The press release below comes straight from the FBI's website and describes charges brought against a Glock distributor, two Glock managers and their wives. What's interesting about this case is that Glock first brought suit against John Ralph, the owner of Global Guns & Hunting, Inc. and subpoenaed its own employees in 2012 when it first discovered the plot alleged in this latest indictment.
As near as I can tell from the court documents I found online, Glock's execs figured out back in 2012 that two of their employees were providing the means to Ralph to turn lower priced, blue label Glock pistols into more expensive red label products that would give Ralph's company a larger profit margin on each sale. Glock fired those involved and began civil legal proceedings against them. The latest FBI's charges against the same actors appears to be a continuation of the proceedings in criminal court.
moreIf you've not heard the term 'blue label' Glocks, it refers to the color of the label on the case the guns are sold in. Blue label guns are identical to red label guns, except for the fact they are priced below those sold through retail channels and are set aside for sale to law enforcement agencies, individual officers or other entities that use the firearms in a professional capacity.
From the documents and conversations I've had with people that know how Glock's sales system works, it appears all that was needed to turn blue label guns into red was authentic Glock packaging labels, a label printer and the software to run it.
The FBI's June 4, 2014 press release:
A Kansas firearms distributor was indicted today on federal charges of paying more than $1 million in bribes and kickbacks to executives of the company that manufactures Glock pistols, U.S. Attorney Barry Grissom said.
John Sullivan Ralph, III, 40, Olathe, Kansas, who was owner of Global Guns & Hunting Inc. of Olathe, Kansas, doing business as OMB Guns, is charged with one count of conspiracy, 11 counts of wire fraud, and 10 counts of money laundering.
The indictment alleges Ralph secretly paid executives of Glock to receive preferential treatment over other distributors of firearms, including directing potential customers to his company, giving his company priority access to limited products, steering government contracts and sales to government agencies of firearms and accessories to his company, and providing confidential Glock information to him.
The following co-defendants are charged with the same counts as Ralph:
James "Craig" Dutton, 42, Acworth, Georgia, who was the assistant national sales manager for Glock. The American headquarters of Glock Inc. is in Smyrna, Georgia.
Lisa Delaine Dutton, 42, Acworth, Georgia, who was Craig Dutton's wife, and who formed a company called Supreme Solutions LLC. She is alleged to have concealed payments of bribes and kickbacks.
Welcome D. "Bo" Wood, Jr., 65, Oviedo, Florida, who was the Eastern Regional Manager for Glock.
Paula Ann Wood, 63, Oviedo, Florida, who was Bo Wood's wife, and who formed a company called Tropical Marketing & Consulting LLC. She is alleged to have concealed payments of bribes and kickbacks.
According to the indictment, most of Glock's pistols are sold to independent firearm distributors who have contracts with Glock to resell its pistols. The allocation of Glock pistols was important because the demand frequently exceeded the supply.
Glock created two different sales channels for purposes of licensing its distributors. One channel was for sales to law enforcement agencies. Independent distributors were authorized to resell Glock pistols to law enforcement agencies within a specific geographic territory. The other channel was for the commercial market. Distributors of commercial market products were not restricted to a particular geographic area.
Glock used a Universal Product Code to differentiate pistols that were sold for resale to law enforcement agencies (blue label products) from pistols sold for resale to the commercial market (red label products). The price list for pistols intended for resale to law enforcement agencies is lower due to the fact law enforcement agencies routinely buy in bulk and are often subject to bidding processes.
The indictment alleges Wood and Dutton provided Ralph with equipment and software to allow him to convert firearms sold with the law enforcement discount (blue label) to firearms sold at the premium price to the commercial market (red label). Ralph is alleged to have sold at least 14,000 pistols to commercial buyers—including Cabela's—which Glock sold to Ralph for resale to law enforcement agencies.
The indictment alleges that from 2003 to 2009, Ralph used the U.S. Postal Service to send and receive approximately 140 bribes and kickbacks that were delivered to defendants Lisa Dutton and Paula Wood. Between 2009 and 2011, the indictment alleges, Ralph used wire transfers to send approximately 80 bribes and kickbacks.
Upon conviction, the crimes carry the following penalties:
Conspiracy: A maximum penalty of 30 years in federal prison and a fine up to $1 million.
Wire fraud: A maximum penalty of 30 years in federal prison and a fine up to $1 million on each count.
Money laundering: A maximum penalty of 20 years and a fine up to $50,000 on each count.
The FBI investigated. Assistant U.S. Attorney Richard Hathaway is prosecuting.
