Catholic Hospital Owner Also Owns Connecticut Shooting Rampage Rifle Manufacturer

December 18, 2012

Our prayers at BCI go to the victims of the Newtown, CT shooting last Friday and their families. This horrible tragedy is still weighing heavy on our hearts.

The Boston Globe reported today that guns used to kill people and Catholic hospitals may seem an unusual pairing in an investment portfolio, but not for Cerberus Capital Management.

BCI readers know that Cerberus Capital, a private equity firm, purchased Caritas Christi Healthcare from the Boston Archdiocese back in 2010.  At the time, we knew that Cerberus owned a gun company.  Today we learned that gun company was the manufacturer of the semi-automatic rifle used in Newtown, Connecticut killings last Friday, and Cerberus has now decided to sell their investment in the company.

The Globe reported first the ownership situation this morning:

The New York investment firm that controls the Steward Health Care System hospital chain in Boston also owns the company that makes the semiautomatic rifle that Adam Lanza used to kill 20 children and six adults at Sandy Hook Elementary School in Newtown, Conn., last Friday.

Cerberus is one of the most powerful forces in the gun business. It owns Freedom Group Inc., a Madison, N.C., company that is the nation’s largest seller of firearms and the number two seller of ammunition. Freedom, according to its annual report, sold 1.1 million long guns and 2 billion rounds of ammunition that generated $775 million in sales last year.

Freedom’s chief executive, George Kollitides, worked previously for Cerberus, where he focused on buying companies in the firearms and defense businesses for the firm. Described as a “lifelong hunter, shooter, and firearms enthusiast” on the company’s website, he is also a trustee for the NRA Foundation and serves on several of the group’s committees.

Kollitides led the charge to acquire Bushmaster Firearms Inc. from Windham, Maine, native Dick Dyke in 2006. The gun used in the Newtown shootings, a Bushmaster .223 semiautomatic rifle, contained a 30-round ammunition clip that allowed the gunman to fire continuously inside the school.

That same model Bushmaster was also used in the 2002 Washington sniper shootings, in which 10 people were killed, according to published reports.

Dr. Robert D. Sege, director of ambulatory pediatrics at Boston Medical Center and coauthor of a policy statement on gun control by the American Academy of Pediatrics, said he strongly favors reinstituting the assault weapons ban. If Cerberus is not working for laws to make guns and the community safer, he said, “At the very least it calls into question the overall aims of Cerberus Capital.”

An executive at Cerberus did not return requests for comment Monday, and Ralph de la Torre, chief executive of Steward Health Care, was traveling and unavailable to comment, a spokesman said. An official from Freedom Group could not be reached for comment.

When Cerberus created Steward in Boston, by acquiring the former Caritas Christi hospitals, de la Torre conducted a public relations tour to present Cerberus as the best hope for saving a cash-strapped community hospital group. The Catholic hospital group includes St. Elizabeth’s Medical Center in Brighton and Carney Hospital in Dorchester.

While Cerberus’s wooing of the local hospital group was highly public, its amassing of gun companies was less well known.

If new gun controls are proposed in the wake of the Newtown tragedy, Freedom and Cerberus will have much at stake. In the past, company executives have said in earnings calls that when “political rhetoric heats up,” the furor typically dies down quickly.

But this week, gun critics expressed outrage that a company could both own hospitals and gun makers. “How can you promote good health and unrestricted access to deadly weapons at the same time?” said John Rosenthal, a Boston developer and cofounder of Stop Handgun Violence. “It’s clear to me all they care about is the profit motive.”

Well, the furor did not die down quickly.  This afternoon, the Globe reports that Cerberus plans to sell investment in gunmaker after Connecticut school shootings:

Cerberus Capital Management, the investment firm that controls the Steward Hospital Health Care System hospital chain in Boston, said that it will sell its investment in Freedom Group, the company that makes the rifle that was used in the Connecticut school killings.

“We have determined to immediately engage in a formal process to sell our investment in Freedom Group,” the New York firm said in a statement. “We will retain a financial advisor to design and execute a process to sell our interests in Freedom Group, and we will then return that capital to our investors.”

Together with its gun brands, from Bushmaster to Remington, Freedom is a major contributor to the National Rifle Association and the fight against gun control, according to the Violence Policy Center, a Washington group that tracks corporate funding of gun advocacy.

Reuters reported that pressure mounted on Cerberus as the California State Teachers’ Retirement System (CalSTRS) said on Monday it was reviewing its investment with the private equity firm after the Connecticut school shooting.

Indeed, it does not make sense at all how a firm can promote good health at the same time they are promoting unrestricted access to deadly weapons.  How could they even fathom investing in a company in 2006 that made the weapon used to kill 10 people just four years earlier?  That is Cerberus, which gets its name from the three-headed dog that guards the gates of hell in Greek mythology. We are glad to hear they are selling their investment in Freedom Group. But it is an investment that never should have been made in the first place. With principals of the firm whose code of ethics did not stop them from investing in the gun manufacturer, how exactly are they guiding what remains of the Catholic hospital network.


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