of 2004 that competing products were being introduced, many police
devices . TASER' s business has never recovered . 127. In the first quarter of 2004, TASER experienced a problem with the software in the X26 that required the Company to suspend production . The Company, however, did not publicly disclose the existence of the problem until in or about May 2004. In the Company's quarterly report for the period ending March 31, 2004, filed with the SEC on May 10, 2004, TASER disclosed :
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Although the Company continued to increase production of its new TASER X26 product during the first quarter of 2004, the product experienced a defect in its data recording feature which did not affect the operation of the product but nevertheless required a temporary suspension of shipments for approximately three weeks during the quarter. The resolution of this software problem required the reprogramming of more than 4,000 weapons and 15,000 battery packs at the factory and preparation for field upgrades for more than 12,000 weapons that had already been shipped in previous periods . The cost to repair the software and upgrade the weapons in house was expensed in the quarter through cost of goods sold . In addition, the Company accrued approximately $41,000 of additional expense through a warranty accrual to retrofit the remaining units in the field . In addition to the foregoing , however , TASER failed to disclose that it also was experiencin g
9 10 11 12 13 14 15 16 connection with his sales and marketing functions, and that Defendant Rick Smith had responsibilit y 17 18 19 20 21 22 23 Hanrahan became overextended with her manufacturing responsibilities and Daniel Behrendt was 24 hired as the Company's CFO in or about the middle of 2004 . Hanrahan continued as Chie f 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
widespread quality control and design problems that caused a massive number of product defects throughout the Class Period . 128 . CW1 is a former Company employee who is familiar with the manufacturing proces s for the TASER weapons based on his/her employment at the Company from prior to start of the Class Period until the fall of 2004. CW 1 stated that Defendant Tom Smith had oversight o f TASER' s sales and marketing staff and spent a substantial po rtion of his time traveling i n
over Product Development and Engineering . CW 1 also stated that Dave Dubay, the head of Produc t Development, Max Nerheim, TASER's chief engineer and designer of both the M26 and X26, Mila n Cerovic, who was in charge of mechanical engineering, and Matt Carver, an assistant engineer, all reported directly to Rick Smith . CW 1 further stated that Defendant Hanrahan served as Compan y CFO with oversight of finance, operations and manufacturing . CW 1 stated that as Taser grew,
Operating Officer, overseeing production and manufactu ring. 129 . According to CW1 , both the M26 and X26 were beset with a range of defects due t o
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an "unstable" design of the circuit board . These problems included the failure to fire, intermitten t firing as well as repeat uncontrolled firing (due to the failure of a component of the circuit board t o shut off) . In addition, CW 1 stated that the software did not properly record data of the weapons ' functions, and the laser sight was not visible in sunlight .
5 6 7 8 9 10 11 however, that most of the "smarter people" involved in the technical side of the assembly wor k 12 shared this view . CW 1 stated "[t]hey came from other companies that know what a good board i s 13 14 15 16 17 18 19 131 . CW 1 stated that TASER attempted to blame the circuit board problem on the vendo r 20 21 22 23 24 25 26 27 28
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130 . CW1 stated that based on his /her expe ri ence in manufactu ring electronics products, such as digital cameras and copier printers , the TASER circuit board , which was used in both the M26 and the X26, was in need of a complete redesign due to the inherent complexity of workin g with miniaturized components that produce high voltage . CW 1 stated that the Company's chie f engineers never acknowledged that there was a design flaw with the circuit boards . CW1 also stated,
like and they knew they shouldn't have to be constantly reworking the stuff." CW 1 stated that he/she urged both Defendants Rick Smith and Tom Smith to recruit electrical engineers to review the circuit board design, but Max Nerheim gave short shrift to the resumes of all potential candidates . CW I further stated that Rick Smith was too loyal to Nerheim and Milan Cerovic t o challenge their authority regarding the design of the devices .
who supplied them, First Electronics in Tempe, Arizona . He/she stated that in mid-2004, a representative of First Electronics , who was resisting TASER' s demands return and refund demands , met with Max Nerheim and told him the problem was with TASER's circuit board design . CW1 , who was standing behind Nerheim at the time, overheard that conversation . 132 . CW1 also stated that the X26 suffered from so ftware problems . CW1 said that six months after the May debut of the X26, TASER experienced a tidal wave of retu rns from the field.
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CW 1 also stated that there were at least two or three product recalls while he/she was at TASER . CW 1 did not recall how many devices were involved, but stated that the recalls involved th e software programs downloaded into the law enforcement weapons which monitored six or eight different functions : the time and date of discharge ; the temperature of the day; the temperature of the
5 6 7 8 9 10 11 12 were the result of an inferior design, he/she also stated problems in the manufacturing process also 13 14 15 16 17 18 19 inefficient operation, primarily due to problems with "batch processing," and other issues . CW1 20 21 22 23 24 25 26 27 28
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gun; how many times the trigger was pulled ; and how long the trigger was depressed . CW 1 stated "[s]tuff got out the door before they could catch the problem and so they had to recall it to get i t back. We were rushed to get stuff out of the door, instead of doing a proper product roll-out . That' s the way it always was . Stuff would get out before we had done full testing and we'd have to recall i t to upgrade the software ." 133 . Although CW 1 stated that he/she believed that the majority of TASER's problems
resulted in product defects . According to CWl, temporary, unskilled workers, who did not speak English, failed to accurately record quality data, exacerbating manufacturing problems . In mid2003, a team from Brazil, who CW 1 believed to be either potential investors or joint ventur e partners, visited TASER and walked the plant floor with Defendant Tom Smith and Hanrahan . According to CW1, these individuals told the TASER executives the manufacturing facility was an
stated that after those individuals left, Defendant Tom Smith said "[w]e don't care . We're not going to fix it because we don't have to deal with them ." CW 1 explained that the Smith brothers refused to expend any capital necessary to automate the manufacturing process while he/she was employe d at the Company. 134 . CW 1 stated that at times as much as 70% of the M26s and X26s tested in-house by TASER were defective . CW 1 stated that he/she does not know how many of these defectiv e
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weapons were actually shipped to customers because TASER failed to closely weed out bad product . CW1 explained, however, that "[a]lthough outside defect rates were very low compared to inside, I know that stuff just leaked out the door . We didn't really know what the real defect rate was . W e didn't keep good data on what guns [internally found to be defective] had been reworked befor e
5 6 7 8 9 10 11 12 explained that the defective products usually came back to the Company several months after bein g 13 14 15 16 17 18 19 other routine discussion items during those production meetings were manufacturing cost, proces s 20 21 22 23 24 25 26 27 28
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being shipped ." CW1 further explained that the Company did not have an adequate system to trac k how many defective devices were reworked versus how many were shipped . 135 . CW1 stated that the product returns became so numerous that in early 2004, TASER had to build an extra room in a building across the street from the plant to store the returns, and als o had to hire three additional employees to process those returns . CW1 stated "I would see four o r five boxes (containing 20-30 guns each) come in regularly from this or that distributor ." CW 1
shipped because the defects were not discovered until the devices were fired . 136. CW1 stated that the design defects were routinely discussed at daily 1 :30 p .m. production meetings attended by Hanrahan, Cerovic and others . According to CWI , Defend ant Rick Smith would frequently participate in those meetings . CW1 stated that Tom Smith also personall y participated in those meetings, albeit less frequently due to his travel schedule . According to CW1 ,
issues and delivery schedules . CW1 also stated that the 70 percent defect rate was openly discusse d at the daily production meetings with the Smith brothers . CW1 stated that "[t]hey saw it themselve s in those meetings ." CW1 stated that the daily production numbers presented at these meeting s would show, for example, that 500 guns were built in a day, but only 100 had actually made it through the assembly line . "You had a certain percentage you had to build and they (the Smiths) saw what fell out at the end of the day." CW1 stated that in response to the alarmingly high defect
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rates, Defendants Tom and Rick Smith were directly told at one production meeting in Septembe r 2003 "that if you keep shipping out a lot of crap, it's going to come back." According to CW 1, th e Smiths' response was, "We'll work on it ." In subsequent production meetings, when the defect rate issue was raised , Rick Smith's only responses were "[w]e'll look into it," or "How bad is bad? "
5 6 7 8 9 10 11 more smarts in the X26 which led to more problems ; there were a lot more complications in an 12 unstable design ." 13 14 15 16 17 18 19 139 . CWI also stated that it was common practice for Davidson's and several othe r 20 21 22 23 24 25 26 27 28
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137 . When CWI was first employed by TASER, the Company was producing 100 device s a day with 40 workers . By September 2004, TASER was producing 500 devices, primarily the X26 , a day during two shifts with 150 workers . CW1 stated that "[t]he quota went up every qua rter. They wanted to keep ramping it up to meet the expectations of [TASER' s shareholders ] . We were trying to ramp up with an undeveloped product, so obviously the defect rate went up . There were a lot
138. CW1 stated that soon after the debut of the X26, in May 2003, he/she overheard conversations amongst TASER' s sales staff that police depa rtments were complaining they didn' t like the X26 because it was not always effective and did not always fully incapacitate the subject . Comparing the X26 to the M26, CW1 stated "[p]olice didn't like going to the new X26 because with the M26, if a guy would drop, he would stay down . The M26 was like getting hit with a hammer ."
distributors to agree to take extra devices at the end of quarters when TASER was not making it s sales numbers. CW 1 stated that "when TASER needed to meet quota, sales staff would call u p distributors in order to make it look like people were orde ring" more than they were. CW 1 further stated that TASER would accept returns from a distributor if the product was defective, and clearl y labeled as such . CW 1 did state, however, that "[t]hey had to call it a defect, otherwise they couldn' t return it, even if they call it an `unfounded defect."'
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140 . CW 1 stated that he/she would frequently be told that production had to be increase d near the end of a quarter . CW1 was particularly suspicious when there were production increases a t the end of quarters to meet orders, only to be later told that the order was cancelled because a distributor changed its mind, or did not have a sufficient credit line . CW 1 stated "[i]t was just funn y
5 6 7 8 9 10 11 12 first order had been shipped . Jeff Dryer, a former sales representative for TASER's Midwester n 13 14 15 16 17 18 19 unnecessary in the consumer version . 20 21 22 23 24 25 26 27 28
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that we were always pressured to get these orders out, and then the order would disappear ." CW 1 stated he/she also learned by looking over the shoulders of sales staff in their review of vendor data , that some distributors were ordering units far beyond their credit limits . He/she gave the hypothetical example of a distributor that had a $500,000 credit line but had been approved t o receive a $1 million order with no collateral to cover the difference . In other instances, CW 1 state d that there were suspect sales made to distributors where multiple orders were placed even before th e
territory, often hinted to CW 1 that sales were not on the up and up . 141 . CWI stated that in September 2004, he/she was told by Tom Smith to expedite production on the X26C consumer model . CW1 stated that the X26C units were made from la w enforcement units that were returned because of software program failures . CW 1 explained that certain functions, such as data recording regarding the number of discharges, etc ., were simpl y Significantly , although TASER asse rts otherwise in
marketing material, CW 1 stated that the consumer device does not have a different pulse rate than the X26 law enforcement version . CW1 stated that "[t]here's only certain people who knew that o n the inside ." CW 1 explained that the casing of the consumer device is the same as the la w enforcement model, but the labels on the outside of the device were changed based on what customer orders dictated . CW 1 stated that from a manufacturing perspective, "it was the sam e thing." CW 1 stated that in a two-day period, TASER produced 1,000 X26C units, which CW 1
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believed were subsequently shipped to Davidson's . 142 . CW2 is a former Company employee who worked at TASER from before the start o f the Class Period until the middle of May 2004 . CW2 was familiar with the manufacturi ng processe s for the TASER devices .
5 6 7 8 9 10 11 Sundays for a period of time to take apart the weapons and remove the high-voltage boards . These 12 boards were then simply put in new casings with new serial numbers and sent out again without th e 13 14 15 16 17 18 19 "[s]ometimes it would fire and wouldn't stop and, other times, if you pulled it two or three times, it 20 might fire just once ." CW2 stated that the repeated firing was caused by "one of the electronic part s 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
143 . CW2 stated that sometime several weeks after the May 2003 introduction of the X26 , the Company received approximately 6,000 M26 returns from one or more customers complaining of defects in the circuit board . CW2 stated that he/she recalled seeing dozens of boxes of these returns stacked up against the wall of the plant ; approximately 70 devices in a box . CW2 state d employees were directed by Jay Pearl, Production Manager, to repo rt to work on Saturdays an d
flaws actually being rectified. 144 . CW2 stated that the X26 had an even less stable design than the M26 . He/she attributed the problems to design defects and the positioning of the high-voltage board betwee n electrodes at the front of the device . CW2 stated that during in-house tests of the finished units overseen by engineer Max Nerheim, some of the X26s failed to fire consistently . CW2 stated
on the [high voltage] board [that] would fail to shut down when it was supposed to ." According to CW2, "[y]ou didn ' t even have to press the t ri gger, it would just continuously run ." CW2 was also aware some of the X26s "that were firing too rapidly , got sent out anyway ." 145 . CW2 also stated that the ratio of the frequency of the "arc" on the stun guns was no t consistent. CW2 explained that "[s]ometimes it would go really, really fast, and sometimes rea l
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slow, sometimes it wouldn't do it all and sometimes it wouldn't quit ." CW2 stated that the voltage rates on the individual X26 units were also inconsistent, both in the low and high range . CW2 wa s involved in the production of the very first X26 unit, which was initially mandated to read betwee n 97 and 150 amps (amperes) on the amp meter . Some variance was acceptable both below the low
5 6 7 8 9 10 11 12 designed the X26, had a lot of employees working with him to try to troubleshoot the problems . 13 14 15 16 17 18 19 occasionally, Defendants Rick and Tom Smith would walk the production floor with Jay Pearl, th e 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
end and above the high end, but CW2 did not recall these ranges . As the X26 moved into fuller production, the adherence to these allowances was abandoned . CW2 said that the engineers "wer e changing the (voltage and the ohms) allowance every week, if not daily, sometimes more than once a day. They were changing what they would allow us to pass through . The engineers would come out and say, `let's have it read this and this and this on the meters .' It was like, oh man, you never knew whether something was going to pass or not ." CW2 said that Max Nerheim, who originall y
CW2 stated "[h]e had everybody and their brother in on it trying to tell him how to change this, change that, do this, do that . I think he just finally gave up on it and just let them do what the y wanted ." 146 . Despite the fact that the X26 was riddled with problems, CW2 stated that it wa s shipped out anyway, only to be later rejected and returned by customers . CW2 stated that
Production Manager, and CW2 overheard Pearl describe the various defects in the X26 and tell the m that defective units were being sent to customers . CW2 stated "I know [Jay Pearl] had conversation s with Rick Smith and his brother [Tom Smith], and there wasn't really too awfully much of anythin g done ." In one or two instances -- sometime between Janua ry and April 2004 - CW2 observed Defendants Rick and Tom Smith "walking up and down the isles behind Jay, and he would be tellin g them, `We don't know what's wrong with them (the X26s) ; we're just building them and sendin g
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them out."' 147. Throughout his/her employment, CW2 observed " deliveries of cartons and cart ons and of returns -- we're talking about pallets of returns" of both the M26 and the X26 . CW2 said "I seen a lot come back because they just flat wouldn't work ." Because CW2's work station was once
5 6 7 8 9 10 11 Saturdays and Sundays to handle the product returns . CW2 stated that this involved sawing the unit s 12 in half and removing the high-voltage boards . The boards were retained and the device's plasti c 13 14 15 16 17 18 19 electrical arc in the weapon . CW2 stated that he/ she and others were required to build a total of 600 20 coils a day. CW2 estimated , however, that 50 out of every 300-400 coils would not work . CW2 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
moved to a part of the plant in front of the dock doors, CW2 stated that he/she could see how much product was being shipped : [w]e seen what went out, and we seen what come in . When you got a s much coming back in, as you're shipping out, there's a problem . Some days we had more com e back in than we sent out ." 148 . CW2 stated that he/she and others were directed by Jay Pearl to report to work o n
body would be shredded . The boards were "reworked" and installed in other devices, then shippe d out again . 149. CW2 stated that Jay Pearl required Company workers to build 500 X26 units per day . CW 2 stated that "[y]ou got fired if you didn' t make quota." CW2 also stated that he/she worked on manufactu ring coils used in the X26. CW2 explained that the coils as created power for the
said "[t]hey would be one voltage before we put the coil on the board and we would put it on th e board, and test the coil again, and it would be another number on the meter -- higher or lower . We'd put it in the case, they'd fill it with epoxy and let it dry . When they tested it again, it would b e another number yet . So there was no consistency anywhere along the way ." Despite thes e disparities , CW2 said that these X26 units were completed and shipped .
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150. CW2 also stated that both the M26 and X26 had bad solder joints, which would later cause the weapons to separate and fall apart . CW2 stated that after three to four months at TASER, he/she went to Marci Rigoni, Director of Human Resources, to request a face-to-face meeting with Rick Smith to discuss manufacturing problems. Rigoni refused the request . Shortly thereafter, CW2 I
5 6 7 8 9 10 11 12 he/she never saw the line leads working in the log book, and was never able to locate the log boo k 13 14 15 16 17 18 19 engineering assistant), during which the quality issues were discussed in detail . CW2 stated that 20 he/she often heard Pearl complain about how fed up he was with the Company's manufacturin g 21 22 23 24 25 26 27 28
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spotted Rick Smith in the plant and spoke to him about the problems with the solder joints and circuit boards . According to CW2, Rick Smith flatly instructed him/her to "just get them out ." CW 2 explained that "[a]s long as they sparked, we would ship them out ." 151 . CW2 stated that the line leads, who had responsibility for testing the guns, wer e supposed to record and document the failure of every gun in a log book . In addition, CW2 said that he/she was required to report certain statistics in the same log book. CW2 stated, however, that
on the floor. CW2 stated "[w]e could never find it to write anything in it ." CW2 said that while Defendants continuously highlighted the strength of TASER' s quality controls and in-house testin g in its public statements, there was a complete lack of overall quality control on the plant floor . 152 . CW2 stated that TASER held daily 1 :30 p .m. production meetings attended b y Defendants Rick Smith and Tom Smith, Jay Pearl, Hanrahan, Max Nerheim and Ryan (a n
problems . 153 . CW3 is a former TASER employee who was employed by the Company from prior t o the start of the Class Period until 2005, and is familiar with TASER' s manufacturing processes . CW3 stated that he/she also recalled that approximately 6,000 defective M26s were returned to TASER shortly after the introduction of the X26 . CW3 also recalled that dozens of boxes of thes e
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returns, containing approximately 70 devices in each box, were stacked up in the TASER plant . CW3 also corroborated that employees were directed by Jay Pearl to work on Saturdays an d Sundays for a period of time to disassemble M26s to remove the high-voltage boards which wer e then put in new casings with new serial numbers .
5 6 7 8 9 10 11 was like they would just ship anything out" to meet the demand . 12 155 . CW3, who is certified to operate an oscilloscope and tested the X26 circuit boards , 13 14 15 16 17 18 19 discarded once they entered the assembly line . CW3 stated that he/she believes that TASER's ill20 trained work force did not know that they were not supposed to use the circuit boards with 21 22 23 24 25 26 27 28
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154. According to CW3, from May 2003 to December 2003 -- the first seven months o f the X26's production -- TASER had no specified limit on the unit 's frequency . CW3 stated "[t]hey would take everything out of the door that sparks because there was such a high demand ." According to CW3, TASER had a rush of orders for the X26 during this period and sol d approximately 50,000-60,000 units. CW3 said "[w]e were forced to build 7,000-10,000 a month . It
stated that the hertz (frequency) on the X26's circuit board ranged from 19 hertz to 120 hertz during that May to December 2003 period . After testing the circuit boards, CW3 labeled the boards with tags detailing frequency and voltage which were dated and initialed . When a lot of 50 circuit board s were accumulated in a plastic bin, they were sent to the order lines where one person would assemble a trigger, another a laser sight, another a LED light, and so on . The circuit board tags were
frequencies in the very high ranges . CW3 stated "Most of those people . . . don't even know what a currency is . I will tell you right now -- 80 percent of those people -- will not know what a hertz is . They wouldn't even care . They don't even know what they're reading, they will just take the tag ou t and throw it in the trash . I would separate good guns from the bad guns, but in the end I didn't know what happened. The second shift would come through and they probably didn't realize what's goo d
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and what's bad." CW3 stated that after December 2003, TASER utilized new "test boxes" that were calibrated for the proper frequency specification . CW3 stated "[t]he high frequency rate dropped significantly. We were getting closer to an average of between 19 and 24 hertz ." 156 . CW3 stated that TASER did not provide the manufactu ring stations with assembly
5 6 7 8 9 10 11 12 Notably, the Amnesty International Report was issued on November 30, 2004 . 13 14 15 16 17 18 19 ran a total of 6 lines at that time . CW3 said "[ t]here was no absolutely no st andardized 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
manuals until November 2004 . According to CW3, the manuals contained detailed instructions fo r the manufacture of the TASER devices, including the specification that X26's output should be a minimum of 19 hertz and a maximum of 24 hertz . CW3 stated that he/she believed that by November 2004, TASER had learned that 36 hertz would stop a pig's heart . CW3 stated that the Company provided the manuals in November 2004 because of increased outside scrutiny of the stungun's safety . CW3 stated . "[a]fter people started investigating, TASER moved to protect itself."
157. CW3 stated that the lack of manuals prior to November 2004 on each assembly line typified the Company's major quality control problems . CW3 stated "[n]obody had a handbook . The line lead would usually go down the line, and show somebody how to do it and come back late r on and check out their work . The line lead could control only two people ; but you cannot control 1 3 people in a line." CW3 explained that each line consisted of 13 assembly tables, and that TASE R
manufactu ring process ."
CW3 further stated that the Company 's use of non-English speaking
temporary workers, who had no electronics training, exacerbated the quality control problems . 158. CW3 further stated that both the M26 and X26 had bad solder joints, which would later cause the weapons to separate and fall apart . Specifically, CW3 stated that two capacitors that sat on the circuit board -- one white 500-voltage capacitor and one red 2,000-volt capacitor - wer e not soldered correctly by TASER' s poorly-trained temporary workers, causing a failed connection i n
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the circuit board and leading to customer complaints . CW3 also stated that the weapons ' "spark gap" -- a photosensitive mechanism that required a liquid crystal or an LED light in order to function -- did not work properly, leading to the weapons' frequent failure to fire and/or a threesecond delay in discharge . CW3 also stated that he/she believed that the manufacturing defect s
5 6 7 8 9 10 11 159 . CW3 stated that beginning in October 2004, TASER production slowed dow n 12 significantly as the Company experienced a decline in law enforcement orders. 13 14 15 16 17 18 19 they wouldn't listen to us, so that's the reason why it's so messed up. No one knew how to train 20 anybody. They didn't run it very well . I think at one time maybe TASER was doing pretty good , 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
caused the TASER weapons to discharge at frequencies far above those stated in the weapons ' specifications . CW3 stated that the weapons' failure rate was 200 of 300 units, and this failure rat e was consistent throughout 2003-2005 . CW3 believed the defective units were shipped to distributors and customers in 2002 through 2003, but stated that in 2004, TASER began to withhol d malfunctioning units.
160 . CW4 is a former TASER employee who worked assembling trigger and cartridge components from September 2004 through November 2004 . CW4 stated that he/she "quit becaus e the way they was running it and everything . They did know of problems coming through . We told them about it, but they ignored it." CW4 stated that TASER used unskilled workers who knew littl e or no English, as a temporary labor force . CW4 stated "[t]hey tried to have us to teach them and
but then they was [sic] cutting corners every day ." 161 . CW4 stated that there were a number of quality problems on the assembly line. CW4 said that because of the faulty way workers injected silicon or epoxy in the device casing supporting the trigger area and surrounding wires, it interfered with the path of the laser beam . CW4 state d "[t]hey knew about it, but they didn't fix it and went ahead and sent it out ." In addition, CW4 state d
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that when workers "pushed down" the silicon injection into the body of the weapon, it would com e apart . 162 . CW4 also stated that he/she observed " cases upon cases" of back-logged cartridges and other components sitting in the warehouse . CW4 said that the cartridges were not supposed to
5 6 7 8 9 10 11 manufacturing managers who came to the plant one day that the X26s needed to be rechecke d 12 because law enforcement agencies had returned them . CW4 stated that they were told that the 13 14 15 16 17 18 19 reason we were checking them, was because the officers were saying they weren't firing on the firs t 20 fire." CW4 explained that everyone at TASER knew this was a serious problem because every 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
be turned over because this would affect the function of the explosive device within the cartridge . However, CW4 noticed that the cases were o ften turn ed upside down and rotated by workers. CW4 said "[t]hey even had a big sign up there saying not to do that, but they was doing it anyway ." 163 . CW4 also corroborated that devices were coming back to TASER from customers b y the "caseloads ." CW4 stated that he/she and other workers were informed by several TASE R
reason for the returns was the X26s "weren't firing on the first fire . After the second one on, it would fire, but the very first initial firing was not firing ." CW4 stated that "t]hey had us all in the office one time rechecking them, because they had cases of them that had came back . Oh my gosh , they had a whole roomful of cases up to the ceiling ." CW4 estimated there were 50 cases o f returned stun guns ; each case containing approximately 36 units . CW4 said "[t]hey said that the
second to a police officer is crucial . 164. CW4 further stated that production slowed "way down" during the fourth quarter o f 2004. When CW4 first began in September 2004, he/she had a quota to assemble 150 trigge r cartridges an hour . CW4 explained that each worker had an hourly quota and all were informed b y Mary Phillip, the night-shift supervisor, that if they didn't hit their targets, they would be replaced .
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CW4 stated that "[t]hen all of a sudden, it just kind of died . Like within the first week that I wa s working, they was yelling that we had to get this and that and everything out, and then next thing I know, we were just doing back-up work and filling our time in because we weren't getting any production out hardly . Everybody was all upset and up in arms because they thought they was [sic]
5 6 7 8 9 10 11 12 productive work ." CW4 stated that this continued through November : "[t]hey weren't getting much 13 14 15 16 17 18 19 167 . CW5 stated that "[t]here was a lot of shady stuff going on . I quit my job because of 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
going to lose their jobs ." CW4 said that in September , Mary Phillip had informed the workers that a big order was expected, but it apparently never materialized . CW4 said "[w]e never saw it . " 165 . CW4 stated that in his /her second week on the job, production slowed so much tha t he/she was taken off the assembly line and assigned to side tasks, such as trimming plastic molds . CW4 stated that "[t]hey took me off of [the assembly line], because they said they was back-piled o n it. I was then doing silly stuff; anything to keep us busy for eight hours. It wasn't no [sic]
of anything out ." CW4 said that many of the temporary workers who had been expecting to mov e into permanent positions were not hired "and they just let them go ." 166. CW5 is a former Company employee who was employed by TASER from September 2003 through March 2004 . CW5 worked in production as a line lead, and was involved in buildin g and testing TASER cartridges and finished weapons p rior to shipment.
it . A lot of times I didn't want things to be shipped out that went through anyway ." CW5 explained that there were problems with the testing of cartridges as well as bad solder joints in the weapo n casings. CW5 said that he/she sent a "statement" to senior management at TASER about th e problems and "they did nothing about it ." CW5 stated that "[t]hey were shipping out guns that were poor quality to make their numbers. We got cash bonuses if we got a certain number of units out th e door. Guns were being returned from customers with problems . Things went out that I wouldn' t
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have wanted my name on ." 168 . CW5 stated there were endemic quality and other control weaknesses on the plant floor. CW5 said that the manufacturing supervisor, Mark Walker was more concerning with rolling joints behind his desk than overseeing the operation . CW5 said that workers complained abou t
5 6 7 8 9 10 11 12 through May 2004, in Quality & Inventory Control . CW6 was responsible for testing and visuall y 13 14 15 16 17 18 19 every 100 guns, 5% to 15% would malfunction . CW6 said that sometimes they would not fire on th e 20 first discharge and other times they would fire on the first discharge, but not the second . CW5 sai d 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Walker to Company management, but they were reluctant to fire him. By contrast, CW5 said that Production Manager Jay Pearl was terminated because of the way he tried to alert upper management to these issues, including problems with Taser testing . CW5 also stated that TASER' s employees regularly stole the law enforcement stun guns -- that were supposed to be under guard at the plant -- and sold them to people in parking lots . 169 . CW6 is a former TASER employee who worked at the Company from January 200 4
inspecting finished TASER devices prior to shipment. CW6 stated that the voltage, amperage, wattage were tested by other workers in the plant, such as line leads, as they assembled the guns . Most of the products CW6 handled were X26 units . 170. CW6 stated that he/she and other quality control employees would conduct a fire test of every X26 by laying the gun on a table and discharging it once or twice . CW6 stated that out of
these guns were set aside and not shipped . CW6 attributed the problem to a glitch in the software program that controlled and registered many of the devices' functions, including how many seconds the weapon fired per discharge ; how many times it was fired ; and the battery energy level . CW6 stated that "I was always kind of leery about the way they worked . It seems like there were flaws i n their system, their computer chips or their computer. Sometimes they would fire, and sometimes
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they wouldn't. There were times it wouldn't repeat fire ." CW6 said that "[n]obody there could pinpoint the problem" while he/she was at TASER . CW6 said that TASER's engineers "admitted there was a glitch because they kept having to revise the program ." 171 . In January 2004, when CW6 first started with the Company, he/she noted tha t
5 6 7 8 9 10 11 fire each one of them one hundred times . 12 172 . CW6 stated that each weapons ' performance was recorded in a quality report that was 13 14 15 16 17 18 19 174 . The Company's rampant Class Pe riod quality control deficiencies resulted in the wid e 20 distribution of defective products to distributors and customers . CW7 is a former TASE R 21 22 23 24 25 26 27 28
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customers had returned boxes of faulty X26s . CW6 said he/she saw 20 to 30 cartons of retu rns on the plant floor . Then, sometime in March 2004, CW6 said that TASER received another complaint from a police department customer . In response to the complaint and "because they were having a lot of problems with the firings of the guns ," TASER' s plant manager, "Keith," directed CW6 and others in quality control to unbox at least 2,000 guns that were about to be shipped and individually
reviewed daily by TASER engineers . CW6 stated that he /she assumed the engineers forwarded the performance reports to Company management . CW6 stated "I'm sure they informed them on what was going on and the owners had to make the call . " 173 . CW6 said that the Company had a daily quota of shipments imposed by the plan t manager Keith . CW6 said "[i]t was always rush, rush to get out 200-300 a day ."
distributor whose assigned territory was in the Northeastern United States one month before the start of the Class Period . CW7 is also certified as a TASER Master Instructor and estimates that he/sh e took approximately 350 hits from the M26 over a three year period . CW7 stated that he/she now ha s a serious heart condition . CW7 stated that TASER' s quality problems were notorious. CW7 estimated that in every order of M26 units, ranging from 3 to 8 units, there was at least one devic e
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that either didn't work right out of the box or broke shortly after . CW7 said "[y[ou put the batterie s in and it didn't light up or nothing happened when you pulled the trigger ." 175 . CW7 stated that when he/she first began as a distributor, TASER's policy was t o immediately replace any defective device with a new one off the assembly line . CW7 said that
5 6 7 8 9 10 11 176 . CW7 stated that while TASER reported the number of units it shipped every quarter 12 in its SEC filings, it didn't disclose the returns . CW7 said "I never saw a report of turnarounds, onl y 13 14 15 16 17 18 19 them done and put them out there as quick as possible because the sooner you get them out the door , 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
distributors grew tired of having to deal with the defective devices, however, so they started tellin g customers to ship the defective products directly back to the factory . Toward the end of CW7' s tenure, the Company stopped immediately replacing malfunctioning devices and held onto th e returned units to determine whether they were inherently defective or whether the customer ha d damaged it.
the number of guns that went out . What was their repair rate? How many guns did they see come back based on the number than went out? Did they book replacements as standard sales? " 177 . CW7 said that he/she had almost daily contact with the Company on training an d distribution issues and would often complain to Jami Hill, TASER's Training Coordinator, whe n he/she had a defective device . CW7 stated that "[t]he impression I had is that TASER wanted to get
the sooner you can show them as actual sales ." CW7 said "[w]hen I first got involved with th e Smiths, they were a private company . I still to this day think they had no idea it was going to take off the way it did . All of a sudden, it happened to click and the Smiths happened to hit the market at the exact right time and everybody was looking for something . . . and it was far beyond what they were ready for ." 178 . CW7 stated that In February or March 2005, the Suffolk County Police Department i n
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New York ordered 50 weapons . CW7 said that he was informed by a contact at that police department that "seven out of the box were bad from the start . They didn't even work ." He/she was further told that another three of the devices malfunctioned during police training classes : one of th e two probes failed to hit a metallic target and the officers got feedback from the device handles,
5 6 7 8 9 10 11 12 180. The fact that devices in the hands of customers delivered a charge 50% mor e 13 14 15 16 17 18 19 researchers from ensuring that the stun gun was operating correctly, Dr . Stratbucker stated : 20 21 22 23 24 published specifications . For example, in all its training materials, TASER touted the fact that the 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
receiving shocks themselves . CW7 was told that these units also were sent back to TASER . 179 . The Company's endemic quality control problems may also have caused some units to deliver charges significantly at variance with the devices' specifications . For example , The New Times reported, in a July 18, 2004 article, that "[a]ccording to Taser, the [M26] produced 26 watts of power, four times the power of the earlier model . A field test in 2001 by the Canadian police showed that the M26 was even stronger, with an output of 39 watts ." [Emphasis added .]
powerful than the weapon's specifications undercuts the Company's product safety claims . Such devices, although appearing to operate normally, posed substantial safety risks beyond thos e associated with a properly functioning device . For example, prior to working for TASER, Dr . Stratbucker conducted an evaluation of another stun gun, the Nova XR-5000 in or about 1984 . Discussing the fact that no performance specifications were provided with the device, precluding
Although unlikely , a malfunction might cause a change in the electrical characteristics and result in the output becoming substantially more injurious, even though the device appeared to function norma ll y. [Emphasis added .] 181 . Conversely, product defects could cause the devices to under-perform based on their
M26 has incapacitated even the most fit and motivated individuals, such as members of elite polic e SWAT units . However, on March 30, 2005, Stuart News, in an article entitled "Nine jolts fail to
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stop suspect ," reported that Indian River County Sheriff s Deputies in Florida used a TASER device to shock Christopher Patrick Vuras nine times because he continued to resist even after applicatio n of the shock . While the article does not state that the TASER devices involved were defective, th e performance of the weapons in the a rticle's account calls into question the proper functioning of th e
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Watts, compared to the 26 Watt output of the M26, TASER claimed that its newest law enforcemen t 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
devices . According to the article : Deputies struggled with Vuras when he tried to get back into the store after repeatedly being told to stay outside . During the struggle, Deputy John Gillette pressed his Taser stun gun to Vuras' back and initiated a five-second jolt when Vuras allegedly resisted arrest, a Sheriff's Office report stated . Assisting Deputy John Kane Jr . then fired his Taser's probes - two insulated copper wires with attached straightened fishhooks that can be deployed up to 21 feet away - into Vuras' chest and administered two more five-second shocks with little effect, the affidavit stated . "He was told by the deputies to stay down (on the ground)," said Sgt . Kent Campbell, who was the supervisor on the scene after the incident . "But (Vuras) instead grabbed the probes, pulled them out and got up ." Gillette deployed Taser probes into Vuras two more times as he continued to walk into the store, the report stated . Both times Vuras pulled the probes out while he was being shocked, according to the report . 182 . A spokesperson for the Indian River County Sheriff's Office identified the TASER devices used in the struggle with Vuras as the M26 . The Ineffectiveness of the X26' s 183 . As noted above, despite the fact that the electrical charge delivered by the X26 was 5
model had 5% greater stopping power due to its Shaped Pulse technology . The Company claimed that by delivering shocks in two phases, the "Arc and Phase" the "Stim Phase," the X26 wa s optimized to penetrate clothing, skin or other barriers and, by ionizing the air, create a low impedance electrical conductor that conducts the second pulse phase into the body . TASER claimed
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that because the Stim phase only has to flow across the highly conductive arc from the Arc Phase, i t is optimized to provide maximum incapacitation for a human target while operating at superefficient power levels . The X26 delivered a 5 second charge with 19 pulses per second for the first two seconds of the cycle, dropping to 15 pulses per second for the last three seconds of the firin g
5 6 7 8 9 10 11 CW1, "[p]olice didn't like going to the new X26 because with the M26, if a guy would drop, h e 12 would stay down. The M26 was like getting hit with a hammer ." 13 14 15 16 17 18 19 and were able to break the wires connecting the X26 to the barbs fired into the subject, thereb y 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
cycle . 184 . The reduced number of pulses during the last three seconds of the firing cycle , however, allowed individuals that were incapacitated during the initial two seconds to regain som e mobility during the final three seconds of the cycle . In other words, as originally sold, the X26 failed to deliver adequate stopping power throughout its entire five second firing cycle . As noted by
185 . In September 2004, TASER issued a training bulletin that tacitly acknowledged problems with the effectiveness of the X26 . In that bulletin, TASER announced that it was releasing a software upgrade for the X26 that increased the number of pulses during the last three seconds o f the firing cycle from 15 pulses to 19 pulses. The Company stated that this software upgrade was based upon its receipt of reports that subjects were able to gain partial mobility while being shocke d
breaking the electrical circuit and ending the shock . 186. A January 21, 2005 article in The New York Times, which first publicly disclosed th e issues surrounding the effectiveness of the X26 and modification of the X26 software, also reported that "[w]hile Taser claims an effectiveness rate of about 95 percent, a Pentagon study conducted b y an Air Force laboratory found that they were effective 60 percent to 86 percent of the time . Th e weapons become less effective at increased distances, according to the study ." It also reported :
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In marketing material, Taser says that the X26 works as well as the M26 despite its lower power output because it delivers its electric shock in a special wave form that enters the body more efficiently . Both guns put out multiple pulses of electricity each second, causing muscles to tighten and loosen uncontrollably . But Dr. James Jauchem, an Air Force scientist, reported at a conference on Tasers and similar weapons in November that tests on pigs showed that the X26 electric pulse was no more effective than other pulses of the same size . The Adverse Impact on TASER 's Busines s 187 . TASER enjoyed a virtual monopoly in the conducted energy weapons marke t following its buy-out of Tasetron . Indeed, in the Company's Form 10-K for the fiscal year ended December 31, 2003, TASER stated "[i]n the law enforcement an d corrections markets, the ADVANCED TASER and TASER X26 no longer have a direct competitor ." That position , however, came to an abrupt end during the fourth quarter of 2004 . On October 21, 2004, La w Enforcement Associates announced that it had completed the housing design for its new stun weapo n
14
which had a projected launch date of March 2005 . Further, on November 15, 2004, Stinger System s
15 16
announced that it had entered the projectile stun gun market with the introduction of "The Stinger ." Both products were to compete directly with TASER' s M26 and X26 weapons. The introduction o f competing products had a catastrophic effect on the Company's business during the fourth quarte r because of the heated debate over the safety of TASER 's devices, the widespread product defects , and the undisclosed problems with the effectiveness of the X26 . As alleged below, during the fourth quarter 2004, an increasing number of law enforcement agencies announced that they were delayin g
17 18 19 20 21 22 23 24 25 26 27 28
implementation of the TASER devices . 188 . For example, in February 2004, the province of Ontario, Canada approved a measure to allow the widespread use of TASER devices for front-line supervisors in the Toronto police force . At the time, Toronto Police Chief Julian Frantino was lobbying for approval of $1 .1 million in fund s to purchase 539 devices . However, in September 2004, the Toronto Police Services Board chose no t
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
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to include the TASER devices in the 2005 budget, for reasons not described in press reports . In midNovember 2004, the Board met again to reconsider Police Chief Frantino 's request for $1 .1 millio n in Tasers. Just prior to the vote, press stories highlighted the Amnesty International Report' s assertion that TASER weapons were found to be a contributory factor in several deaths . (Canadian
5 6 7 8 9 10 11 "Putting another 500 Tasers into the hands of 500 officers is not a minor step . I think before we tak e 12 that step, it's essential we find out what the true effects are and find out whether this is a safe thin g 13 14 15 16 17 18 19 Equipping Police with Tasers") . 20 21 22 23 24 25 26 27 28
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Press, Nov . 16, 2004, "Toronto Police Seek More Tasers for Officers as Debate over Safet y Continues") . In a 3-2 vote on November 18, 2004, the Toronto Police Services Board, chose to put the $1 .1-million purchase order of the TASER devices on hold . "This decision made by the board means it will be years into the future before our service is able to deploy the Tasers to front-lin e sergeants," one board member said . Board chair Pam McConnell defended the decision, saying :
or not a safe thing ." At the time of the vote, the Toronto force's number of Tasers was only 24 guns , mostly used by members of the elite Emergency Task Force . In the 3-2 vote, the board asked for a report from the city's medical officer on the long-term effects of the TASER devices . (Associated Press, Nov . 19, 2004, "Board Pulls Plug on Proposal to buy 500 Taser Stun Guns for Toront o Police ;" Etobicoke (Ontario, Canada) Guardian, Nov . 21, 2004, "Police Board Holds off on
189 . According to an October 11, 2004 article in the Daily World entitled "Police to Study Taser Usage," law enforcement agencies in the state of Louisiana revaluated their use of TASE R devices following the recent death of a man in Lafayette . The Lafayette Police Department recalled 20 of its TASER devices from the field in the aftermath of the death, allowing only supervisors t o continue to use them . The Police Chief of Porte Baree, LA also told a reporter: "We are in the process of re-evaluating our usage ." That department had purchased one Taser in early 2004 .
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190. According to a November 5, 2004 Associated Press article entitled "Las Vegas Polic e Adjusting Policies Guiding Taser Use," police officers were banned from using TASER guns o n handcuffed prisoners and discouraged from applying direct multiple shocks, following a departmen t review and two in-custody deaths . Police officials spent about four months evaluating their TASE R
5 6 7 8 9 10 11 immediate ban on the use of "less lethal" weapons after a pepper ball gun used by police killed a 12 college student in October 2004 at a Red Sox game . According to a January 16, 2005 article in the 13 14 15 16 17 18 19 more static than interest from wary cops ." As of January 16, 2005, the Boston Police Department 20 21 22 23 24 25 26 27 28
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policy after the death of William Lomax, 26, who was shocked repeatedly while handcuffed . Another man, Keith Tucker, 47, died under similar circumstances . Las Vegas police began equipping 1,310 patrol officers and supervisors with TASER devices in April 2003 . 191 . According to a November 5, 2004 article in the Boston Globe, entitled "Group Asks End of Pepper Gun Use," a group of Boston professors, lawyers and students called for an
Boston Herald, entitled "Taser Stunner : Cops Divided on Gun," although the Boston Police Department had pushed the state to legalize the law enforcement use of TASER devices in July 2004, the early November citizen protests appeared to have a chilling effect on the police department's plans to utilize the devices : "[s]ix months after back-to-back fatal shootings by Boston police sparked the `emergency' legalization of Tasers for law enforcers, the stun gun is drawing
had no standing order with TASER and, in February 2005, announced that its plans to obtain th e weapons were on hold pending the outcome of the continuing investigation into the October 2004 death of the college student . 192. On December 1, 2005, the Journal-Gazette, in an article entitled "Police Postpon e Purchasing Tasers," reported that the Fort Wayne Police Department in Indiana reversed an earlier decision to purchase 83 X26s in early 2005 due to the questions that had been raised about thei r
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safety . The Department's purchase was to have been financed with an $86,000 grant from the Department of Justice. A December 8, 2004 article in the Fort Wayne News Sentinel, entitled "Tase r Discussion Gets Wide Notice," reported the Department of Justice "might have tried to influenc e police in Fort Wayne or other municipalities to avoid purchasing Tasers ." According to that article,
5 6 7 8 9 10 11 devices, a Justice Department researcher , Joyce Gammelmo, encouraged him to do more research 12 before buying the guns . Joseph Estey, president of the International Association of Chiefs of Police, 13 14 15 16 17 18 19 impact on TASER' s business in the fourth quarter of 2004 . For example , Stinger Systems 20 21 22 23 24 25 26 27 28
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the Justice Department, which had provided the grant money to Fort Wayne, had been in contact with Police Chief Rusty York over the past couple of weeks . "They just encouraged due diligenc e and talked about two studies they are conducting," a Fort Wayne police spokesman said . 193 . As noted above, in a December 7, 2004 article, The New York Times reported that Police Chief Rusty York said that after outlining his department ' s research regarding the TASE R
said his agency was working with the Justice Department to examine issues surrounding the weapons . At the time, the Association had not taken a position on TASER . Police Chief Rusty York told The New York Times he did not know whether the Justice Depa rtment had contacted othe r police chiefs. 194. In addition to the foregoing, the emergence of competition had a substantial advers e
("Stinger"), debuted its conducted energy weapon prototype in September 2004 at a Washington, D.C. national law enforcement trade show . Stinger also made presentations to law enforcement agencies around the country, in August and September 2004. In or about November 2004, Stinger contacted the Boston Police Department and subsequently did demonstrations of its prototype for the Boston, Wooster and Springfield Police Departments, as well as the Massachusetts State Police . Stinger's presentations were timed to coincide with budget-setting schedules for 2005 .
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195 . In the fourth quarter of 2004, TASER had submitted contract proposals to supply its weapons to the Massachusetts State Police and the Pennsylvania State Police . These agencies decided to delay orders, however, to afford them the opportunity to consider alternative, competin g products to avoid investing in TASER's technology in the event that became obsolete with th e
5 6 7 8 9 10 1 .1 2004 in order to consider alternative systems . 12 196. As reported above, the Massachusetts legislature passed a law allowing the use of 13 14 15 16 17 18 19 from a pepper ball gun . While some police Massachusetts police departments have purchased 20 TASER devices for training and evaluation , after the passage of one year, the Massachusetts 21 22 23 24 25 26 27 28
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introduction of new-state-of-the-art products from the Company's rivals . In addition, some police departments that were about to make purchases from TASER decided to delay that decision based o n cost factors because Stinger's product was to be was offered at a substantially lower price tha n TASER' s products. For example , the Wooster and Springfield , MA police departments specifically delayed their first-time procurements of TASER devices that were planned for the fourth quarter o f
TASER devices by law enforcement in July 2004 . The Boston Police Department was prevente d
from purchasing 100 Tasers for the July 2004 Democratic National Convention, however, because o f
concerns over the safety of the gun . While TASER had hoped to eventually equip all 2,000 officers in the department, in October 2004 the plan was put on hold after protests over the use of less-letha l weapons stemming from the death of a college student at a Red Sox game after she was hit in the eye
distributor for TASER, Triple Nickel Tactical Supply, has not delivered any products for deployment in the streets . 197 . All of TASER' s sales in the State of New York, New York City and Long Island are factory-direct . Since the fourth quarter of 2004, most of the State law enforcement agencies in New York have delayed any decision about stun gun purchases in order to evaluate the Stinger weapon .
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The 40,000-member depa rtment in New York City has only 150 TASER devices in use because of a 2 3 4 guns were disclosed duri ng the fourth quarter of 2004, the full adverse impact of these and other 5 6 7 8 9 10 11 12 part, states: 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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policy limiting use of the device to emotionally-disturbed people . 198 . Although some of the law enforcement decisions to delay ordering or deploying stu n
delays was not disclosed until after the end of the Class Peri od. As alleged more fully below, by that time, the Individual Defendants and other Company insiders had made more than $85 million i n fourth quarter 2004 sales of TASER stock. The End of the Class Perio d 199 . On January 6, 2005, after the market closed, TASER issued a press release entitle d "TASER International, Inc . Cooperates with SEC Informal Inquiry." The press release, in pe rtinent
We are compiling information to assist the SEC in two areas: Company statements regarding the safety of TASER(R) products and a recent order received from Davidson's, Inc . "We are confident our statements are supported by the safety studies of our products," said Rick Smith, CEO of TASER International, Inc . "We are in the process of compiling the information requested by the SEC and look forward to working with them as we have with other independent entities interested in the safety of TASER devices such as the United States Department of Defense, the Home Office of the United Kingdom and other governmental agencies in the United States and abroad . Our public statements about the safety of TASER devices are consistent with those of medical experts that we have consulted, or in the case of the Department of Defense, were reviewed and approved prior to release by the very agencies that have commissioned the research ." "Davidson's Inc . has been a distributor for TASER International since 1999. Davidson's most recent order was received and shipped in the normal course of business in the fourth quarter of 2004 . It followed a 60-day test market for our new X26C Citizens' Defense System that included two of Davidson's firearms dealers . As a result, we were pleased to secure Davidson's as the exclusive distributor for this market segment with an agreement providing Davidson's the exclusive distribution rights to Federal Firearms License (FFL) dealers . Davidson's ordered an initial 1,000 TASER X26C systems, costing less than one million dollars, for distribution to their dealers with n o
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right to return the product . This order was announced together with an order for other law enforcement products which brought the total order to $1 .5 million," continued Smith . 200. Immediately, on January 7, 2005, The Wall Street Journal reported in an article entitled "SEC Probes Safety Claims Made by Maker of Stun Guns" as follows :
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
The Securities and Exchange Commission has launched an inquiry into claims TASER International Inc . has made about safety studies for its stun guns. The SEC also is looking into a $1 .5 million, end-of-year sale of stun guns by TASER to Davidson's Inc ., a Prescott, Ariz ., firearms distributor . "We're confident that this is going to come out in our favor," TASER's president Tom Smith said late Thursday in announcing that it was cooperating with the SEC informal inquiry . An informal inquiry is a step below a formal investigation, where regulators have subpoena power . Mr . Smith added that the Scottsdale, Ariz., company stands by its safety statements and the recent sale . Shares of TASER were lower in premarket trading F riday Recent investigations by several newspapers have raised se rious questions about the stun gun's safety record and about TASER' s reports to shareholders . Although TASER has repeatedly said its stun guns have never caused a death or serious injury, reports in the Arizona Republic have linked the stun gun to 11 deaths and to several injuries involving police officers . "We feel very confident that the statements that we've made surrounding the safety of our products are supported with the safety studies," Mr . Smith said. However, questions about safety have already caused some police departments around the country to back off purchases of TASERs . Some medical experts believe TASER shocks may exacerbate a risk of heart failure in cases where people are agitated, under the influence of drugs or have underlying health problems . Human-rights advocates want law enforcement to stop using TASERs until scientific evidence can show they don't kill . Last week, an investment analyst raised questions about the sale of 1,000 new consumer stun guns and other products to the dist ributor Davidson's that TASER announced on Dec. 20. "It's a deal that could maybe make a quarter," said Rob Miceli , analyst with the Scottsdale firm Gradien t
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Analytics Inc. "Any time we see something like that it bears further investigation ." 201 . The price of TASER common stock dropped from a close of $27 .62 per share o n January 6, 2005 (prior to the disclosure of the SEC investigation) to a closing price of $22 .72 per share on January 7, 2005 (the first trading day following the disclosure of the SEC investigation) . 202. On January 8, 2005, The New York Times, published an article entitled "S .E.C. Looking At Safety Data and Big Order for Taser Guns ." In that article, the Times reported that in addition to the $1 .5 million Davidson's transaction at the end of the fourth quarter of 2004, another ,
9 10 11 12 13 14 15 16 17 18 19 20 stated "The attorney general has concerns about issues raised in media reports about Tase r 21 International, including questions about safety and alleged misrepresentation . . . "The Attorney 22 23 24 25 26 27 28
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unidentified dist ributor bought $700,000 of TASER' s products on December 30, 2004: An internal company document suggests . . . that Taser was struggling to meet its sales goals at the end of 2004 . he document shows that in another sale, a distributor bought $700,000 in Tasers and accessories on Dec. 30, the last business day of the fourth quarter, about 3 percent of the sales that Taser expected for the fourth quarter . "Hope this will help out! ! ! ! !" the distributor noted in the purchase order, which was provided by a person who will profit if Taser's shares fall . 203 . On January 8, 2005, the Arizona Republic reported that the Arizona Attorney Genera l had initiated an inquiry concerning TASER . In that article, entitled "Taser safety claims draw stat e scrutiny," it was reported that Arizona Attorney General Terry Goddard had met with TASER officials prior to the disclosure of the SEC investigation . A spokesperson for the Attorney General
General 's Office has not opened an investigation but is continuing to gather information ." 204 . With respect to the safety controversy, that article reported : For years, Taser maintained that its stun guns never caused a death or serious injury . As proof, Taser officials said no medical examiner had ever cited the weapon in an autopsy report . But Taser did not have those autopsy reports and didn't start collecting the m
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until April . Using computer searches, autopsy reports, police reports, media reports and Taser's own records, The Republic has identified 88 deaths after police Taser strikes in the United States and Canada since 1999. Of those, 11 autopsy reports have linked deaths to the stun gun. Medical examiners cited Taser as a cause or contributing factor in eight deaths and could not rule it out as a cause in three others . The Republic has also reported that several police officers have sustained career-ending injuries that they attribute to being shocked with Taser .
In reports to bolster safety claims, Taser officials have said more than 100,000 police officers have been shocked during training exercises without suffering a serious injury .
In October, Taser issued a press release saying a Department of Defense study, whose full results have not yet been released, found that its guns were safe. But The Times reported that the Air Force researchers who conducted the study actually found that the guns could be dangerous and that more data was needed to evaluate their risks . 205 . In a January 11, 2004 article entitled "Taser Takes Another Hit, End of Year Pus h Questioned," the Arizona Republic reported: Taser was one of the best-performing stocks in the country over the past two years . Sales soared when police departments around the country armed officers with its electric stun guns, and the company has made millions for investors. But the stock has lost 36 .7 percent of its value since Jan . 1 . Monday's decline came after additional questions were raised about Taser's end-of-year sales . The underlying concern : whether Taser pushed through two large orders at the end of the year to meet its sales and earnings targets . Investors in public companies, especially hot companies such as Taser, pay attention to growth rates to see if momentum is holding up or slowing. If a company falls short, its stock usually drops . The first involves a Dec . 20 announcement by Taser of a $1 .5 million order from Davidson' s Inc ., a longtime Prescott gun distributor. Rob Miceli, an analyst with Gradient Analytics in Scottsdale, raised doubts about the sale in a Dec. 30 report . Miceli couldn't verify that Davidson 's had received the 1,000 consumer stun guns and other products in its order and noted that Taser couldn ' t book the sale for 2004 unless it was shipped by Dec . 31 .
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
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Davidson's Chief Executive Bryan Tucker said last week that he received the guns before year's end and that there was nothing unusual about the timing of the order . He said he needed the guns in time for a big gun show . In a research report Monday, Miceli said new information on the sale provides "additional evidence" that Taser violated accounting rules regarding when a sale can be booked . Miceli said Tucker's revelation, in interviews with reporters, that the new consumer stun guns Davidson's bought can be converted into the policemodel stun guns if they don't sell equals a right of return . Tucker describes it as a "fallback position" in case the new consumer gun "falls on its face ." Under generally accepted accounting principles, Miceli said, the revenue from that sale can't be booked, or recognized, yet because Davidson's might send some guns back for conversion . Booking the entire amount under this scenario is aggressive accounting, he said .
The other new information was a $700,000 purchase order, reported Saturday by the New York Times, outlining an end-of-year sale that Taser did not announce . A note on the Dec . 30 order says, "Hope this will help out ."
Miceli said that purchase, combined with the Davidson's deal, accounted for about 10 percent of Taser's expected sales for the quarter . [Rick] Smith said Taser did not book the entire $700,000 in the fourth quarter . He said it wasn't announced because Taser normally doesn't announce sales to distributors . The Davidson's deal was announced because it involved the new consumer model . He said Taser distributors often attach notes to orders . "We get little notes from our distributors all the time because they're as excited about the business as we are," he said . 206. In addition, on January 11, 2005, the Company issued a press release entitled "A n Open Letter to Our Shareholders and Customers." In that press release, Defendant Thomas P . Smith attempts, inter alia, to explain away the insider sales by the Individual Defendants (without mentio n of the massive sales by other Company insiders). Significantly, the press release also states , "[d]uring the first half of 2005, it is possible that we may see some delays in orders as agencies tes t and evaluate potential new entrants." With that disclosure, all the artificial inflation in the price o f
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the Company's common stock was removed, as TASER closed at $14 .10 per share on January 11 , 2005, compared to the closing price of $20 .05 per share on January 10, 2005 . Post-Class Period Events 207 . Subsequent to the end of the Class Period, TASER acknowledged that the adverse
5 publicity from the safety controversy surrounding its devices, as well as the advent of competition i n 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 concerning the research TASER touted during the Class Period . 21 22 23 24 25 26 27 28
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the conducted energy weapons market had adversely affected the Company's business . In the Company's annual report filed with the SEC on Form 10-KSB on March 31, 2005, the Compan y stated: We anticipate net sales will decrease in the first half of 2005, perhaps significantly, from the levels achieved in the third and fourth quarters of 2004. We believe the principal reasons for the decrease in net sales, or the deferral of orders , may relate to the adverse impact on customers and potential customers of the allegations of death occurring after the use of a TASER device, adverse publicity surrounding our products or use of our products , and potential competition which may cause our customers to postpone or delay orders to allow them to evaluate other competing products. [Emphasis added .] 208. In addition , as the media accounts of deaths linked to the use of TASER devices, th e suspension of their use by various law enforcement agencies , and the debate about the weapons' safety continued to multiply , various post -Class Pe riod disclosures underscored the falsity of Defendants ' portrayal of the TASER weapons as safe, as well as Defendants ' materi al misstatements
209. On January 23, 2005, The Arizona Republic published an article entitled "TASER Doctor's Credibility Questioned ." In that article, the Republic reported that the research of Dr . Stratbucker, one of the authors of the PACE study, was "potentially biased" and that he may hav e misled a judge about his financial relationship with TASER in the Jon Benet Ramsey case. Th e article states :
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Robert Stratbucker, who helped lay the foundation for Taser's claims of safety, has written several medical articles on the stun gun and has conducted studies that company officials use to promote the weapon to police departments across the country . But a Scottsdale research firm is raising questions about Stratbucker's objectivity, which calls into question the doctor's long-held position that Taser has never caused a death or serious injury . "In the case of Dr. Robert A . Stratbucker, in particular, the evidence of bias is extremely compelling," according to the Gradient Analytics report obtained by The Arizona Republic .
The 14 page report focuses on an article about cardiac-safety co-written by Stratbucker, published in the peer-reviewed journal Pacing and Clinical Electrophysiology and trumpeted by Taser in news releases just over a week ago as evidence of the stun gun's safety.
In its report, Gradient questions the way the cardiac study was conducted and the "validity of the results ." It says Taser was tested in a setting that did not match real-world circumstances. It said the study, which used a simulated device to shock pigs, does not take into account factors such as drugs, elevated heart rates and conditions such as heart disease.
The report suggests that cash and options paid to Stratbucker and others who conduct research on Tasers could lead to tainted results. Taser has acknowledged giving options to Stratbucker .
Gradient criticizes Stratbucker, saying he was dismissed as an expert witness in the Jon Benet Ramsey murder case where a Taser might have been used as a weapon . "He was dismissed after it was shown that he had failed to disclose his relationship to Taser, (that) he had previously been compensated in cash and options by Taser and had ignored evidence that appeared to indicate the use of a Taser in the killing," Gradient said . Both Dr. Stratbucker and TASER vigorously denied the allegations made by Gradient .
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210 . On February 10, 2005, an article published by the Associated Press Alert - Arizona entitled "Taser shares fall following Air Force Study," reported that the price of TASER stock fell after a CBS report that an Air Force study had found that "multiple shocks from a Taser stun gun led to heart damage in pigs ." According to the article, CBS reported that it obtained a study by the Ai r
5 6 7 8 9 10 11 12 was "statistically insignificant ." In response, CBS did another report on the "CBS Evening New s 13 14 15 16 17 18 19 damage would put this patient at high risk for developing ventricular fibrillation or sudden cardiac 20 death." 21 22 23 24 25 26 27 28
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Force that "found a jump in the enzyme Troponin-T . . . [and] high levels of blood acid, which is a potentially life-threatening condition," after pigs were subjected to 18 shocks with a TASER device. The article repo rt ed that TASER called the use of 18 shocks " extreme," stating that the test result s are similar to what would result from strong physical exertion . 211 . On February 11, 2005, TASER issued a press release in which it said that the researcher involved in the study, Dr. Jauchem, had told CBS that the slight increase in Troponin T
with Dan Rather" on February 11, 2005 . That story included an interview with Dr . Charles Rackley , who was described as "a respected cardiologist at Georgetown University Hospital ." When asked "if a patient came to you with these blood levels, what would you think as a diagnosis," Dr . Rackley responded, "Well, initial impression would be that that meant some heart muscle damage, threat o f heart attack ." Dr. Rackley continued, "The combination of acidosis as well as the heart muscl e
212 . On February 16, 2005, USA Today reported that "[t]he largest association of polic e chiefs will issue a national bulletin within 10 days urging police departments to review the use of stun guns because of reports that the weapons maybe related to numerous deaths ." The articl e further reported that the International Association of Chiefs of Police and the Justice Department would initiate a study of the more than 80 deaths linked to the stun guns "to assess the risks in usin g
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the weapons . . . ." 213. In or about February 2005, James Ruggieri, an electrical engineer who in February made a presentation to the American Academy of Forensic Sciences in which he said Taser shock s could cause cardiac arrest. In an article dated March 5, 2005, The Arizona Republic reported that
5 6 7 8 9 10 11 12 and has consulted with the Occupational Safety and Health Administration, the Federal Aviation 13 14 15 16 17 18 19 application "have been erroneously dismissed because of a time lapse between the shock and th e 20 heart attack . . . . Despite the low energy output of the Taser . . . the current is enough to caus e 21 22 23 24 25 26 27 28
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Ruggieri, a forensic engineer, "who has written safety standards for the most respected electrical laboratories and commissions in the worlds is warning police departments that shocks from tasers could cause delayed cardiac arrest and that injuries to officers and suspects who are zapped could be going undetected ." The article quoted Ruggieri as telling the American Academy of Forensic Examiners that the "[p]olice should be informed that the Taser can kill . . . ." The article notes that Ruggieri has served as a forensic investigator for the Fairfax County Police Department in Virgini a
Administration, and the National Transportation Safety Board on electrical accidents . The article reported that Ruggieri said that the evidence shows that heart damage and fatal heart rhythms can develop hours after electrical shock occurs . According to Ruggieri, suspects and police officers , who are routinely subjected to shocks during training "`may have unknowingly incurred permanen t heart damage."' The article further reported that Ruggieri said that deaths following a TASER
cardiac arrhythmia ." 214. The article further states that Ruggieri said that TASER incorrectly applied electrical concepts known as the Faraday Shield and skin effect to suggest that electrical current from a TASER device cannot penetrate deeply enough into body tissue to harm internal organs . According to Ruggieri, those concepts apply only to high frequency current, and are not applicable at th e
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frequencies at which the TASER devices operate. While TASER argued that Ruggieri applied th e wrong standard by using "the engineering skin effect and not the biomedical effect," the article note s that medical dictionaries, encyclopedias and electrical journals make no distinction between engineering and biomedical skin effects, and that the effect is calculated using a mathematica l
5 6 7 8 9 10 11 UL spokesman Paul Baker stated that the graph is supposed to apply to an electric fence, an d 12 reportedly stated "[w]e take issue with that data in relation to Taser . . . Underwriters Lab does not 13 14 15 16 17 18 19 20 21 22 23 24 217. In addition, despite the fact that Samuel Powers had filed suit in November 200 3 25 26 27 28
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equation that applies to the way alternating current flows on an electrical conductor. 215. Finally, according to the a rticle, Ruggieri said TASER misapplied elect rical code s and standards to suggest that its devices were safer than they really are . For example, he cites to TASER' s use of a chart that suggests that UL has certified TASER devices as safe. The article als o reports that UL said that the graph that TASER uses does not reflect any study of the devices safety .
agree with Taser." Baker also stated that he was surprised that TASER was still using the graph since UL had publicly stated a month earlier that it had no bearing on the TASER weapons . 216. On March 1, 2005, the Department of Defense released the expanded summary of th e HECOE Report - the March 2005 HECOE Report . That expanded report stated : Several key data gaps were identified in data evaluation . These gaps include the biological basis for TASER effects, appropriate dosimetry [the accurate measurement of dosage], and the impact of environmental and scenario dependent variables on the induction of effects . Available experimental-only data are too limited to adequately quantify possible risks of VF or seizures, particularly in susceptible populations . Limitations in the exposure and incidence data for some infrequent events and the need to rely on database of case reports compiled by TASER International also generate uncertainty in the results. [Emphasis added.]
alleging that he sustained a compression fracture as a result of muscle contraction caused by the shock from an M26, the March 2005 HECOE Report stated "[n]o reports were identified tha t
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describe bone fractures resulting from rapid induction of strong muscle contraction ." The March 2005 HECOE Report also disclosed that TASER employees had participated in the study, and that the data analyzed was primarily provided by TASER . 218. In a March 6, 2005 article, the Sunday Mercury in Britain, reported that Dr . Tony
5 6 7 8 9 10 11 was a working one . 12 219. A May 11, 2005 article in USA Today, entitled "Fairness of Taser study in question, " 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Bleetman, who has spent years touting the TASER devices as safe and authored a 2001 repo rt about TASER weapons, was paid 2000 to conduct research for TASER . The article further reported that a UK subsidiary of TASER - ProTect Systems Ltd . - carried a photo of Dr. Bleetman on its website, describing him as its Medical Director . While the article noted that Dr . Bleetman denied an y affiliation with Pro-Tect Systems Ltd ., it reported that a Pro-Tect Ltd. e-mail address listed for him
I
reported : An adviser to a federally funded study concerning the safety of stun guns made by Taser International also is a paid consultant to Taser, the Justice Department acknowledges . The situation is raising questions about potential conflicts of interest in the $500,000 study, which is being done amid reports that dozens of people have died after being shocked with stun guns . Robert Stratbucker, a physician from Omaha, is among four paid advisers to a two-year study that is being launched by John Webster, a professor of biomedical engineering at the University of Wisconsin . Webster's application to the Justice Department for a research grant last fall cited Stratbucker as an adviser, but it did not mention that Stratbucker is a medical consultant to Taser, the nation's leading seller of stun guns . Stratbucker has worked with Taser as the Arizona company has touted its stun guns - also known as Tasers - as non-lethal weapons that offer a safe way for police to subdue suspects . Taser, whose Web site lists Stratbucker as the company's medical director, has cited his research in promoting its stun guns .
Stratbucker's presence is "a potential conflict of interest," said Hubert Williams, president of the Police Foundation, a think tank here that
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researches law enforcement issues and wants federal money to do its own stun-gun study. "We wouldn't do it ." The critics also cite Webster's written summary of his study that he filed with Justice . He said his premise was that "Tasers do not kill," and that he hoped "to find why these people are dying, and thus save lives . " 220. In a May 13, 2005 letter to Glen A . Fine, Office of the Inspector General, U .S . Department of Justice, Chris Ford, Research Associate for People for the Ethical Treatment o f Animals ("PETA") wrote : We are writing to insist that the Office of the Inspector General (OIG) investigate whether University of Wisconsin professor John Webster provided false information to the National Institute of Justice (NIJ) submitted in a federal grant proposal (which was approved) . We also urge the OIG and the NIJ to withhold funding for the study until this matter has been thoroughly investigated . The proposal-application number 2004-90388-WI-IJ-was submitted for the "Less-Lethal Technologies, Fiscal Year 2004" grant solicitation by the NIJ . Webster and his partners have been granted $500,000 to assess the safety of the Taser International Taser Energy Weapon . As part of the proposal, Webster provided the curriculum vitae of each researcher and consultant working with him on the project . However, Robert A . Stratbucker and Wayne McDaniel failed to disclose their affiliation with Taser International, the company whose weapon is to be studied . Dr. Stratbucker's curriculum vitae fails to disclose that he is the medical director of Taser International . Nothing in the documentation provided states that he has conducted studies for Taser International concluding that Taser weapons are safe. Mr. McDaniel's curriculum vitae also fails to disclose that he has been paid by Taser International to conduct studies and write papers for the company concluding that Tasers are safe . Mr. McDaniel even went so far as to omit publications he wrote for Taser from the list of published works on his curriculum vitae . We are certain that Dr . Webster was well aware of Dr . Stratbucker and Mr. McDaniel's affiliation with Taser International-Webster and Stratbucker are colleagues who have worked together on several studies . It is our assertion that Webster, Stratbucker, and McDaniel conspired to provide the false documents to the NIJ in order to hide this obvious conflict of interest and secure the grant . . . .
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221 . On May 13, 2005, The New York Times reported that Dr. Stratbucker had been removed from the University of Wisconsin study : A Wisconsin researcher has removed Taser International's medical director as an adviser to a study of the safety of stun guns after critics said his involvement with the manufacturer had tainted the research . The researcher, Prof. John Webster of the University of Wisconsin, Madison, had described his two-year, $500,000 study, financed by the Justice Department, as the first to look at the safety of stun guns independent of Taser, the Arizona company that makes the weapons. 222 . In a May 21, 2005 article entitled "Taser Tied to `Independent' Study that Backs Stun Gun," The Arizona Republic reported that TASER was "deeply involved in the HECOE study that
10 11 12 13 14 15 16 223 . The article stated that "[s]ince October, Taser officials have contended that th e 17 company had no involvement in the Defense study, which helped fuel a sharp rise in the company' s 18 19 20 21 22 23 24 article, TASER also provided the bulk of the research material used in the study . Indeed, the articl e 25 26 27 28
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the Company touted as `independent,' based on interviews with military officials and document s obtained by the paper. The article also reported that "[e]-mails that military officials exchanged also reveal for the first time that they asked Taser to tone down public statements about the study . In addition, they urged the company to commission an independent study rather than rely on the Defense study."
stock price last year ." The article notes that following an October news release in which Defendan t Rick Smith stated "'[t]his comprehensive independent study further supports the safety of Taser,"' the price of the Company's stock went up 60% over the next month . The article reported that despite the characte rization of the study as "independent," TASER officials participated in thre e panels to determine the scope of the study, analyze data and review findings . According to the
quotes Larry Farlow, a spokesman for the Air Force Research Laboratory in Texas that oversaw the study as stating, "Were they (Taser) totally disconnected (from the study)? The answer is no . They
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were not disconnected . . . . ." 224. The article further stated that the Air Force conducted the study for the Defens e Department to "assess the risks and effectiveness of Tasers so the military could decide whether t o buy them ." The article stated that Air Force researchers said the study was "not meant to be a
5 6 7 8 9 10 11 12 from two jolts delivered by a Chicago Police officer . The autopsy said methamphetamines 13 14 15 16 17 18 19 226. The Republic also reported that a June 28, 2005 TASER training bulletin advised 20 21 22 23 24 25 26 27 28
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comprehensive review of stun-gun science or safety, and they made no findings on the device' s safety ." 225. On July 30, 2005, The Arizona Republic, in an article entitled "Taser shocks ruled cause of death," that a Chicago medical examiner ruled that shocks from a TASER device were the primary cause of the February 2005 death of Ronald Hasse . The article stated that "[a]n autopsy report from the Cook County Medical Examiner's Office attributed the death . . . to electrocution
contributed to Hasse's death ." Noting that it had identified 140 deaths following a police TASE R device shock since 1999, the Republic reported that coroners said that TASER weapons were a caus e of death in four cases, a contributing factor in 10 cases, and could not be ruled out as a cause o f death in four cases . The Republic further reported that following Hasse's death, the Chicago Police Department halted plans for an expansion of TASER device deployment .
police that "`repeated, prolonged and/or continuous exposures to the Taser may cause strong muscle contractions that may impair breathing and respiration, particularly when the probes are place d across the chest or diaphragm ." The article stated that "[i] training classes and instruction manuals , Taser has previously told police to use repeated shocks to control a suspect . " 227. On July 31, 2005 , The Atlanta Journal-Constitution published an article entitled, "Company : Taser can be lethal ." The article stated:
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Multiple shocks with a Taser could impair breathing and even lead to death, the stun gun's manufacturer says in a new warning to law enforcement agencies .
The three-page bulletin, posted on the Taser International Inc . web site and e-mailed to the company's 19,500 certified trainers, contradicts past statements the company has made to the public and law enforcement, as well as its own training manual, last issued in November 2004 . In fact, the 239-page training manual issued by the Arizona-based company contained its own contradictions, both urging officers to use multiple shocks to subdue unruly suspects and warning against it . "This is a much stronger emphasis than they had before," Duluth police Maj . Don Woodruff, a certified Taser Instructor, said of the new bulletin . "In the past they just told us that if you have a guy who is not compliant, just stun him again . There wasn't that much talk about the health effects . "
The new bulletin, beyond warning officers three times that repeated Taser shocks can impair breathing and lead to death, also describes specific injuries that could result from multiple or prolonged use of the 50,000-volt stun gun. It said multiple shocks could also cause strong muscle contractions that could cause injuries to "tissues, organs, bones, muscles, tendons, ligaments, nerves, joints and stress/compression fractures to bones ."
A major part of Taser's defense for years has been that a medical examiner has never named the weapon as a cause of death . That changed last week when a Chicago coroner named the Taser as the primary cause of a jailed prisoner's death . 228 . Maj . Woodruff s statements concerning TASER' s emphasis on the application o f multiple shocks to gain compliance were corroborated by CW7, who was trained as a Master Instructor for TASER. According to CW7, the Company taught its instructors to teach their student s to apply multiple shocks to attain compliance . CW7 stated "[n]owhere in their training mate rial, is
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there a stated limitation to the number of shocks . We were taught by [Hans Marrero, Taser' s Director of Training] as instructors to turn around and teach our students if the guy doesn't compl y
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in the first pull, pull the trigger again . It was told and taught to us, that you just keep pulling th e
trigger until you gain the compliance you need ." 229. CW7 further stated that he/she accompanied Defendant Rick Smith to a marketing or training session in New York in 2003, and Smith directly advised the officers in attendance about th e
5 6 7 8 9 10 11 12 said he will re-evaluate the inconclusive autopsies of two men who died after being shocked by 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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usefulness of multiple shocks . "The way Rick Smith, who was there, taught it to them, and the wa y all subsequent marketing materials provided to me -- which I was strictly told to adhere -- said it , was "`continue [to administer shocks] until you gain the compliance ."' 230. On August 2, 2005, the Associated Press reported that in the wake of the ne w information about the Company's June 2005 warning of possible respiratory complications i n connection with prolonged TASER device shock, the Gwinnett County medical examiner in Georgi a
TASER devices in jail . 231 . On August 20, 2005, the Associated Press reported that a number of lawsuits were filed against TASER by police officers who sustained inju ries during TASER training . The a rticle states: Police officers in New Mexico and four other states have filed lawsuits against Arizona-based Taser International Inc ., claiming they were seriously injured after being shocked with the electronic stun gun during training classes. All of the lawsuits have been filed in the past two week including four in Maricopa County Superior Court here on behalf of officers in Florida, Kansas, New Mexico and Ohio .
The officers allege they suffered "severe and permanent" injuries including multiple spinal fractures, burns, a shoulder dislocation and soft-tissue injuries .
The lawsuits challenge Taser's principal safety claim and accuse the company of misleading law enforcement about the extent of potential injuries . They also accuse company officials of concealing reports of injurie s to at least a dozen other law enforcement officers .
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In their lawsuits, the officers allege they were injured in training classes between August 2003 and October 2004 . They say that Taser instructors did not reveal any medical information suggesting that the guns could cause injuries and they claim the company has ignored important research suggesting the guns could be extremely dangerous, if not fatal. The 104-page complaints filed Aug . 5 each allege Taser was aware of injuries to other officers but did nothing to warn police departments, "knowing full well that such a reported serious injury would have devastating ramifications on its safety claims and, most importantly, its most-effective sales tool, the law enforcement training program . " Among the five lawsuits is one filed Thursday by Hallsville (Mo .) Police Chief Pete Herring, who claims he suffered heart damage and two strokes when he volunteered to be shocked while hooked up to a cardiac monitor as a way to demonstrate the safety of Taser to his officers in April 2004 . Herring also claims "painful, permanent and progressive" hearing and vision loss and neurological damage in addition to strokes and cardiac damage . Materially False And Misleading Statements Issued During The Class Perio d
knew, or recklessly disregarded, were materially false and misleading . For example, as noted above , a December 5, 2004 Miami Herald article reported that TASER uses a chart in its training m anual that shows that its weapons deliver an electrical shock that is well below the safety threshold tha t Underw riters Laborato ri es ("UL") has determined to be safe for a two-year old . The article explained that TASER includes a line graph in its literature that shows UL shock limits that wil l cause the heart to stop, noting that the safety margin was calculated for humans between 2-75 year s
233 . Defendants, however, knew or recklessly disregarded that the shock limit shown i n the graph was based on a 1939 UL study involving electrified cattle fences and was not appropriat e for use with respect to the TASER devices . Therefore, Defendants' use of the chart to support th e
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Company's safety claims was mate rially false and misleading. The UL study assumed that a single shock flows from the hands through the feet, but the shocks from the TASER devices are pulsed, cyclical and take different routes through the body depending on where the probes land . 234 . Moreover, in December 2004, the Miami Herald reported that UL scientists had
5 6 7 8 9 10 11 Underwriters Lab does not agree with Taser ." Baker also reportedly stated that he was surprised tha t 12 TASER was still using the graph since UL had publicly stated a month earlier that it had no bearin g 13 14 15 16 17 18 19 and I thought UL had tested Tasers and put that dot on the chart ." [Emphasis added .] 20 236. Defendants also made numerous materially false and misleading statements durin g 21 22 23 24 25 26 27 28
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stated that the study results were not applicable to TASER devices and that UL did not certify TASER' s product. Despite UL's statements, TASER continued to use the graph in its training materials and elsewhere . In February 2005, however, TASER was still using the graph . In a March 5, 2005 article, The Arizona Republic reported that UL spokesman Paul Baker stated that the graph i s supposed to apply to an electric fence, and "[w]e take issue with that data in relation to Taser . . .
on the TASER weapons . 235 . Significantly, Gary Bowling, a training officer for the Putnam County Sheriff's Office said that he left a TASER seminar thinking UL endorsed TASER . "I trust UL . . . I treat that chart as gospel" the Miami Herald quoted Bowling as stating . When advised that UL had not actually endorsed the TASER devices, Bowling stated "[ t]hat chart's misleading . I looked at that
the Class Period concerning the effectiveness and safety of TASER' s devices . For example, on May 29, 2003, TASER issued a press release entitled "TASER International, Inc . Announces New TASER X26 Full Deployments New Shaped Pulse Weapon is 60% Smaller and 5 % More Effective than ADVANCED TASER M26 ." [Emphasis added . ] 237. Defendants knew, or recklessly disregarded, that the claim that the X26 was 5% mor e
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effective than the M26 was materially false and misleading . As subsequently disclosed, the X26 has I an output of 5 Watts compared to the 26 Watt output of the M26 . TASER, however, attributed the greater effectiveness of the X26 to its use of "Shaped Pulse" technology . According to the lea d researcher in the HECOE study, Dr . James Jauchem, the shaped pulse of the X26 had little effect o n
5 6 7 8 9 10 11 12 238. In his deposition in the Powers Action, Defendant Rick Smith acknowledged that 13 14 15 16 17 18 19 Eyed in Death / Glendale Police Chief Denies that Shock Cause Man to Die," stated : 20 21 22 23 24 25 26 27 28
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muscle stimulation. Moreover, Defendants knew that after the first two seconds of the X26's fiv e second firing cycle, the pulse rate of the weapon dropped from 19 per second to 15 per second . As a consequence, some individuals were able to regain partial mobility during the last three seconds of the firing cycle. Defendants tacitly acknowledged the falsity of this claim when TASER increased the X26 pulse rate to a constant 19 pulses per second in September 2004 due to police complaints that the device did not fully incapacitate subjects .
TASER employed a policy of responding to every adverse news story or public statement . As a consequence of this policy, Defendants made numerous materially false and misleading statement s concerning the safety of its products, as well as the research concerning its products, during th e Class Period. 239 . On October 1, 2003, an article in the Denver Rocky Mountain News, entitled "Taser
A 37 year old man died Monday aft er a police officer zapped him with a Taser gun to control what a coroner is calling a drug-induced frenzy . . . . But Monday ' s death - the second of its kind in Colorado - brings new scrutiny to a tool that is becoming a growing pa rt of the arsenal for cops on the street . The human rights group Amnesty International has called for a moratorium on law enforcement use of Tasers until there can be more medical testing . "No one can sit there and say definitively that the Taser didn't trigger something that caused this person to die," said Gerald Le Melle, Amnesty International's deputy executive director . "This weapon has never been
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tested by an independent scientific body . You are playing with people's lives ." Steve Tuttle, a spokesman for Taser International, which manufactures the weapon, said the weapon is a low risk alternative to deadly force . Tuttle said the weapon has been fired thousands of times since 1999, when it went on the market, and has been involved in 26 deaths worldwide . The autopsies in those cases showed other causes of death, according to the company . "We've never had the Taser technology directly attributed to any death, and it's never been listed as a contributing factor . It's a very safe product," Tuttle said . The company has tested the weapon on laboratory animals who have been given drugs and found no signs of dangerous heart activity, he said . [Emphasis added] . 240. Defendants knew, or recklessly disregarded, that Defendant Tuttle lacked an y
12 13 14 15 16 17 18 of Justice on a stun gun model less powerful than the M26 and X26 found that it might cause cardia c 19 20 21 22 23 24 25 26 experimental evidence, the high -power Tasers cannot be classed , in the vernacular , as `safe' ." 27 28
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reasonable basis for his statement that TASER devices were a "very safe product ." As alleged above, the controversy surrounding the safety of conducted energy weapons has been on-going sinc e the 1970s, when a study by the CPSB found that far lower powered stun guns could be lethal base d on individual susceptibility. Likewise, according to The New York Times , a 1989 Canadian study found that stun guns induced heart attacks in pigs with pacemakers ; a 1999 study by the Department
arrest in people with heart conditions ; and the Food and Drug Administration had found that othe r electrical devices with a charge half as powerful as the M26 can be dangerous to the heart . Moreover, the most complete independent study on the effects of the conducted energy weapons a t that time was the PSDB study in September 2002. That study expressly stated "[t]h e epidemiological evidence for the safety of the M26 Advanced Taser is certainly not as robust as tha t for the low-power devices . With the lack of substantial histo ri cal data of use and inadequate
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241 . On November 7, 2003, TASER filed its quarterly report on Form 10-Q for the quarter ended September 30, 2003 with the SEC . In that Form 10-Q, the Company stated, "[d]uring th e third quarter of 2003, the Company produced and shipped the first TASER X26 units to the law enforcement community . The new TASER X26 with Shaped PulseTM Technology is the nex t
5 6 7 8 9 10 11 however, attributed the greater effectiveness of the X26 to its use of "Shaped Pulse" technology . 12 According to the lead researcher in the HECOE study, Dr . James Jauchem, the shaped pulse of the 13 14 15 16 17 18 19 2004 due to police complaints that the device did not fully incapacitate subjects . 20 21 22 23 24 25 26 27 28
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generation TASER conducted energy weapon, offering greater stopping power than th e ADVANCED TASER M26 . . . ." 242 . Defendants knew, or recklessly disregarded , that the statement that the X26 offere d greater stopping power than the M26 was materially false and misleading . As subsequently disclosed, the X26 has an output of 5 Watts compared to the 26 Watt output of the M26 . TASER,
X26 had little effect on muscle stimulation . Moreover, Defendants knew that after the first tw o seconds of the X26's five second firing cycle, the pulse rate of the weapon dropped from 19 per second to 15 per second. As a consequence, some individuals were able to regain partial mobility during the last three seconds of the firing cycle . Defendants tacitly acknowledged the falsity of thi s claim when TASER increased the X26 pulse rate to a constant 19 pulses per second in September
243. On November 12, 2003, an article in the Miami Herald, entitled "Davie Man i s Subdued by Taser, Dies," stated : A man wearing only blue swim trunks died Monday night after police in Pembroke Pines used a Taser to subdue him . Reports of a half-naked man beating on cars at Sheridan Street and Northwest 146'h Avenue brought police to the area, just east of Interstate 75, about 7 :30 p .m. Monday . Police identified the man late Tuesday as Kerry Kevin O'Brien, 31, of 6301 Plymouth Ln ., in Davie, about a mile away from the site of the incident .
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Investigators released little information about what happened after they arrived, citing their ongoing investigation . Pembroke Pines Police Capt . Keith Palant said in a written statement : "In an effort to take the subject into custody, a `Taser' was deployed ." He said investigators were still gathering statements from everyone involved, including witnesses and officers . Rescue crews, already on the scene, took the man to Memorial Hospital West, where he was pronounced dead.
Steve Tuttle, a spokesman for Arizona-based Taser International, manufacturer, said the devices are used thousand of times each year without causing permanent harm . He said he knows of no cases in which a medical examiner has ruled that a Taser has contributed to a death .
Tuttle said his company had performed experiments on laboratory animals in which they were given large doses of drugs and then shocked with a Taser . They didn't die or suffer any other heart damage. He said the results prove conclusively that drugs combined with electricity from the Taser will not cause death .
[Broward Medical Examined Dr . Joshua] Perper said he was not so sure . Though the role of the Taser had not been determined in Monday's incident, he said he thought that in general a Taser could kill someone if that person were already suffering from heart disease . . . . [Emphasis added] . 244. Defendants knew, or recklessly disregarded, that Defendant Tuttle's statement tha t the experiments conducted by TASER "prove conclusively that drugs combined with electricity
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from the Taser will not cause death," was materially false and misleading, and lacked any reasonabl e basis . As alleged above , the tests conducted by TASER involved dosing animals with Ketamine, a close chemical relative of PCP, epinephrine, and isoproterenol . The tests did not, however, involv e dosing animals with cocaine. As reported in The New York Times, Dr . John Wikswo, a Vanderbil t University biomedical engineer stated that cocaine substantially increases hea rt attack risk and, because TASER devices are used on people who have used cocaine, that omission is a serious flaw.
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245 . An article, dated February 10, 2004 in the Star Tribune : Newspaper of the Twin Cities, entitled, "Taser safety questioned after man's heart attack / The guns use a small enough jol t to be considered safe, their manufacturer says," stated : When officers see Taser guns at trade shows, company spokesman Steve Tuttle says the first question they always ask is whether a weapon that temporarily paralyzes a person with a 50,000 volt jolt of electricity can cause a heart attack . His short answer is no. But it's a safety issue that Taser International deals with nearly every time somebody is hurt or killed after a Taser incident involving law enforcement .
While few studies have been done on their safety, Tuttle said the U .S. Air Force's Human Effects Center of Excellence will be conducting an independent study in April on the weapon and reviewing cases in which people died when it was used on them . [Emphasis added .] 246. Defendants knew, or recklessly disregarded, that Defendant Tuttle's characterizatio n of the HECOE study as "independent" was materially false and misleading . As alleged above ,
15 16 17 18 19 20 21 the Air Force urged the Company to commission an independent study rather than rely on th e 22 Defense study . 23 24 25 26 27 28
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TASER officials part icipated in three panels to determine the scope of the study, analyze data an d review findings . TASER also provided the bulk of the research material used in the study . Indeed , Larry Farlow, a spokesman for the Air Force Research Laboratory in Texas that oversaw the stud y stated, "Were they (Taser) totally disconnected (from the study)? The answer is no . They were no t disconnected. . . . ." In fact, asking that TASER tone down its comments about the HECOE study,
247 . On March 4, 2004, TASER filed its annual report for fiscal 2003 with the SEC on a Form 10-K signed by Defendants Rick Smith, Tom Smith, Dr . Smith, and Hanrahan. In that Form 10-K, TASER discussed the introduction of the X26 :
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In May, 2003 we introduced the TASER X26 weapon system to our master instructors, at our annual tactical conference . This product incorporated all of the strengths of its predecessor, the ADVANCED TASER, but also introduced to the market a new "shaped pulse" technology, and a new smaller form factor. The product design was completed, comprehensive medical safety testing was conducted , and the first weapons began shipping in September of 2003 . 248. Defendants knew, or recklessly disregarded, that the statement concerning th e
6 7 8 9 10 11 12 mechanisms of incapacitation through use of the taser devices are speculative ;" "[t]he effect of taser 13 14 15 16 17 18 19 20 the State of Arizona alleging that he injured his shoulder during a TASER training session ." 21 22 23 24 25 26 27 however, that disclosure of the magnitude of Powers injury could adversely impact the Company' s 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
"comprehensive medical testing " done p rior to the introduction of the X26 was materially false and misleading . The medical tests conducted by the Company in 1996 and 1999 did not relat e specifically to the X26 and the shaped pulse technology . Moreover, as reported by the PSDB : "no objective scientific studies have been carried out to determine the magnitude and distribution o f electric currents from tasers in the body ;" "[t]he manufacturer's explanations of the physiologica l
devices on pacemakers or other implanted electrical equipment is unclear;" and "[t]he effects of tasers on the heart have not been thoroughly investigated . . . ." Commenting on the experiment s conducted by Stratbucker and McDaniels in 1996 and 1999, the PSDB report stated that "[t]h e experimental work previously carried out on animals was poorly designed." 249 . In the 2003 Form 10-K section entitled "Legal Proceedings," the Company reporte d "[i]n November 2003, Samuel Powers served a complaint against the Company in Superior Court fo r
250. Defendants knew, or recklessly disregarded, that the statement that Samuel Power s alleged that he had sustained "a shoulder injury" was materially false and misleading . As alleged above , in or about May 2003, TASER was provided with a videotape of the training session an d notified that Powers claimed that he sustained a compression fracture of the T7 vertebra as a result of the muscle contraction caused by an M26 shock during a training session . Defendants knew ,
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standing in the law enforcement community , TASER' s biggest customer market .
251 . The Form 10-K further stated that : 2003 also marked significant success in the development of new products, and on the strengthening of our intellectual property rights . In May of 2003, we introduced our newest TASER weapon, the TASER X26 . This product was met with significant customer approval, contributing more than $8.1 million of net sales, and another $2 .5 million of orders which will ship in the first quarter of 2004 . 252. Defendants knew, or recklessly disregarded, that the statement concerning customer approval was materially false and misleading because Defendants failed to disclose that massiv e
9 quantities of defective X26 were being returned to the Company throughout the Class Period . As 10 11 12 13 14 15 16 things, caused many police departments to delay the purchase of the TASER devices upon th e 17 18 19 20 21 22 23 Safety Questioned / ACLU Seeks Curbs in Response to Death of Man Having Seizures," stated : 24 25 26 27 28
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alleged above, according to former TASER employees , the return s became so numerous that TASER eventually built a special room just to store them . Indeed, although the Company subsequently disclosed that it had experienced a software problem in the X26 during the first quarter of 2004 that caused TASER to suspend production of the device, it failed to disclose this problem despite the fact that 10-K was filed in the last month of the quarter. The high product malfunction rate, among othe r
introduction of competing products in the fourth quarter of 2004 . The extraordinarily high return rate of the X26 caused the Company to increase its warranty reserves five-fold , from $60,000 i n fiscal 2002 to $313,000 in 2003 . It was subsequently disclosed that $312,000 of the 2003 reserves were expended as warranty costs in the fourth quarter 2003 alone . 253 . On March 12, 2004, an a rticle in the Denver Rocky Mountain News, entitled "Taser
The American Civil Liberties Union is challenging the Glendale Police Department's training procedures as a result of the death of a man who was repeatedly shocked with a Taser while suffering drug-induced seizures last fall. . . .
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[ACLU Legal Director Mark] Silverstein, in a letter earlier this month asking Denver police to curb their use of Tasers, cited several reports that raise questions about the weapons' safety . "The training failed to inform officers of medical evidence indicating that electroshock weapons may be dangerous, or even lethal, to extremely agitated or psychotic persons ; persons suffering from high levels of drug intoxication; and persons with heart disease," Silverstein wrote . The ACLU's challenges come at a time when police agencies across the country are purchasing more and more Tasers in the hope of reducing suspect and officer fatalities . Tasers fire needle-like probes up to 21 feet . The probes are connected to a wire that delivers a 26-watt charge, causing a suspect ' s muscles to lock up for five seconds . The manufacturer says the weapon is safe .
10 11 12 13 14 15 16 17 18 Indeed, as early as the 1970s, the CPSC concluded that far less powerful stun guns could be lethal 19 20 21 22 23 24 25 26 255. On April 6, 2004, TASER issued a press release in response to a news report on the 27 28
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"We stand by the safety of our product . It does not cause death ," Taser International co-founder and president Tom Smith said Thursday. "We've done medical testing and field testing to support this . In fact, 14 .6 percent of all of our documented uses involve suspects using dangerous narcotics ." [Emphasis added.] 254. Defendant Tom Smith knew, or recklessly disregarded, that he had no reasonabl e basis for his statement that TASER devices do not cause death . As alleged above, The Arizona Republic reported that a medical examiner in Indiana had determined that shock from a TASER device was a contributory cause of death of an inmate in November 2003, prior to this statement .
depending on individual susceptibility . Likewise, according to The New York Times, a 1989 Canadian study found that stun guns induced heart attacks in pigs with pacemakers ; a 1999 study by the Department of Justice on a stun gun model less powerful than the M26 and X26 found that i t might cause cardiac arrest in people with heart conditions ; and the Food and Drug Administratio n had found that other electrical devices with a charge half as powerful as the M26 can be dangerous to the heart.
CBS Evening News where it was reported that approximately 40 people had died after being stunned 2 by TASER' s stun guns . Rick Smith stated : TASER energy weapon was used to restrain them, in all of those cases where autopsy reports are available the medical examiners have not listed the TASER as the cause of death in even one instance . None of the medical examiner 's reports attributed the cause of death to the TASER energy weapon . We are always saddened with loss of a loved one for the grieving families, but all of the medical testing we have done and the tens of thousands of uses of TASER conducted energy weapons by Police have clearly established the medical safety of this product . [Emphasis added .] 256. Defendant Rick Smith knew, or recklessly disregarded, that his statements that none 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
4
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of the medical examiners' reports have attributed the cause of death to a TASER weapon, wer e materially false and misleading . As alleged above, The Arizona Republic reported that a medical examiner in Indiana had determined that shock from a TASER device was a contributory cause of death of an inmate in November 2003 . 257. In an April 7, 2004 interview on CNBC/Dow Jones Business Video, Defendant Rick Smith was questioned about the safety of the Company's devices : [CNBC anchor MARIA] BARTIROMO : Do we know what the cause of death was, if it wasn't this Taser gun that you say wasn't declared to be the problem ? [RICK] SMITH : Absolutely . We've posted all those cases on our web site . You can go to Taser.com and look at them in detail. The majority of these cases, while they're unfortunate and tragic, are drug overdoses, where police were called to the scene to deal with somebody who was acting very bizarrely, usually in a psychotic rage, involving an overdose of stimulants such as cocaine. And police would use the Taser to subdue these people, but that's not going to stop the blood toxicology of an ongoing drug overdose . So this is something that our law enforcement customers are very aware of. It has been part of our training for years . And the biggest issue is, frankly, one of public perception, that people try to tie a cause relationship between the two . But you know, Tasers are not dangerous . I've been hit with them six times, we've had instructors hit with them hundreds of times .
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SMITH : We do animal studies to develop the waveforms, so that they're optimized so that it only effects your neuromuscular controls . So it does not affect the heartbeat, and it doesn't affect other autonomic systems within the body . And we've - in fact, we have developed systems now where when we do our safety testing, we can increase the electrical charge, and we run these tests directly across the heart, so we can increase the charge until we see how far are we from the dangerous level? And what we've found is that the difference is 20 to one . You have to go to 20 times more energy . Just to put that in perspective, if you take 20 times the maximum dose of aspirin, it could kill you . [Emphasis added . ] 258. Defendant Rick Smith knew, or recklessly disregarded, that his statements concernin g the cases involving fatalities following application of a TASER device shock were materially fals e
9 and misleading because, according to the Arizona Republic, "[t]he company's report does not include 10 11 12 13 14 15 16 found, or at the very least, allowed for the possibility, that TASER device shocks could be fatal in 17 18 19 20 21 22 23 24 based on standards issued by UL in 1939 in connection with an electric fence. The UL expressl y 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
details suggesting a Taser could have played a role in someone's death . The report also omit s published findings of a medical examiner who concluded that electrical shocks from a Taser contributed directly to the death of a man in an Indiana jail ." 259. Likewise, Defendant Rick Smith knew, or recklessly disregarded, that his statement that TASER devices are not dangerous was materially false and misleading. Numerous studies had
certain susceptible groups . Moreover, the PSDB study had concluded that based on the lack o f substantial historical data of use and inadequate experimental evidence, "the high-power Tasers cannot be classed, in the vernacular, as `safe' ." 260. Furthermore, Defendant Rick Smith knew, or recklessly disregarded, that hi s statement that a shock 20 times more powerful than that delivered by TASER devices was necessar y to jeopardize the heart were materially false and misleading . As alleged above, that analysis wa s
stated that the 1939 study had no application to the TASER devices because of the manner in which the electrical charge is transmitted by the TASER versus an electric fence.
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261 . As a further response to the growing media attention on deaths of individuals afte r being stunned by TASER' s stun guns, Rick Smith stated the following in an Ap ril 28, 2004 pres s
We continue to be amazed by the premature, unfounded, speculation in the media concerning the unexpected, unforeseen deaths of criminal suspects while in police custody after use of the TASER device. In every single case the medical examiner has attributed the direct cause of death in the autopsy reports to causes other than the TASER device . In over a decade of use, our products have not been listed as a direct cause of death by an independent medical examiner or coroner. [Emphasis added .] 262 . Defendant Rick Smith knew, or recklessly disregarded, that his statements that "In every single case the medical examiner has attributed the direct cause of death in the autopsy report s to causes other than the TASER device," was materially false and misleading . As alleged above, The Arizona Republic reported that a medical examiner in Indiana had determined that shock from a
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CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
TASER device was a contributory cause of death of an inmate in November 2003 . 263 . In a May 4, 2004 first quarter conference call on the FD Wire, Defendant Rick Smith stated as follows : Taser' s are not dangerous but they are used in very dangerous situations . In the vast degree of cases the deaths occurred were after the Taser use and electricity does not linger in the body . If electricity were to cause a death, the effect would be immediate . It doesn't stop the heart half an hour later . . . . And the third area is quality control . You will see as we move through this, we have had some challenges, we've had we took the X26 to market from concepts to market introduction in 12 months, which was a pretty Herculean effort, and we've had to ramp production faster than we ever thought we would because the market responded so affirmatively to the X26 it blew right half to our M26 sales in its first quarter . And as you can imagine, ramping production has meant we have had production yield issues and we have had some quality issues particularly as it relates to the holstering systems where you've got breakage in the field and we'll come back to that . But even with these handicaps so to speak, we've still turned in a record quarter across the board .
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[Defendant Tom Smith] We do also know that during the trial there were some quality issues that were raised regarding some weapon problems and failures during the course of the year, rest assured we are working very closely with the United Kingdom and we've got a feedback and addressing those concerns from a operation standpoint. But the overall result of the rest is extremely positive . [Defendant Kathy Hanrahan ] As you heard from Tom and Rick, our single most important objective in the next s ix months is implement processes to control our quality . During the last 90 days we identified and addressed the following customer concern . The first was the X26 software . Second , was holster breakage issues that you heard Rick discuss, and cartridge tap breaks . During the last, I am sorry, in February we found that our software in the X26 had created some data errors during firing. This was corrected with reprogramming and we've accrued 41,000 to allow for shipping programmable data [packs] out to our customers . 264. Defendant Rick Smith knew, or recklessly disregarded, that his statements tha t TASER devices are not dangerous, and that electricity doesn't linger in the body so death from a TASER device would be immediate, were materially false and misleading . As alleged above , numerous studies had failed to conclude that TASER devices were safe . Moreover, Smith' s statement that death from a TASER shock would be immediate was belied by an a rticle on the effects of stun guns and tasers, published in the medical journal, the Lancet, in September 2001 .
18 19 20 21 22 23 24 with stun guns, the authors stated "[b]y this time, taser-induced muscle contractions would no longe r 25 be present, and one would expect the individuals to be relaxing and able to breathe in a way tha t 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
That article addressed the risk of acidosis and ventricular dysrhythmias in people in states of severe agitation or physical aggression, particularly when under the influence of drugs such as phencyclidine (PCP) or cocaine . The article stated "[t]he taser itself may affect acid-base balance b y briefly increasing skeletal muscle activity and decreasing respiration ." Reviewing an earlier study in which three people (high on drugs) went into cardiac arrest between 5-25 minutes after being hi t
would compensate for a metabolic acidosis . Such may not be the case if the individuals remaine d
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agitated or were prevented from breathing freely ." 265 . Furthermore, Defendants Rick Smith, Tom Smith and Hanrahan knew, or recklessl y disregarded, that their statements that the quality control issues involving the X26 were primarily related to "holster breakage issues" was materially false and misleading because they failed t o
5 6 7 8 9 10 11 reported that subsequently four more X26s ceased operating . During general demonstrations one 12 ceased functioning in such a way that the X26 clicked inside but the spark did not cross the front o f 13 14 15 16 17 18 19 Also during spark gap testing one unit would count down 5 seconds but would not discharge at all . 20 266. In addition, these Defendants failed to disclose that the Company had been deluge d 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
disclose that the X26 was plagued with circuit board flaws and manufacturing errors that caused widespread firing malfunctions . In addition , the PSDB, which re-evaluated the TASER devices , including the X26, found that 7 out of 11 X26s failed during trials . The problems encountered by the PSDB included : a) 5 second countdown with no discharge ; b) squeaking sound and smell with no discharge; c) a pulse repetition rate of 32Hz with no slow down after 2 seconds . The PSDB also
the unit. The PSDB also found that upon removing an X26 that had been stored and unused for 2- 3 weeks the device pulsed very slowly without arcing at the front of the weapon and stopped after 2 seconds . When the safety was re-engaged it then cycled through the warranty on the display scree n as if the battery had just been inserted . During spark gap testing one unit discharged into its ow n flashlight . This stopped the flashlight from working and the unit no longer sparked across its front .
with defective products as a consequence of its lack of adequate quality controls . As disclosed in th e Company's Form 10-Q for the quarter ended March 31, 2004, TASER's warranty costs on a quarterly basis ballooned from $312,934, for the quarter ended December 31, 2003, to $580,080 for the quarter ended March 31, 2004. 267. On May 10, 2003, the Company filed its quarterly report for the quarter ended March
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31, 2003 with the SEC on a Form 10-Q signed by Defendants Rick Smith and Hanrahan . In that Form 10-Q, TASER stated : Although the Company continued to increase production of its new TASER X26 product during the first quarter of 2004, the product experienced a defect in its data recording feature which did not affect the operation of the product but nevertheless required a temporary suspension of shipments for approximately three weeks during the quarter . The resolution of this software problem required the reprogramming of more than 4,000 weapons and 15,000 battery packs at the factory and preparation for field upgrades for more than 12,000 weapons that had already been shipped in previous periods . 268 . Defendants knew, or recklessly disregarded, that the foregoing statements concernin g defects in the X26 were materially false and misleading because Defendants failed to disclose that , in addition to a software problem that did not affect the operation of the X26, TASER wa s experiencing myriad product defects that prevented the devices from operating, as alleged above ,
13 due to circuit board flaws and manufacturing errors that prevented the weapons from firing, cause d 14 15 16 17 18 19 20 alleged that he had sustained "a shoulder injury" was materially false and misleading . As alleged 21 22 23 24 25 26 27 271 . On May 15, 2004, a guest editorial by Taser spokesman and Defendant Steve Tuttl e 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
them to constantly cycle, or caused them to not discharge . 269 . In the section of the Form 10-Q entitled "Legal Proceedings," the Company reporte d I "[ijn November 2003, Samuel Powers served a complaint against the Company in Superior Court for the State of Arizona alleging that he injured his shoulder during a TASER training session ." 270 . Defendants knew, or recklessly disregarded, that the statement that Samuel Power s
above, in or about May 2003, TASER was provided with a videotape of the training session an d notified that Powers claimed that he sustained a compression fracture of the T7 vertebra as a result of the muscle contraction caused by an M26 shock during a training session . Defendants knew , however, that disclosure of the magnitude of Powers injury could adversely impact the Company' s standing in the law enforcement community , TASER' s biggest customer market .
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in Florida Today, entitled "The lowdown on Tasers, Device used by police on unruly suspects can' t kill," besides containing false and misleading statements, explicitly stated that numerou s applications of the Taser are often required to subdue perpetrators : I just read Florida Today's May 6 editorial concerning a suspect involved in a noise violation who was subdued with a Taser by Melbourne Police . Our company, which makes the devices, does not get involved in internal issues on the use of force .
However, I believe the public should know more details concerning the need to apply more than one application of the Taser to safely subdue someone . . ..
Often, even subjects that are down on the ground require multiple cycles to stop dangerous behavior. The device is designed to put someone on the ground, but that doesn't mean that the subject has been subdued or handcuffed . . . . The comment that these devices cause death is wrong . In the 45 fatalities following a Taser use, none had a medical examiner list the cause of death by our technology . ... Despite its high voltage, the Taser ' s electrical output is too low to affect the heart . Moreover, as one world leading cardiac expert said recently, the chances of the Taser's electrical frequency causing damage to cardiac tissue is as likely as someone receiving a cell phone call on their AM radio . . . . Further, let's please keep in mind that the Taser technology is nonlethal . [Emphasis added] . 272. Defendants knew, or recklessly disregarded, that Defendant Tuttle lacked an y reasonable basis for his statement that "[t]he comment that these devices causes death is wrong ." As alleged above, The Arizona Republic reported that a medical examiner in Indiana had determined that shock from a TASER device was a contributory cause of death of an inmate in November 2003 .
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CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Indeed , as early as the 1970s , a CPSC concluded that far less powerful stun guns could be letha l depending on individual susceptibility. Likewise, according to The New York Times, a 198 9 Canadian study found that stun guns induced heart attacks in pigs with pacemakers ; a 1999 study b y the Department of Justice on a stun gun model less powerful than the M26 and X26 found that i t
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might cause cardiac arrest in people with heart conditions ; and the Food and Drug Administration had found that other electrical devices with a charge half as powerful as the M26 can be dangerou s to the heart. 273 . Defendants also knew, or recklessly disregarded, that Defendant Tuttle's statement
5 6 7 8 9 10 11 orders for its next generation TASER X26." The two purchasers were the Pima County Sheriffs 12 Department in Tucson, AZ and Charlotte-Mecklenburg Police Department in North Carolina . Th e 13 14 15 16 17 18 19 greater stopping power than the M26 was materially false and misleading . As subsequentl y 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
that "the Taser's electrical output is too low to affect the heart," was materially false and misleadin g because it was not only contrary to the findings of the 1999 Department of Justice study and th e FDA study, but was improperly based, in part, on the standards relating to electric fence standard s promulgated by UL in 1939 . 274. On May 29, 2003, the Company issued a press release announcing "two significant
press release continued on to state that the TASER X26 is "60% smaller and lighter than the curren t ADVANCED TASER M26 . . .. The TASER X26 uses revolutionary Shaped Pulse technology to achieve even greater stopping power than the vaunted ADVANCED TASER M26 with the sam e margin of safety . . . ." 275. Defendants knew, or recklessly disregarded, that the statement the X26 achieve d
disclosed, the X26 has an output of 5 Watts compared to the 26 Watt output of the M26 . TASER, however, attributed the greater effectiveness of the X26 to its use of "Shaped Pulse" technology . According to the lead researcher in the HECOE study, Dr . James Jauchem, the shaped pulse of th e X26 had little effect on muscle stimulation . Moreover, Defendants knew that after the first two seconds of the X26's five second firing cycle, the pulse rate of the weapon dropped from 19 per second to 15 per second . As a consequence, some individuals were able to regain partial mobilit y
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during the last three seconds of the firing cycle . Defendants tacitly acknowledged the falsity of thi s claim when TASER increased the X26 pulse rate to a constant 19 pulses per second in Septembe r 2004 due to police complaints that the device did not fully incapacitate subjects . 276. In response to Amnesty International's request for Georgia law enforcement official s
5 6 7 8 9 10 11 12 13 14 15 16 Arizona Republic reported that a medical examiner in Indiana had determined that shock from a 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
to suspend using TASER 's stun guns, Rick Smith stated in a press release dated June 2, 2004 that "[i]ndependent medical, law enforcement and legal experts have studied TASER devices for over 3 0 years since its inception ." Rick Smith further stated, in part : In each and every case, independent medical examiners have determined the cause of death to be due to a variety of factors, usually heart disease, chronic toxic drug use, and protracted over-exertion during struggle with law enforcement officers . 277 . Defendant Rick Smith knew, or recklessly disregarded, that his statement that in each and every fatality following the use of a TASER device, medical examiners have determined th e cause of death to be due to a variety of factors, was materially false and misleading because he faile d to disclose that one of those factors was shock from a TASER device . As alleged above, The
TASER device was a contributory cause of death of an inmate in November 2003 . 278 . A June 9, 2004 article by Defendant Steve Tuttle in the Atlanta Journal an d Constitution (GA), entitled "Equal Time" stated : Recent deaths in Georgia of suspects in custody have created an enormous amount of speculation about the safety of the Taser technology. At first blush, there is a tendency to equate the Taser energy weapon's conductive current as a lethal byproduct in these sudden and unexpected deaths. However, the fact of the matter is that our Taser technology has not been the cause of a single death . Period . In more than 30 years since the first Taser was introduced, there have been exactly zero deaths clearly caused by the Taser . This statement is supported by independent medical examiners. Moreover, published data fro m esteemed medical publications and hospitals establish the safety of our technology. Our own research conducted at the University of Missour i
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has shown the electrical output will not interfere with cardiac tissue even if the suspect is under the influence of extremely dangerous narcotics .
There has never been a single case where the Taser was named as the primary cause of death by any of these independent medical examiners . 279. Defendants knew, or recklessly disregarded, that Defendant Tuttle lacked any reasonable basis for his statement that "[t]he fact of the matter is that our Taser technology has not been the cause of a single death. Period ." As alleged above, The Arizona Republic reported that a medical examiner in Indiana had determined that shock from a TASER device was a contributor y
9 cause of death of an inmate in November 2003 . Indeed, as early as the 1970s, a CPSC conclude d 10 11 12 13 14 15 16 charge half as powerful as the M26 can be dangerous to the heart . 17 280. Likewise, Defendants knew, or recklessly disregarded, that Defendant Tuttle' s 18 19 20 21 22 23 24 heart. Further, the Company's animal studies involved dosing animals with a chemical relative o f 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
that far less powerful stun guns could be lethal depending on individual susceptibility . Likewise, according to The New York Times, a 1989 Canadian study found that stun guns induced heart attack s in pigs with pacemakers ; a 1999 study by the Department of Justice on a stun gun model les s powerful than the M26 and X26 found that it might cause cardiac arrest in people with heart conditions ; and the Food and Drug Administration had found that other electrical devices with a
statements that published data establish the safety of TASER's technology and that the Company' s research shows that the electrical output will not interfere with cardiac tissue even if the suspect i s under the influence of extremely dangerous narcotics, was materially false and misleading . As alleged above, far from "establishing" the safety of TASER's technology, numerous studies found that the TASER could be lethal to certain susceptible populations and could pose a danger to the
PCP, but did not involve administration of narcotics, such as cocaine, that were commonl y understood to pose a risk of inducing arrhythmia .
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281 . An article dated June 29, 2004, in Atlanta Journal and Constitution (GA), entitled 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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"Deaths Spur Taser Debate Police Embrace Stun Guns, But a Series of Fatalities Brings Calls fo r Halt to Their Use" stated as follows : The maximum-security inmate fought through six shots of pepper spray and sprinted toward Gwinnett sheriff's Capt . Carl Sims . Sims pulled his weapon, an electroshock gun called a Taser. One shot, and the prisoner fell, immobilized . . . . On June 4, about 100 people rallied at the Gwinnett County Justice and Administration Center to protest the death of an inmate after he was shocked with a Taser. A legal director of the American Civil Liberties Union says Tasers have been involved in too many deaths and calls for more research if law enforcement officers intend to keep using them . . . . The gun's manufacturer says that, based on autopsy results, none of the deaths has been directly caused by a Taser . . . . "Tasers aren 't dangerous ," said Taser International spokesman Steve Tuttle. "They are just used in dangerous situations ." [ . . .] But those who question Taser use say that not enough independent research has been done on humans to prove that the weapons provide the less than lethal alternative to firearms that boosters say they do . And, although several doctors who have conducted research on Tasers say the 50,000 volts the gun packs shouldn't cause life-threatening injuries, they stop short of saying the weapons aren't strong enough to cause death . . . . People respond differently to electric current, said Sakis Meliopoulos, a professor of electrical and computer engineering at Georgia Tech. Meliopoulos, who has testified as an expert witness in electrocution cases around the country, specializes in the safety of electrical systems . "Some people can withstand the severe pain, some people may faint, or the pain could cause additional problems," Meliopoulos said . "In a person with pre-existing conditions, who knows how the body is going to respond?" [ ...] Tuttle points to a study done on pigs, financed by Taser International, that found that the device had no fatal impact on the heart . Noting that the study was done on animals, Amnesty International and the ACLU argue that more research is needed to determine how the guns affect humans . [Emphasis added] . 282 . Defendants knew, or recklessly disregarded, that Defendant Tuttle's statement tha t
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Taser's aren't dangerous was materially false and misleading . As alleged above, The Arizona Republic repo rted that a medical examiner in Indiana had determined that shock from a TASE R device was a contributory cause of death of an inmate in November 2003 . Indeed, as early as the 1970s, a CPSC concluded that far less powerful stun guns could be lethal depending on individua l
5 6 7 8 9 10 11 12 experimental evidence, "the high-power Tasers cannot be classed, in the vernacular, as `safe' . " 13 14 15 16 17 18 19 20 was proximately caused by a TASER device," was materially false and misleading . As alleged 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
susceptibility . Likewise, according to The New York Times, a 1989 Canadian study found that stun guns induced heart attacks in pigs with pacemakers ; a 1999 study by the Department of Justice on a stun gun model less powerful than the M26 and X26 found that it might cause cardiac arrest in people with heart conditions ; and the Food and Drug Administration had found that other electrica l devices with a charge half as powerful as the M26 can be dangerous to the heart . Moreover, th e PSDB study had concluded that based on the lack of substantial historical data of use and inadequat e
283. On July 2, 2004, after a civil lawsuit was dismissed , Doug Klint, Vice President an d General Counsel of TASER, stated in part: TASER devices have been safely deployed for 30 years and their medical safety has been clearly established through scientific and medical testing, approximately 100,000 voluntary uses with no serious injury, an d approximately 40,000 field uses where no death was proximately caused by a TASER device. 284. Defendants knew, or recklessly disregarded, that Klint's statements that "no deat h
above, The Arizona Republic reported that a medical examiner in Indiana had determined that shock from a TASER device was a contributory cause of death of an inmate in November 2003 . 285 . On July 20, 2004, the Company filed an amended quarterly report for the perio d ending March 31, 2004 with the SEC on a Form 10-QSB/A signed by Defendants Rick Smith an d Behrendt . 286. Defendants knew, or recklessly disregarded, that the amended quarterly report wa s
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materially false and misleading for the same reasons cited in 268 through 270, above . 287 . In a July 23, 2004 interview on Money Gang, defendant Phillips Smith stated follows : [Ali Velshi, CNNFN anchor] The allegation is people have died from being struck by a Taser and that some people don't use it . [Phillips Smith] Well, quick answer is, no one's died from the Taser. They've tried to get the medical evidence . It's not out there . The scientific data says it does not kill people . 288 . Defendant Dr. Smith knew, or recklessly disregarded, that his statements that no one's died from the Taser and that scientific data says it does not kill people were materially fals e and misleading. As alleged above , a medical examiner in Indiana determined that shock from a
10 11 12 13 14 15 16 Form 10-QSB , TASER stated: 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
TASER device was a contributory cause in the death of an inmate in November 2003 . In addition, numerous studies indicated that electric shock from devices far less powerful than the TASER devices may cause death, particularly in certain susceptible populations . 289. On August 16, 2004, the Company filed its quarterly report for the period ending Jun e 30, 2004 with the SEC on a Form 10-QSB signed by Defendants Rick Smith and Behrendt . In that
[D]uring the quarter, the media have reported a number of cases where suspects have died in police custody in incidents involving the use of a TASER device . The Company believes that its products are safe for thei r intended use. We have completed animal tests under universityapproved protocols which indicate a significant margin of product safety. In addition, there have been approximately 100,000 uses of TASER products on human volunteers and approximately 50,000 field uses with an extremely low incidence of physical injury . In two reported cases, a coroner ' s inquest or a medical examiner has listed electric shock as a contributing factor in the deaths. In these cases, toxic drug use or chronic medical problems were cited as primary causes of death . The contribution of the TASER device to these deaths is being disputed by the Company and other experts . Based upon our analysis and expert advice, we believe these cases are similar to other sudden unexpected deaths in police custody where TASER devices are not used.
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We do not believe there is a causal link between the use of TASER device and a death of a suspect other than the general stress of the physical exertion during TASER stimulation, which is similar to athletic type exertions and is comparable to or less than the stress of other available physical restraint procedures . Sudden unexpected deaths in police custody are unfortunate, but we believe the incidents to date do not indicate that a suspect on whom a TASER device has been used is any more likely to suddenly die in police custody than a suspect on whom a TASER device has not been used . [Emphasis added.] 290. Defendants knew, or recklessly disregarded, that the statements concerning the base s I of the beliefs that the Company's products are safe and that the TASER devices were no t I contributing factors in two deaths were materially false and misleading because Defendants failed t o disclose that studies, other than those cited by the Company, have indicated that TASER device s may be lethal, particularly for certain susceptible populations . Further, Defendants failed to disclos e that various scientists and experts had opined that other deaths had also been causally linked to the
13 14 15 16 17 18 19 20 alleged that he had sustained "a shoulder injury" was materially false and misleading . As alleged 21 22 23 24 25 26 27 293. An article dated September 5, 2004 in Asheville-Citizen Times entitled "Stun Guns : 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
use of TASER' s devices . 291 . In the section of the Form 10-QSB entitled "Legal Proceedings," the Compan y I reported "[i]n November 2003, Samuel Powers served a complaint against the Company in Superio r Court for the State of Arizona alleging that he injured his shoulder during a TASER training session ." 292. Defendants knew, or recklessly disregarded, that the statement that Samuel Power s
above, in or about May 2003, TASER was provided with a videotape of the training session an d notified that Powers claimed that he sustained a compression fracture of the T7 vertebra as a resul t of the muscle contraction caused by an M26 shock during a training session . Defendants knew , however, that disclosure of the magnitude of Powers injury could adversely impact the Company' s standing in the law enforcement community , TASER' s biggest customer market .
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Changing the Way Law Officers Handle Resisting Suspects " stated as follows : Local law enforcement officers described the sensation as out of body, unbelievable, knee-buckling and extremely uncomfortable . No, the haven't been shot . They've been "Tasered ." [. . .] "The Taser has been cleared in every case," said Taser International Government Affairs Manager Mark Johnson . But investigations by the New York Times reveal that the company's only testing on the technology was done on a single pig in 1996 and five dogs in 1999 . Company-paid researchers, instead of independent scientists , conducted the studies. "(The Taser) is a very effective tool," Asheville Police Chief Bill Hogan said . "But if there needs to be more testing, the someone should step forward nationally to satisfy concerns ." [ . . .] "There have been medical experts looking at Tasers for years now," said Johnson, who deals with Taser International's medical safety issues . "They do not cause deaths ." Johnson also said that reports indicate that Tasers do not have negative effects on people with pacemakers or other heart complications . But independent medical examiners used by the Arizona Republic found that Tasers were linked to at least five deaths . . . . Human rights Group Amnesty International is calling on all law enforcement agencies to stop using Tasers until more independent research is done . "Law enforcement agencies are playing a deadly game of wait-and-see," Amnesty International medical director Edward Jackson said. "Despite questions, law enforcement agencies are continuing to use them ." [Emphasis added] . 294 . Defendants knew, or recklessly disregarded, that Johnson's statements that "[t]her e have been medical experts looking at Tasers for years now" and "[t]hey do not cause deaths" wer e materially false and misleading . As alleged above, in addition to the findings of the medica l examiners that found TASER devices were a contributory factor in two deaths , as noted in th e
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CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
August 2004 Form 10-QSB, The Arizona Republic reported that based on its "review of autopsies and interviews with medical examiners [it] found Tasers have been linked to at least five deaths ."
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Specifically, the article reported that "[m]edical examiners in three cases involving suspects wh o died in police custody cited Tasers as a cause or a contributing factor in the deaths . In two other cases, Tasers could not be ruled out as a cause of death ." 295. An article dated October 14, 2004 in AP Alert - Business entitled "HL: Medical
5 6 7 8 9 10 11 12 13 14 15 16 17 18 296 . Defendants knew, or recklessly disregarded, that Defendant Tuttle's statement tha t 19 20 21 22 23 24 25 26 electrical devices with a charge half as powerful as the M26 can be dangerous to the heart . 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
experts who question Taser research wary of labeling devices safe" stated as follows : Several medical and engineering experts warn that too little is known about what happens when people who are high on drugs or have heart problems are hit with Taser stun guns . . . . "I do not think that enough work has yet been done to be able to say unequivocally the Taser never causes harm," said Dr . Raymond Ideker, who conducts research in cardiac electrophysiology at the University of Alabama at Birmingham . . . . "I guess what is increasingly becoming of concern with respect to Taser is, how less-than-lethal are they?" said Alex Neve, secretary general for Amnesty International Canada. "As the number of deaths mount, that question has really come into sharp focus ." [ . . .] Arizona-based Taser International rejects assertions there isn't enough research to proclaim the Taser safe . "I think that ' s rubbish ," said company spokesman Steve Tuttle . "Because the studies indicate that the technology is safe." [Emphasis added] .
"studies indicate that the technology is safe," was materially false and misleading . Indeed, as early a s the 1970s, a CPSC concluded that far less powerful stun guns could be lethal depending o n individual susceptibility . Likewise, according to The New York Times, a 1989 Canadian study foun d that stun guns induced heart attacks in pigs with pacemakers; a 1999 study by the Department o f Justice on a stun gun model less powerful than the M26 and X26 found that it might cause cardia c arrest in people with heart conditions ; and the Food and Drug Administration had found that other
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Moreover, the PSDB study had concluded that based on the lack of substantial historical data of us e and inadequate experimental evidence, "the high-power Tasers cannot be classed, in the vernacular , as `safe' ." 297. An article dated October 15, 2004, in The Canadian Press, entitled "Taser stun gun s
5 6 7 8 9 10 11 12 13 14 15 16 17 significant questions about the safety of the Company's products . 18 299. An article dated October 17, 2004, in Star Tribune, entitled "Stun guns pack uncertai n 19 20 21 22 23 24 25 26 27 28
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the target of growing concern as use spreads" stated as follows : Canada's public safety minister has joined human-rights group and some police officers urging a closer look at Taser stun guns . [ . . . ] Amnesty International says the contentious devices should be suspended pending more independent research . As many as 60 people have died in the United States after being zapped, but Taser International stresses that not a single death has been directly or primarily blamed on its product . "Our studies currently show the technology is safe," said Steve Tuttle, a spokesman for the Arizona-based company . [Emphasis added] . 298. Defendants knew, or recklessly disregarded, that Defendant Tuttle's statement tha t "our studies show the technology is safe," was materially false and misleading because Defendan t Tuttle failed to disclose that other studies, such as those referenced in 296, above, had raised
risk / Available to police and public alike, they don't always live up to nonlethal billing" stated a s follows: The Star Tribune has documented news reports of 105 cases nationwide since 1983 in which a person died after being shocked by police with an electric stun weapon . Three people have died in Minnesota in the past 14 months . News accounts of 14 of the deaths nationwide cite coroners, medical examiners or forensic pathologists as saying the Taser may have been a contributing factor . . . .
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A spokesman for Taser International Inc ., of Scottsdale, Arizona, said the weapons don't kill . "We know that Tasers are used every day, and we will be involved in tragic incidents involving in-custody deaths that are very similar to in-custody deaths that have occurred when Tasers have not been used," said Taser spokesman Steve Tuttle . "We have never been listed as a direct or primary cause of death in our company's existence ." [ . . . ] "Our brother went right into cardiac arrest after being Tasered," said Siegler's sister, Kelly Dietrich of Inver Grove Heights . "Do I think a Taser is safer than a gun? Yes . Do I think a Taser is perfectly safe? No . My concern is that Taser International is portraying this as a perfectly safe weapon ." [ . . .] [Emphasis added] . 300. Defendants knew, or recklessly disregarded, that Defendant Tuttle's statement tha t
10 "the weapons don't kill," was materially false and misleading . While the devices had not, to tha t 11 12 13 14 15 16 17 custody cited Tasers as a cause or a contributing factor in the deaths . In two other cases, Tasers 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
point, been found to be the primary cause of any death , two medical examiners found that TASER devices were a contributory factor in two deaths, as noted in the August 2004 Form 10-QSB . In addition, The Arizona Republic reported that based on its "review of autopsies and interviews with medical examiners [it] found Tasers have been linked to at least five deaths ." Specifically, th e article reported that "[m]edical examiners in three cases involving suspects who died in polic e
could not be ruled out as a cause of death ." 301 . In October 2004, the United States Department of Defense released the Repor t Summary of the HECOE Report. The HECOE Report was heavily touted by the Company . A press release issued on October 18, 2004, stated: a Department of Defense (DoD) study by the Human Effects Center of Excellence (HECOE) concludes that TASER technology is generally effective without significant risk of unintended results .
"The HECOE study is the latest chapter in a series of comprehensive medical and scientific studies which conclude that TASER technology i s
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safe and effective" said Rick Smith, CEO of TASER International, Inc . "This study re-affirms the life-saving value of TASER technology and is consistent with the recent independent findings of researchers in the United Kingdom and Canada," stated Mr . Smith . [Emphasis added .] 302. Defendants knew, or recklessly disregarded, that the statements concerning th e HECOE Repo rt findings were materi ally false and misleading. It was subsequently disclosed by The New York Times, "the Air Force laboratory that conducted the study now says that it actually found that the guns could be dangerous and that more data was needed to evaluate their risks ." In additio n the Times reported that after a symposium on less -deadly weapons in Winston-Salem , N .C ., the Air
9 Force laboratory that conducted the study said that it had not found Tasers were safe . The guns "ma y 10 11 12 13 14 15 16 acidotic - a dangerous condition in which the ph of the blood drops . Because a 1999 study by th e 17 18 19 20 21 22 23 rather than rely on the Defense study." 24 304. On October 19, 2004, TASER issued a press release in which the Company upwardly 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
cause several unintended effects, albeit with estimated low probabilities of occurrence," the laboratory said . "Available laboratory data are [sic] too limited to adequately quantify possible risk s of ventricular fibrillation or seizures, particularly in susceptible populations." Further, it wa s disclosed that Dr. James Jauchem, the primary Air Force researcher in the HECOE study, presented data at that symposium that showed that repeated TASER device shocks caused pigs to becom e
Justice Department suggested that "deaths following Tasers' use may be due to acidosis," Dr . Jauchem stated that people subjected to repeated shocks should receive medical monitoring . 303 . Indeed, The Arizona Republic reported that "[ e]-mails that military official s exchanged also reveal for the first time that they asked Taser to tone down public statements abou t the [HECOE] study. In addition , they urged the company to commission an independent stud y
revised revenue projections for fiscal 2004: "The third quarter is historically our slowest quarter of the year and we are pleased to be able to report such solid results . With the continued strong ne w
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business picture for the company through three consecutive quarters, we now believe we can increase guidance on revenue growth from 150% to an increase of 175% over the prior year," stated Rick Smith, CEO of TASER International, Inc . 305 . Defendants knew, or recklessly disregarded, that Defendant Smith's statemen t I concerning the increase in revenue guidance lacked any reasonable basis . As stated above, both CW3 and CW4 stated that the Company had experienced a dramatic slowdown during the thir d quarter of 2004 . Indeed , CW4, who started to work for TASER in September 2004 stated that i n his/her second week on the job, production slowed so much that he/she was taken off the assembl y
9 10 11 12 13 14 15 16 306 . Various TASER Defendants and spokesmen made comments in a third quarter 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
line and assigned to side tasks , such as t ri mming plastic molds . CW4 stated that "[t]hey took me off of [the assembly line], because they said they was back-piled on it . I was then doing silly stuff; anything to keep us busy for eight hours . It wasn't no [sic] productive work ." CW4 stated that thi s continued through November : "[t]hey weren't getting much of anything out ." CW4 said that man y of the temporary workers who had been expecting to move into permanent positions were not hire d "and they just let them go ."
conference call on October 19, 2004 on FD Wire : [Tom Smith] We have stated that the TASER in the medical testing that we have done and in the analysis that has been done by medical experts and in looking at the facts have shown the TASER technology to be safe .
And finally, the granddaddy of them all, in fact, Rick will talk about this in Prague there over there making presentations, the HECOE, the Human Center of Excellence from the Department of Defense is actually making presentations in Prague to the NATO countries about all the fine work they did . This is a huge study, and their conclusions are - "analyses provided by law-enforcement agencies indicate that increased use of the TASER M26 of the X26 has decreased the overall injury rate of both police officers and suspects in complex situations when compared to alternatives along the use of forced specter (ph) .
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[Taser General Counsel Doug Klint] "We are also involved in litigation from 3 unexpected and unforeseeable deaths while in police custody . The TASER device was not the approximate [sic] cause of death in any of these cases . It was listed as a contributing factor in one case which is being contested by medical experts and by the way was covered extensively by CBS News . We now have the independent HECOE study connected by the U .S. Government which concluded that the TASER device is likely not the primary causative factor and reportedly (indiscernible). This report will play a very important role in this litigation and will provide additional evidence to support our motions for a summary judgment . These claims are also covered by insurance . . . . [Richard Smith] "And finally, independent safety tests. Certainly this is a great example of what doesn't kill you makes you stronger . In the past six to nine months we've seen all of these allegations regarded [sic] to product safety and requests for independent tests . While with TASER we now have independent tests from the U .S. Department of Defense, UK, Canada, Australia and other countries . And each one of these tests are multi hundred thousand dollars expended if not more, in some cases in the millions of dollars . Now that we have those independent tests, anybody else looking to get into the space is either going to A, violate our patents on our waveforms because that is specifically what has been tested or they would have to come up with something new . Now we are very skeptical that anyone can come up with a way to incapacitate a human subject through an electro muscular disruption without violating one of our patents . We don't think that can be done . Let's assume they can . Now you have got a new waveform that has to go forth and be tested independently by all these other agencies . And again, the impetus for them to do so, there is a lot of time, cost and efforts - I remind you we've been at this for almost four years in the United Kingdom . [Emphasis added] . 307 . Defendants knew, or recklessly disregarded, that the statements of Defendant Rick Smith and Doug Klint that the HECOE study was independent were mate rially false and misleading . As alleged above , TASER officials part icipated in three panels to determine the scope of the study, analyze data and review findings . TASER also provided the bulk of the research material used in th e study . Indeed, Larry Farlow, a spokesman for the Air Force Research Laboratory in Texas tha t oversaw the study stated, "Were they (Taser) totally disconnected (from the study)? The answer i s
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
no. They were not disconnected . . . . ." 308 . On November 15, 2004, the Company filed its quarterly report for the period endin g
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September 30, 2004 with the SEC on a Form 10-QSB signed by Defendants Rick Smith an d Behrendt . In the 2003 Form 10-K section entitled "Legal Proceedings," the Company reported "[i] n November 2003, Samuel Powers served a complaint against the Company in Superior Court for the State of Arizona alleging that he injured his shoulder during a TASER training session . "
5 6 7 8 9 10 11 12 standing in the law enforcement community , TASER' s biggest customer market . 13 14 15 16 17 18 19 20 21 22 23 comprehensive review of the devices' safety. The Arizona Republic reported on May 21, 2005 tha t 24 the Air Force conducted the study for the Defense Department to "assess the risks and effectivenes s 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
309. Defendants knew, or recklessly disregarded, that the statement that Samuel Power s alleged that he had sustained "a shoulder injury" was materially false and misleading . As alleged above, in or about May 2003, TASER was provided with a videotape of the training session an d notified that Powers claimed that he sustained a compression fracture of the T7 vertebra as a resul t of the muscle contraction caused by an M26 shock during a training session . Defendants knew , however, that disclosure of the magnitude of Powers injury could adversely impact the Company' s
310. An article dated December 4, 2004 in PR Newswire entitled "Taser(R) International Clarifies Issues Raised by Miami Herald Regarding Taser Safety" stated as follows : "Our confidence in Taser technology is based on a body of overwhelming evidence that Tasers are generally safe and effective - - not on any one guideline or standard," said Steve Tuttle, Vice President of Communications at Taser International . 311 . Defendants knew, or recklessly disregarded, that Defendant Tuttle's statement wa s materially false and misleading because there was no overwhelming body of evidence that TASER devices were safe . In fact, while the number of deaths following application of the TASER device s continued to mount, it was disclosed that the heavily touted HECOE study was not intended to be a
of Tasers so the military could decide whether to buy them ." It further reported that Air Force researchers said the study was "not meant to be a comprehensive review of stun-gun science o r
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safety, and they made no findings on the device's safety ." SCIENTER 312 . Each of the Individual Defendants, by virtue of their receipt of information reflecting the improper and fraudulent behavior described above and/or their failure to review information they
5 6 7 8 9 10 11 12 statements and omissions contained in publicly disseminated statements would adversely affect th e 13 14 15 16 17 18 19 20 with recklessness and had both motive and opportunity to commit fraud . 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
had a duty to monitor, their control over TASER's materially false and misleading statements, an d their association with the Company which made them privy to confidential proprietary informatio n concerning the Company, were active, culpable, and primary participants in the fraudulent schem e alleged herein . The Individual Defendants knew or recklessly disregarded the materially false an d misleading nature of the information they caused to be disseminated to the investing public . 313 . The Individual Defendants also knew or recklessly disregarded that the misleading
integrity of the market for the Company's common stock and would cause the price of th e Company's common stock to be artificially inflated . The Individual Defendants acted knowingly or in such reckless manner as to constitute a fraud and deceit upon Plaintiff and other members of th e Class . 314. In addition to the foregoing and other acts alleged herein, the following facts provid e compelling evidence that the Individual Defendants acted with actual knowledge, or, at the very leas t
Knowledge or Reckless Disregard by the Individual Defendant s 315 . A key element of the Individual Defendants' securities fraud is their false an d misleading disclosures regarding the safety of TASER's devices . This was the subject of heated debate throughout and following the Class Period . Because TASER's revenues are derive d exclusively from the sale of its stun gun devices and associated products, such as cartridge refills, th e safety of its products was central to the business prospects of the Company .
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316. For that reason alone, as described below, the Individual Defendants must hav e known or were reckless in not knowing everything about the studies conducted in connection wit h stun gun safety. Consequently, the Individual Defendants knew or were reckless in not knowing that their disclosures regarding the studies conce rning the safety of stun guns generally, and TASER' s
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
devices in particular, were false and misleading. 317. When the significance of the studies to the Company's core business is coupled wit h the following additional facts, the strong inference that the Individual Defendants acted with sciente r is inescapable : (a) The Individual Defendants, Company insiders and members of the Board sold approximately $51 million in TASER stock during a then-undisclosed suspension of shipments resulting from a software defect ; (b) according to the deposition testimony of Defendant Tom Smith in the Powers Action, Rick Smith had reviewed available scientific materials as far back as 1999 ; (c) the Individual Defendants had a specific duty to review available scientific data and studies before representing that the scientific evidence established that the TASER devices did not cause death ; (d) Defendants knew that the certain of the studies that they claimed were independent were, in fact, linked to TASER ; (d) the Individual Defendants had a specific duty to monitor and review all available autopsy reports, and not rely on anecdotal information from the police and media, before representing that no medical examiner had ever found that TASER's devices caused or were the proximate cause of any death ; (e) the Individual Defendants were on notice of the design flaws in the circuit boards used in the Company's devices, as well as the lack of adequate quality controls in the manufacturing process ; (f) the Individual Defendants were aware of the massive number of returns during the Class Period due to device malfunctions ; (g) the Individual Defendants were aware of the imminent publication of the highly critical Amnesty International Report several weeks before it was released ; (h) orders for TASER devices were declining in the third and fourth quarter due to the safety controversy , product quality issues, and the announcements conce rning the introduction of two competing products ; and
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(i) the Individual Defendants and other Company insiders, some of whom engaged in large insider sales during an undisclosed first quarter 2004 product recall, sold more than $81 million worth of stock in a two-week period shortly before the release of the Amnesty International Report . The Studies and Reports 318. In a deposition taken in the Powers Action, Defendant Tom Smith testified that Ric k Smith had reviewed available scientific research concerning the health effects of electric shocks a s far back as 1999. Moreover, Defendant Rick Smith testified in his deposition in the Powers Actio n that part of his review was the 1987 Ordog study . That study found, among other things, that there was a danger of respiratory failure from the continuous application of a stun gun that had
10 11 12 13 14 15 16 that the TASER devices were "safe" were false because, as he acknowledged in his depositio n 17 testimony in the Powers Action, no peer reviewed studies showed that the M26 was "safe an d 18 19 20 21 22 23 24 be characterized in the vernacular as "safe ." 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
significantly less power than the M26 . That study also involved the review of three fatalities following application of a stun gun. While Dr. Ordog concluded that that the stun guns could not be held "solely" responsible for the deaths, he did not conclude that the shocks from those weapon s played no role in the fatalities . 319. Defendant Rick Smith knew that the assertions that scientific studies had establishe d
incapable of causing significant injury . . . ." In addition, many, if not all, of the studies concerning the health effects of stun guns were available in the public domain . Defendants, who repeatedly represented that the "scientific evidence ," "studies," and/or "research " established that TASE R devices were safe or would not cause death, failed to reference the studies that were adverse, or eve n equivocal in their findings . For example, the PSDB Report expressly stated that TASER could no t
320. Moreover, Defendants knew that they had overstated the findings of the specific studies they did reference . For example, Defendants actually participated in the HECOE study ,
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participating in three panels to determine the scope of the study, analyze data and review findings , and by providing the bulk of the research material used in the study. In fact, Defendant Steve Tuttle , TASER' s spokesman, testified in a deposition in the Powers Action , that researchers in that stud y "left no stone unturned . They wanted everything we had ." Despite the Company's role ,
5 6 7 8 9 10 11 12 the HECOE study was inconclusive : 13 14 15 16 17 18 19 20 HECOE study was not independent . Indeed , the Air Force specifically urged the Company t o 21 22 23 24 25 26 27 324. Defendants' knowledge that the scientific research had not established the safety o f 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Defendants' mischaracterized the findings of the study, with Defendant Rick Smith stating "[t]h e HECOE study is the latest chapter in a series of comprehensive medical and scientific studies which conclude that TASER technology is safe and effective ." 321 . It was subsequently reported, however, that "[e]-mails that military official s exchanged also reveal for the first time that they asked Taser to tone down public statements abou t the [HECOE] study. Indeed, far from concluding that "TASER technology is safe and effective,"
Several key data gaps were identified in data evaluation . These gaps include the biological basis for TASER effects, appropriate dosimetry [the accurate measurement of dosage], and the impact of environmental and scenario dependent variables on the induction of effects . Available experimentalonly data are too limited to adequately quantify possible risks of VF or seizures, particularly in susceptible populations. Limitations in the exposure and incidence data for some infrequent events and the need to rely on database of case reports compiled by TASER International also generate uncertainty in the results. 322. Furthermore, because TASER participated in that study, Defendants knew that the
commission an independent study rather than rely on the HECOE study . 323 . Defendants also knew, or were reckless in disregarding, that they had no reasonabl e basis for their statements that no medical examiner had found TASER devices to be a cause of death, or a proximate cause of death because Defendants did not actually begin collecting autopsy report s for review until April 2004 .
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the Company's devices is further evidenced by their attempts to influence ostensibly independen t studies. As alleged above, the University of Wisconsin had solicited a grant from the Department o f Justice to conduct a comprehensive, independent study of the safety of TASER devices . However, it was disclosed that Dr. Stratbucker - TASER' s Medical Director, who had already concluded that
5 6 7 8 9 10 11 the findings of the various studies cited by Defendants throughout the Class Period. Further, durin g 12 the Class Period, Defendant Tuttle had conversations with Defendant Rick Smith concerning the 13 14 15 16 17 18 19 Design and Product Defects 20 326. With respect to the design flaws, CW 1 stated that the Company was informed b y 21 22 23 24 25 26 27 327. Furthermore, CW1, CW2, CW3, CW4, CW5, and CW6 all stated that the qualit y 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
TASER devices were safe - had applied as an advisor in the study . Dr. Stratbucker, however, failed to disclose his affiliation with TASER in any of the paperwork submitted to the Department o f Justice during the Class Period . Upon the public disclosure of the foregoing, he was removed fro m participation in the study. 325 . Based on deposition testimony in the Powers Action, Defendant Tuttle was aware o f
safety studies . In addition, he acted as one of TASER' s liaisons with the Department of Defense i n the HECOE Study. Thus, Tuttle had actual knowledge that TASER participated in the HECOE Study and, therefore, that the HECOE Study was not independent . Tuttle also had actual knowledg e of Defendants' material overstatements concerning that study by virtue of his interaction with th e Department of Defense, among other things .
representatives of First Electronics (the manufacturer of the circuit boards used in TASER devices ) that product malfunctions were being caused by the design flaws, and not manufacturing defects, in the circuit boards . Indeed, CW1 stated that he/she unsuccessfully urged both Defendants Rick Smit h and Tom Smith to recruit electrical engineers to review the circuit board design due to the massiv e number of malfunctioning devices .
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control problems at TASER were widespread , and CW7, a former TASER distributor, stated that th e quality problems with TASER devices were notorious . There were days when more was returned than was shipped out, according to CW2 . In fact, the product returns became so bad that the Company had to build additional space merely to accommodate them .
5 6 7 8 9 10 11 in September 2003, both Rick and Tom Smith were warned that "if you keep shipping out a lot o f 12 crap, it's going to come back ." 13 14 15 16 17 18 19 - sometime between January and April 2004 - CW2 observed the Defendants Rick and Tom Smith 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
328. TASER held daily production meetings during which the quality control , design fla w and product defect issues were repeatedly discussed . According to CWl, CW2, and CW3 , Defendants Rick Smith and Hanrahan regularly attended these meetings . In addition, Defendant Tom Smith attended these meetings, albeit less frequently . CW 1 stated that during these meetings the defect rates, which were as high as 70%, were discussed . CW 1 further stated that at one meetin g
329 . Moreover, CW2 stated that occasionally, Defendants Rick and Tom Smith woul d walk the production floor with Jay Pearl, the Production Manager, and CW2 overheard Pearl describe the various defects in the X26 and tell them that defective units were being sent t o customers . CW2 stated "I know [Jay Pearl] had conversations with Rick Smith and his brother [Tom Smith], and there wasn 't really too awfully much of anything done." In one or two instances
"walking up and down the isles behind Jay, and he would be telling them, `We don't know what' s wrong with them (the X26s); we're just building them and sending them out."' 330. CW2 also stated that he/she personally spoke with Defendant Rick Smith abou t product defects relating to solder joint and the circuit boards . According to CW2, Rick Smith's response was "just get them out." CW2 stated "[a]s long as they sparked, we would ship them out . " 331 . CW 1 also stated that sales staff at TASER discussed complaints that the Compan y
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had received from various police departments regarding the ineffectiveness of the X26 . Accordin g to CWI, the police did not like the X26 because did not always incapacitate suspects . Comparing the X26 to the M26, CW1 stated "[p]olice didn't like going to the new X26 because with the M26, i f a guy would drop, he would stay down . The M26 was like getting hit with a hammer ."
5 6 7 8 9 10 11 12 333. During the first quarter of 2004, the Company discovered a software defect effecting 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
THE INSIDER SALE S 332. Defendants were motivated to engage in the above-described fraudulent conduct in order to artificially inflate and/or maintain the artificially inflated price of the Company's commo n stock . That the Individual Defendants, Company insiders, and members of TASER' s Board twice made unusual and suspiciously-timed sales prior to the public disclosure of adverse events is highl y probative and evidence of the Individual Defendants' scienter .
approximately 31,000 units of the new X26 . This defect forced TASER to delay shipment of th e product for almost a month and to issue the necessary software repairs to over 12,000 weapons that were already in the field . The Company first publicly disclosed this information in or about Ma y 2004. In its 10-Q for the second quarter 2004, dated May 10, 2004 TASER stated: Although the Company continued to increase production of its new TASER X26 product during the first quarter of 2004, the product experienced a defect in its data recording feature which did not affect the operation of the product but nevertheless required a temporary suspension of shipments for approximately three weeks during the quarter . The resolution of this software problem required the reprogramming of more than 4,000 weapons and 15,000 battery packs at the factory and preparation for field upgrades for more than 12,000 weapons that had already been shipped in previous periods . The cost to repair the software and upgrade the weapons in house was expensed in the quarter through cost of goods sold . In addition, the Company accrued approximately $41,000 of additional expense through a warranty accrual to retrofit the remaining units in the field . 334. Prior to that disclosure, however, but after the defect was known, Company insider s also made large sales of their personal TASER stock . Between February 4, 2004 and February 18 ,
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2004, Company insiders sold 883,117' shares for gross proceeds of over $41 .5 million : Defendant Sale s Defendant Rick Smith Shares Sold : 245,000 Defendant Tom Smith Shares Sold : 215,000 Proceeds : $10,212,000 Proceeds : $11,695,000
Defendant Dr. Smith Shares Sold : 270,000 Defendant Hanrahan Shares Sold : 67,36 6 Total Shares Sold: 797,366 Proceeds : $3,227,07 8 Total Proceeds : $37,096,17 8 Company Insider and Director Sale s Kroll (Director) Shares Sold : 22,50 0 McBrady (Director) Proceeds : $930,75 0 Proceeds : $11,962,100
18 19 20 21 22 23 24 25 26 27 28
Shares Sold : 13,25 1 Total Shares Sold: 15,751
Proceeds : $547,000 Total Proceeds : $1,477,750
335. Furthermore, during a two week period from October 28, 2004 through November 10, 2004, nine Company insiders, including the Individual Defendants, grossed over $85 .1 million from suspiciously timed sales of their personal TASER stock holdings . These stock sales immediately followed the announcement that the Company had upwardly revised its projected 2004 revenu e
1 The February sales are shown in pre-split totals .
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growth from a 150% increase over 2003, to a 175% increase over 2003 . 336. Shortly after the announced earnings projection , the Individual Defendants , as well a s numerous members of the TASER Board and other Company insiders, engaged in massive insider sales of almost 1 .7 million shares of TASER common stock . The volume of sales by the Individua l
5 6 7 8 9 10 11 12 November 2004 . Citing numerous incidents of fatalities and injuries reported following TASER 13 14 15 16 17 18 19 products were to compete directly with TASER's M26 and X26 weapons. The Individual 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Defendants during this two week period was more than twice the number of shares sold they in th e prior two years combined . Defendant Phillips Smith garnered over $35 .7 million, selling more than 706,000 shares ; Defendant Patrick Smith collected over $15 .4 million, selling 310,000 shares ; Defendant Thomas Smith collected over $12 .7 million, selling 260,000 shares . 337. These transactions occurred after the Individual Defendants lea rned that Amnesty International was going to issue a highly critical report on the safety of the TASER devices in lat e
device use, Amnesty International recommended a moratorium on continued use of the weapon s pending comprehensive safety testing . In addition, on October 21, 2004, Law Enforcemen t Associates announced that it had completed the housing design for its new stun weapon which had a projected launch date of March 2005 . Further, on November 15, 2004, Stinger Systems announced that it had entered the projectile stun gun market with the introduction of "The Stinger ." Both
Defendants knew that because of (i) the falsity of their statements concerning the TASER weapons ' safety ; (ii) the undisclosed design and manufacturing defects ; and (iii) the undisclosed issue s regarding the effectiveness of the X26, the emergence of competing products would have a calamitous effect on the Company's sales . Indeed, according to CW3 and CW4, production at TASER fell dramatically in the third and fourth quarters of 2004 because of the decline in orders . 338. The sales of the Individual Defendants, various members of the TASER Board, an d
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other Company insiders are shown below : Defendant Sales Between October 28th and November 10th, 2004 Defendant Rick Smith (CEO) Shares Sold : 310,000 Proceeds : $15,453,000 Defendant Tom Smith (President ) Shares Sold : 706,440 Proceeds : $35,767,000
Defendant Dr . Smith (Chairman) Shares Sold : 260,000 Defendant Hanrahan (COO) Shares Sold : 160,000 Defendant Behrendt (CFO) Shares Sold : 16,000 Total Shares Sold : 1,452,440 Proceeds : $540,625 Total Proceeds : $71,616,27 0 Proceeds : $7,106,64 5 Proceeds : $12,749,00 0
15 16 17 18 19 20 Kroll (Director) 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Company Insider and Director Sales Between October 28th and November 10th 200 4 Culver (Director) Shares Sold : 90,000 Proceeds : $4,428,803
Shares Sold : 37,500 Proceeds : $2,027,340 Kerik (Director) Shares Sold : 204,332 Proceeds : $5,856,155 McBrady (Director) Shares Sold : 29,998 Proceeds: $1,229,61 0 Total Shares Sold: 361 ,830 Total Proceeds : $13,541,90 8
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339 . Not only were the sales of the Individual Defendants, the Directors, and the Company insiders suspiciously timed, but these sales far exceeded all other sales made by these individuals . For example, while the Individual Defendants' total combined sales prior to the Class Period were 604,932 shares, during the two brief periods of Class Period referenced above, the Individual
5 6 7 8 9 10 11 12 disclose, TASER' s securities traded at artificially inflated prices during the Class Period . Plaintiff 13 14 15 16 17 18 19 20 safety of the Company's products, findings of various studies, the independence of certain studies , 21 22 23 24 25 26 27 damages under the federal securities laws . 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Defendants sold 2,249,806 shares of their TASER stock . The unusual and suspiciously-timed Clas s Period sales of approximately $120 million - $40 million more than the Company 2003 and 200 4 revenues - are highly probative of scienter . LOSS CAUSATION/ECONOMIC LOS S 340. The market for TASER' s securities was open, well-developed and efficient at al l relevant times . As a result of these materially false and misleading statements and failures t o
and the other members of the Class purchased or otherwise acquired TASER stock relying upon the integrity of the market price of TASER 's stock and market information relating to TASER, and hav e been damaged thereby. 341 . During the Class Period, as detailed herein, Defendants engaged in a scheme t o deceive the market and a course of conduct that artificially inflated TASER's stock price an d operated as a fraud or deceit on Class Period purchasers of TASER stock by misrepresenting the
the loss of business due to safety concerns, product quality deficiencies, and the introduction o f competing products . Moreover, based on their possession of undisclosed information about the foregoing, certain Company insiders and members of the Board sold massive quantities of TASER stock at artificially inflated prices as specified above . As a result of their purchases of TASER stock during the Class Period, Plaintiffs and other members of the Class suffered economic loss, i.e. ,
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342 . By misrepresenting TASER 's financial results, Defendants presented a misleading picture of TASER's business and prospects . Instead of truthfully disclosing during the Class Period that TASER's products might pose substantial safety risks, and that the Company suffered from widespread quality control deficiencies that jeopardized its business prospects, Defendants mad e
5 6 7 8 9 10 11 12 $32.59 per share on a split-adjusted basis . 13 14 15 16 17 18 19 that orders had been canceled and delayed due to the safety concerns about its devices, as well as the 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
repeated material misstatements and omissions as alleged above . 343. These material misrepresentations and omissions caused and maintained the artificia l inflation in TASER's stock price throughout the Class Period until the truth was revealed to th e market. 344 . Defendants' false and misleading statements had the intended effect and caused TASER stock to trade at artificially inflated levels throughout the Class Period , reaching as high as
345 . On January 6, 2005, after the market closed, TASER announced that the SEC ha d initiated an informal inquiry concerning the Company's statements concerning the safety of it s weapons, as well as Davidson' s transaction . Then, on January 11, 2005, TASER announced tha t "[d]uring the first half of 2005, it is possible that we may see some delays in orders as agencies test and evaluate potential new entrants ." In addition, in the Company's 2004 Form 10-K, TASER state d
introduction of competing products . As investors and the market became aware that TASER's prior statements were false and that the Company's business prospects were adversely affected thereby , the prior artificial inflation came out of TASER 's stock pri ce, damaging investors . 346. As a direct result of Defendants ' admissions and the public revelations regarding th e truth about TASER's statements concerning the safety of its products and the Company's busines s prospects , TASER' s stock p rice plummeted almost 48% . This drop removed the inflation from
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TASER' s stock pri ce, causing real economic loss to investors who had purchased the stock du ring the Class Period. In sum, as the truth about Defendants' fraud and TASER's business performanc e was revealed, the Company's stock price plummeted, the artificial inflation came out of the stoc k and Plaintiff and other members of the Class were damaged, suffering economic losses .
5 6 7 8 9 10 11 12 of Defendants ' fraudulent scheme to artificially inflate TASER' s stock price and the subsequent 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
347 . The decline in TASER' s stock price at the end of the Class Peri od was a direct result of the nature and extent of Defendants' fraud being revealed to investors and the market . The timing and magnitude of TASER 's stock price decline negate any inference that the loss suffered b y Plaintiff and other Class members was caused by changed market conditions, macroeconomic o r industry factors or Company-specific facts unrelated to the Defendants' fraudulent conduct . Th e economic loss, i.e., damages, suffered by Plaintiff and other members of the Class was a direct resul t
significant decline in the value of TASER' s stock when Defendants ' prior misrepresentations and other fraudulent conduct was revealed . Applicability Of Presumptio n Of Reliance: Fraud-On-The-Market Doctrine 348. At all relevant times, the market for TASER's securities was efficient for th e following reasons, among others : a. TASER's stock met the requirements for listing, and was listed and traded on the NASDAQ, a highly efficient and automated market ; b. As a regulated issuer, TASER filed periodic public reports with the SEC and the NASDAQ ; c . TASER regularly communicated with public investors via established market communication mechanisms, including through regular disseminations of press releases on the national circuits of major newswire services and through other wide-ranging public disclosures, such as communications with the financial press and other similar reporting services ; and d. TASER was followed by several securities analysts employed by major brokerage firms who wrote reports that were distributed to the sales force an d
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certain customers of their respective brokerage firms . Each of these reports was publicly available and entered the public marketplace . 349. As a result of the foregoing , the market for TASER' s secu rities promptly digeste d current information regarding TASER from all publicly available sources and reflected suc h
4 5 6 7 8 9 10 11 Many of the specific statements pleaded herein were not identified as "forward-looking statements " 12 13 14 15 16 17 18 statements was made, the particular speaker knew that the particular forward-looking statement was 19 false, and/or the forward-looking statement was authorized and/or approved by an executive officer 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
information in TASER's stock price . Under these circumstances, all purchasers of TASER's stock during the Class Period suffered similar injury through their purchase of TASER's stock a t artificially inflated prices and a presumption of reliance applies . NO SAFE HARBOR 350 . The statutory safe harbor provided for forward-looking statements under certai n circumstances does not apply to any of the allegedly false statements pleaded in this Complaint .
when made . To the extent there were any forward-looking statements, there were no meaningfu l cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements . Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, Defendants are liable for those false forward-looking statements because at the time each of those forward-lookin g
of TASER who knew that statement was false when made . COUNT I Violation Of Section 10(b) O f The Exchange Act And Rule 10b-5 Promulgated Thereunder Against All Defendants 351 . Plaintiff repeats and realleges each and every allegation contained above as if full y set forth herein .
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352. Throughout the Class Pe riod , TASER and the Individual Defendants carri ed out a plan, scheme, and course of conduct that was intended to and did : (i) deceive the investing public , including Plaintiff and the other Class members, as alleged herein ; (ii) artificially inflate and maintain the market price of TASER' s stock ; and (iii) cause Plaintiff and the other members of th e
5 6 7 8 9 10 11 and deceit upon the purchasers of the Company's stock in an effort to maintain artificially high 12 market prices for TASER's stock in violation of Section 10(b) of the Exchange Act and Rule I Ob-5 . 13 14 15 16 17 18 19 truthful information that would be material to investors in compliance with the integrated disclosur e 20 provisions of the SEC as embodied in SEC Regulation S-X (17 C .F.R. Section 210 .01 et sM .) and 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Class to purchase TASER' s stock at artificially inflated p rices. In furtherance of this unlawful scheme and course of conduct, Defendants took the actions set forth herein . 353. Defendants (a) employed devices, schemes, and artifices to defraud ; (b) made untru e statements of material fact and/or omitted to state material facts necessary to make the statement s not misleading; and (c) engaged in acts, practices, and a course of business that operated as a frau d
Defendants are sued either as primary participants in the wrongful and illegal conduct charged herein or as controlling persons as alleged below. 354. In addition to the duties of full disclosure imposed on Defendants as a result of thei r making of affirmative statements and reports, or participation in the making of affirmativ e statements and reports to the investing public, Defendants had a duty to promptly disseminat e
Regulation S-K (17 C .F.R. Section 229 .10 et seq .) and other SEC regulations, including accurate and truthful information with respect to the Company's operations , financial condition, and earnings s o that the market price of the Company's stock would be based on truthful, complete, and accurat e information . 355. TASER and the Individual Defendants, individually and in concert, directly an d
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indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engage d and participated in a continuous course of conduct to conceal material, adverse information about th e business, operations , and future prospects of TASER as specified herein . 356. Defendants employed devices , schemes and artifices to defraud, while in possession
5 6 7 8 9 10 11 12 and engaged in transactions, practices and a course of business that operated as a fraud and decei t 13 14 15 16 17 18 19 20 information to the investing public that they knew or recklessly disregarded was materially false an d 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
of material, adverse, non-public information and engaged in acts, practices , and a course of conduc t as alleged herein in an effort to assure investors of TASER 's value and performance and continue d substantial growth, which included the making of, or the participation in the making of, untrue statements of material facts and omitting to state material facts necessary in order to make th e statements made about TASER and its business operations and future prospects in the light of th e circumstances under which they were made, not misleading, as set forth more particularly herein,
upon the purchasers of TASER 's stock during the Class Pe riod. 357. The Individual Defendants' primary liability, and controlling person liability, arise s from the following facts : (i) the Individual Defendants were high-level officers and/or directors a t the Company du ring the Class Pe riod; (ii) the Individual Defendants were privy to and participate d in the creation, development and reporting of the Company's internal budgets, plans, projection s and/or repo rts; and (iii) the Individual Defendants were aware of the Company' s dissemination o f
misleading. 358 . Defendants had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with reckless disregard for the truth in that they failed to ascertain an d to disclose such facts, even though such facts were available to them . Such Defendants' material I misrepresentations and/or omissions were done knowingly or recklessly and for the purpose an d
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effect of concealing TASER 's operating condition and future business prospects from the investing public and suppo rt ing the a rtificially inflated price of its stock . As demonstrated by Defendants ' I overstatements and misstatements of the Company's business, operations and earnings throughou t the Class Period, Defendants, if they did not have actual knowledge of the misrepresentations and
5 omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from 6 7 8 9 10 11 12 misleading statements made by Defendants, or upon the integrity of the market in which the stock 13 14 15 16 17 18 19 20 members of the Class and the marketplace known of the true financial condition and busines s 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
taking those steps necessary to discover whether those statements were false or misleading . 359 . As a result of the dissemination of the materially false and misleading information and failure to disclose material facts, as set forth above, the market price of TASER's stock wa s artificially inflated during the Class Period . In ignorance of the fact that market prices of TASER's publicly-traded stock were artificially inflated, and relying directly or indirectly on the false and
trades, and/or on the absence of material, adverse information that was known to or recklessl y disregarded by Defendants but not disclosed in public statements by Defendants du ring the Class Period, Plaintiff and the other members of the Class acquired TASER stock during the Class Period at artificially high prices and were damaged thereby . 360 . At the time of said misrepresentations and omissions, Plaintiff and the other member s of the Class were ignorant of their falsity, and believed them to be true . Had Plaintiff and the other
prospects of TASER, which were not disclosed by Defendants, Plaintiff and the other members of the Class would not have purchased or otherwise acquired their TASER stock, or, if they had acquired such stock during the Class Period, they would not have done so at the artificially inflate d prices that they paid . 361 . By virtue of the foregoing, Defendants have violated Section 10(b) of the Exchang e
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Act and Rule lOb-5 promulgated thereunder . 362 . As a direct and proximate result of Defendants' wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases and sale s I of the Company's stock during the Class Period .
5 6 7 8 9 set forth herein . 10 11 12 13 14 15 16 17 Company, including the content and dissemination of the various statements that Plaintiff contends 18 19 20 21 22 23 24 day-to-day operations of the Company and, therefore, are presumed to have had the power to control 25 or influence the particular transactions giving rise to the securities violations as alleged herein, an d 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
COUNT II Violation Of Section 20(a) O f The Exchange Act Against the Individual Defendants 363 . Plaintiff repeats and realleges each and every allegation contained above as if full y
364. The Individual Defendants acted as controlling persons of TASER within th e meaning of Section 20(a) of the Exchange Act as alleged herein . By virtue of their high-level positions, and their ownership and contractual rights, participation in and/or awareness of the Company's operations and/or intimate knowledge of the statements filed by the Company with th e SEC and disseminated to the investing public, the Individual Defendants had the power to influenc e and control and did influence and control, directly or indirectly, the decision-making of th e
are false and misleading . The Individual Defendants were provided with or had unlimited access to copies of the Company's reports, press releases, public filings, and other statements alleged by Plaintiff to be misleading prior to and/or shortly after these statements were issued and had th e ability to prevent the issuance of the statements or cause the statements to be corrected . 365 . In particular, the Individual Defendants had direct and supervisory involvement in th e
exercised the same.
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366 . As set forth above, TASER and the Individual Defendants each violated Sectio n 10(b) and Rule lOb-5 by their acts and omissions as alleged in this Complaint . By virtue of their positions each as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act . As a direct and proximate result of TASER and the Individual Defendants'
5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their purchases of the Company's stock during the Class Period . PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for relief and judgment, as follows : A. Determining that this action is a proper class action under Rule 23 of the Federal Rules of Civil Procedure ; B . Awarding compensatory damages in favor of Plaintiff and the other members of the Class against all Defendants for all damages sustained as a result of Defendants' wrongdoing, in an amount to be proven at trial, including interest thereon ; C . Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees ; an d D. Such other and further relief as the Court may deem just and proper .
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1 JURY TRIAL DEMANDED 2 Plaintiff hereby demands a trial by jury . 3 4 5 6 7 8 9 10 11 /s/ 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
CONSOLIDATED AMENDED CLASS ACTION COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
Date : August 29, 2005 MITCHELL LAW OFFICES, P .C. Robert Mitchell (AZ 011922) Anchor Centre One, Suite 122B 2210 East Camelback Road Phoenix, Arizona 85016 Tel: [phone] Fax : [phone] Liaison Counsel for Plaintiff and the Clas s BERNSTEIN LIEBHARD & LIFSHITZ, LL P
Mel . E. Lifshitz Keith M . Fleischman Timothy J . MacFal l Joseph R. Seidman, Jr. (admitted pro hac vice) Stephanie Beig e Russell M . Iger Jeffrey Lerner 10 East 40t h Street New York, NY 10016 Tel: [phone] Fax : [phone] Lead Counsel for Plaintiff and the Clas s
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CERTIFICATE OF SERVIC E The undersigned certifies that a copy of the attached amended complaint was served upon the following counsel, via regular mail, this 29th day of August, 2005 : Counsel for Defendants : David B . Rosenbaum, Esq . OSBORN MALEDON, P .A. 2929 North Central Avenue Phoenix, AZ 8501 2 Keith E. Eggleton, Esq . WILSON SONSINI GOODRICH & ROSATI 650 Page Mill Road
Palo Alto, CA 94304
/s/
JOSEPH R . SEIDMAN, JR.