Rick Scott, Sanctions, And A Shady Gun Maker With Russian Ties

on May 15, 2017 in Miami, Florida.
Joe Raedle/Getty Images North America

On Saturday, protesters denounced a plan by a gun manufacturer to make Kalashnikov-branded AK-47s at a facility in Pompano Beach, Florida — about 14 miles from the site of the Parkland school shooting.

“I could discuss the morals of it, I could tell you I’m disgusted, but you know you’re disgusting,” shooting survivor Cameron Kasky said ahead of the protest.

But a closer look at the gunmaker, Kalashnikov USA, and its quest to set up a Florida facility reveals a far stranger story, and one that’s perhaps more troubling still.

Kalashnikov USA first announced its plan to make AK-47s in the U.S. — using the slogan “Russian Innovation, American Heritage” — as a way to get around sanctions, which forced it to stop importing the weapons from a Russian gunmaker with whom it had close ties. But it wouldn’t say where it was making the weapons. Then, to lure the company to Florida, Gov. Rick Scott’s administration pledged to give the firm $162,000 in tax breaks, but the tax deal fell through when the gunmaker failed to provide the required paperwork. Despite a string of announcements that Kalashnikov USA would soon start cranking out AK-47s in Pompano Beach, it’s not clear that it has ever made any AK-47s at all. And when a TPM reporter called to ask questions, a company official hung up on him.

Kalashnikov USA isn’t the only gun company that Scott has rolled out the red carpet for. The number of gun manufacturers in the state has ballooned from 232 when Scott took office in 2011 to 764 today, according to statistics from the Bureau of Alcohol, Tobacco and Firearms — a slightly higher rate than the one at which it has increased nationwide. In 2011, Scott personally announced that he had promised gunmaker Colt a tax break deal of its own, this one worth $1.6m, to relocate 63 jobs to Kissimmee, Fla. And in 2015, Scott’s office touted job growth at another Florida company, Azimuth Technologies, which makes parts for AR-15s, as evidence that Florida’s elimination of taxes on manufacturing equipment had brought work to the state.

Scott’s support for the gun industry has come under scrutiny in the wake of the deadly massacre, for which Nikolas Cruz used a version of an AR-15 rifle. In response to widespread outrage over the shooting, Scott, who is expected to challenge Sen. Bill Nelson (D-FL) this fall, has proposed new gun safety measures, including raising the age limit for buying an assault rifle to 21 and making it harder for mentally ill people to get weapons.

At a CNN town hall last Wednesday, Nelson sought to make hay out of the Kalashnikov USA tax deal.

“Did you know that the state of Florida, the governor’s office, gave financial incentives for them to come into the state and manufacture?” Nelson asked.

But Kalashnikov USA’s efforts to find a way around the U.S. sanctions on Russia raise further questions about its presence in Florida.

The Obama administration’s 2014 sanctions, imposed in response to Russia’s annexation of Crimea, created a problem for a Pennsylvania-based company called RWC. Since 2012, RWC  — it stood for Russians Weapons Company — had been the exclusive importer and distributor of Kalashnikov guns. Now, it was forbidden from doing business with Moscow-based Kalashnikov Concern, which has been described as its parent company. 

As TPM has reported, the National Rifle Association raised concerns at the time about the ban on Kalashnikov Concern doing business in the U.S., warning that the Obama administration might be “using a geopolitical crisis as a convenient excuse to advance the president’s domestic anti-gun agenda.”

Designed in the 1940s by a Red Army engineer, the AK-47’s low cost and reliability have made it and its variants the world’s most ubiquitous weapon. While many companies, including American manufacturers, make their own versions of the weapon, the original is coveted by collectors.

At the January 2015 SHOT show, a Las Vegas gun-industry conference, RWC announced a work-around in response to the sanctions: It told CNN Money’s Aaron Smith that it would cut ties with Kalashnikov Concern and start making AK-47s in the U.S, rebranding itself as Kalashnikov USA. The plan was legal, RWC said, as long as the company had no contact with Kalashnikov Concern.

“We are not permitted to pick up the phone and to talk to them,” RWC’s then-CEO Thomas McCrossin told CNN. “We were forced to stop doing business with them because of the sanctions.”

Erich Ferrari, a Washington D. C. attorney who specializes in sanctions law, said if Kalashnikov USA truly didn’t communicate with Kalashnikov Concern in producing its guns, that “may obviate the sanctions concern.” But Ferrari said the two companies would need to have had a pre-existing deal in place that covered major changes in the relationship, like converting from an importer to a manufacturer with no discussion of compensation and use of the storied Kalashnikov brand.

Yelena Kalashnikov, the daughter of the rifle designer Mikhail Kalashnikov, said in response to RWC’s 2015 announcement that she was “bewildered,” by the plan, suggesting they were “us[ing] what doesn’t belong to them.” But the company itself said it had no objection.

In any event, in June 2015, Kalashnikov USA told CNN Money’s Smith that its American-made AK-47s were now available for purchase, though it wouldn’t say where its factory was located. The company used the slogan: “Russian heritage, American innovation.”

And four months later, Scott’s DEO inked a deal with Kalashnikov USA, in which it promised the firm a tax refund deal worth $162,000 if it relocated from RWC’s Pennsylvania headquarters to Broward County and created at least 54 jobs. That short-lived deal was first reported last week by the Florida Bulldog, an independent investigative news site.

Scott’s office didn’t respond to multiple requests for comment on the Kalashnikov USA deal. But Tiffany Vause, a spokeswoman for Florida’s Department of Economic Opportunity, told TPM that the tax deal was terminated when RWC failed to provide the necessary paperwork.

“Our due diligence was conducted on the RWC Group, LLC which is an American company,” Vause said. “The contract that all companies must sign specifically states that they must comply with all federal and state laws. Additionally, the City of Pompano Beach and Broward County adopted resolutions and committed financial support for this project.”

Kalashnikov USA appears to have decided to move to Florida anyway. At the January 2016 SHOT show, it told CNN Money’s Smith and another CNN Money reporter that it was readying its Florida factory. The guns would be available “soon,” CNN Money reported.

A year later, the company returned to the SHOT show, where CEO Brian Skinner promised Smith that the gun was coming the following month. 

But according to a local report this week on the protest, the opening of the Pompano Beach facility is still be held up while the company negotiates with the city.

In calls to three authorized dealers listed on Kalashnikov USA’s web page, TPM could not find a dealer who had sold one. On the company’s Instagram page, fed-up gun enthusiasts posted annoyed comments under a picture of the rifle from last month.

“Sooo is it finally going into production?” wrote one.

“Where are your AK-47s!?” asked another. 

Kalashnikov USA didn’t respond to repeated requests from TPM to comment. Evrold Henry, who signed the company’s application for the Florida tax abatements, declined to say whether the company had made any AK-47s or had the rights to do so, then hung up. No one at the company answered emails. One salesman referred TPM to Anastasia Bokareva, who he described as a business manager for the company. Bokareva did not respond to voicemails or email.

A clerk at the Pompano Beach Office of Business and Tax Receipt said the Kalashnikov USA facility has licenses for firearms sale, assembly, import-export, and manufacture. The clerk said she did not know whether the facility actually manufactured guns or simply converted them in accordance with import laws.

“We go by whatever they put on the application,” she said.

Scott’s recent announcement of his support for several gun control measures was a shift in course. Until now, Scott has lined up staunchly behind the NRA, which gives him an A+ rating. He has championed the state’s “stand your ground” law, hobbled efforts to improve background checks, and reduced the cost of a concealed carry license. Scott also signed a law preventing doctors from asking their patients if they had access to a weapon.

“Governor Scott has stood strong to protect your right of self-defense,” NRA mailers sent to voters during Scott’s 2014 re-election campaign said. “This election is our chance to make sure it stays that way.”

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