Legal Claims Get Costly for Maker of Cheap Handguns

Jim Waldorf only made it to 11th grade, but there is no disputing his success.

He is chief executive of Lorcin Engineering Co., which, despite its name, is a leading maker of the cheap handguns known as Saturday night specials. He has made up to $900,000 per year and has a multimillion-dollar net worth.

He has also written a book, “Landing on Your Feet,” that is an evangelical appeal to victims of corporate downsizing to pursue the entrepreneurial path. Extolling hard work and the can-do spirit, it includes such chapters as “Thank God I Lost My Job” and “Isn’t It Great Being Here at the Bottom.”

Lately, however, it is the enterprising Waldorf and his beleaguered Riverside County firm that are struggling to stay on their feet.

A contentious bankruptcy, triggered by a flood of product liability claims, has opened privately held Lorcin to public scrutiny for the first time. And the prosecution of a major gun theft ring also has put the once-obscure firm in the spotlight.

Moreover, the recent heated legislative debate over a proposed ban on the manufacture and sale of Saturday night specials in California has focused attention on the societal role of Lorcin and other Southern California producers of cheap handguns, known collectively as the “Ring of Fire.” At issue are warring images of the gun makers as providers of affordable protection for a crime-weary public or as outfitters of gangsters and crooks.

In Waldorf’s view, Lorcin caters to law-abiding folks of limited means. As he said in a television interview, “We truly are the world’s most affordable handguns and we consider ourself, actually, the blue-collar gun of America.”

*

Yet for four years in a row, Lorcin’s top seller, the L380 pistol, has been the gun most often traced at crime scenes, according to data from the U.S. Bureau of Alcohol, Tobacco and Firearms. And the ATF is investigating Lorcin after the convictions of four men for stealing guns from the firm’s Mira Loma plant and selling them from the trunks of their cars, court records and interviews show.

Adding to the embarrassment, the episode was the subject of a scathing documentary last June on public television’s “Frontline” program.

The bankruptcy case comes in the wake of at least 35 wrongful-death or injury claims involving people killed or wounded when their Lorcin pistols allegedly accidentally discharged.

Among the cases: a Kentucky suit involving a man whose Lorcin allegedly went off and fatally shot him through the stomach; that of a Michigan man killed when his Lorcin allegedly slipped from its holster and hit the pavement; the claim of a Louisiana man that he was shot in the leg because of a defective safety on his Lorcin pistol.

Staggered by snowballing claims, Lorcin last year filed its petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code. The case is winding its way through federal bankruptcy court in Riverside County.

So far, creditors have forced Waldorf and his partner, Errol Brown, to temporarily scale back their salaries to about $250,000 and have also questioned the solvency of Lorcin’s liability insurance carrier--a secretive Costa Rican concern.

The trim, bespectacled Waldorf, 48, in past interviews called gun control advocates “wackos” and bans on Saturday night specials “more discriminatory than slavery.” More discreet these days, he declined to be interviewed by The Times.

Nonetheless, Lorcin’s travails have opened a window on a big player in the gun control debate: a firm that has attained notoriety and success out of proportion to its size.

Situated in a business park off the Pomona Freeway an hour east of Los Angeles, Lorcin’s plant is beyond unobtrusive. Nowhere on the lawn, the building or the front door does the firm’s name even appear.

In its best year, sales hit $14.7 million--much less than such famed arms makers as Colt and Smith & Wesson.

Yet with its line of pocket-sized pistols priced at $79 to $150, Lorcin is a huge presence at the low end of the market. In 1993, the year after the Los Angeles riots, it sold 341,000 guns.

Waldorf founded the company with Brown in 1988, naming it for his daughters, Lori and Cindy. By then, the production of cheap handguns already was a regional--and family--affair.

*

The patriarch, machine shop operator George Jennings, founded Raven Arms in 1970. Inspired by his success, a host of Jennings’ family members and friends, including Waldorf, jumped in, opening plants in outlying areas of Los Angeles.

They were prime beneficiaries of the crackdown on cheap, foreign-made handguns that followed the assassination of Robert F. Kennedy. In the Gun Control Act of 1968, Congress set safety and concealment standards for imported handguns but exempted domestically produced weapons.

The result: a protected market for the firms arrayed around Los Angeles--which came to be known as the “Ring of Fire” companies after the chain of volcanoes that ring the Pacific.

Jennings’ son Bruce was the first to strike out on his own, founding Jennings Firearms in 1978. Later, Bruce Jennings started Bryco Arms, named for his son Bryan. A third firm, Davis Arms, was established by George Jennings’ son-in-law, Jim Davis, while a Jennings nephew started Sundance Industries. Waldorf, no blood relation of the clan, grew up in the San Gabriel Valley and had known Bruce Jennings in high school.

“Ring of Fire” guns annually rank high among firearms most often traced at crime scenes. The companies say this reflects their high sales volume. But critics point out that the quantity of cheap guns linked to crimes is out of proportion to their sales.

In a 1994 report, Dr. Garen Wintemute, a physician and head of the Violence Prevention Research Program in Davis, Calif., matched two years of ATF tracing data with production figures for Ring of Fire and “Gun Valley” manufacturers: the long-established concerns along the Connecticut River such as Colt and Smith & Wesson.

Wintemute found that the handguns produced in Southern California were 3.4 times more likely than “Gun Valley” arms to be traced. “They truly are weapons of choice for criminal use,” Wintemute said.

*

For Waldorf, the appeal of the gun business was simple. “I have always enjoyed firearms,” he said in a deposition in the bankruptcy case. “It looked like a good market and . . . an opportunity to make a lot of money.”

His money-making skills were already well-established. Previously, he had started and sold a journal that advertised heavy equipment, and took a fee for each piece sold. During the 1980s he also reaped huge commissions as a machinery manufacturer’s rep.

“It might be worth noting that during that period of time . . . I was the No. 1 machinery salesman in the world as far as volume of equipment,” he said.

Waldorf and Brown each put up $110,000 to start Lorcin, and soon turned up the heat on their rivals.

“We took a very aggressive position in marketing,” Waldorf said in his deposition. Other firms “were order-takers. We were salesmen. That’s what it boils down to.”

To boost sales to women, and to men buying guns for girlfriends and wives, Lorcin offered its guns with pink grips. It ran ads showing three daintier models with the heading: “3 Little Ladies That Get The Job Done.” Lorcin astutely won new accounts by offering to cover firearms distributors and retailers under its insurance policy. “Wholesalers like to be indemnified with the product liability,” Waldorf said in his deposition. “They never had product liability insurance” before.

In reality, Lorcin’s coverage--until recently limited to $1 million per year--was so modest that the benefit to distributors could prove illusory.

For example, one bankruptcy creditor is a Texas wholesaler who sought to be indemnified in a Lorcin wrongful-death case, only to be refused on grounds that the $1-million policy for that year was exhausted. (The distributor has since reached a settlement with Lorcin).

*

“Have you ever heard of a company with a $1-million aggregate for a product that goes around shooting people?” complained Elisa Barnes, a New York attorney who has sued gun makers, including Lorcin, on behalf of a group of victims of gun violence.

Even so, Lorcin flourished, providing princely salaries for Waldorf and Brown. The two made a combined $1.85 million in 1994--or a whopping 23% of that year’s sales, bankruptcy records show.

In October 1996, when the bankruptcy petition was filed, Waldorf and Brown were both drawing $15,000 per week--enough to cover some glamorous perks. Waldorf, for example, who has homes in Reno and on the pricey North Shore of Lake Tahoe, also boasts of owning the lowest-mileage DeLorean automobile in the world.

His book is a 189-page celebration of self-made success. “Why in the world would you want to be just like the masses of wage earners who are mediocre,” he exhorts readers, “when you have the opportunity to be spectacular?”

Among his ‘dos’ and ‘don’ts’: “Avoid association with negative people . . . . ‘Can’t’ should not be in your vocabulary.”

Elsewhere, he offers a provocative example of willpower paying off, recalling the time as a child he saw dogs having sex through a chain-link fence: “What determination! It is a perfect example of the motivational thought process through to the accomplishment of the goal.”

Waldorf calls on start-up businesses to rely on a “mastermind alliance” of informal advisors. Waldorf’s own success in the firearms business, he says, proves the value “of the mastermind alliance coupled with limitless thinking.”

Lately, however, only Lorcin’s problems seem limitless.

In December 1994, federal authorities busted an illegal firearms ring, arresting four men--two of them Lorcin employees--who had been stealing and selling Lorcin guns, including to undercover agents. All four pleaded guilty and were sentenced to federal prison terms ranging from two to five years.

One of those convicted, Lorcin worker Jeremy Mendoza, told an ATF agent that he had been stealing guns for some time merely by showing up for work before supervisors got there.

“Mendoza told me that he could get the guns any time from Lorcin because ‘they were so stupid,’ ” said ATF Special Agent Daryl R. McCrary in an affidavit filed in court.

How many guns were stolen and funneled to criminals remain something of a mystery. An ATF document, citing a Lorcin report in February 1995, said about 5,700 guns were stolen altogether. But law enforcement officials, speaking on condition of anonymity, said they believe the number is several thousand higher.

Another official said authorities can’t be sure how many guns were taken “because their [Lorcin’s] record-keeping was so bad.”

Dennis Henigan, legal director of the Center to Prevent Handgun Violence in Washington, said Lorcin had a “special responsibility to the public to guard against theft.”

The firm “makes handguns, not vacuum cleaners,” Henigan said, adding that stolen guns are usually sold to criminals and “used to harm innocent people.”

Waldorf on “Frontline” discussed the thefts with resignation. “I think that if you take a thief that’s intent on stealing something . . . they’re going to steal it,” he said.

Company lawyer Robert Pitts told The Times that Lorcin has since beefed up security and record-keeping, but did not give specifics.

Federal officials, speaking on condition of anonymity, said they are investigating whether Lorcin violated rules requiring the reporting of gun thefts. Even if no charges are filed, sources said the ATF could take action against Lorcin’s gun manufacturing license.

*

The firm’s bankruptcy filing was triggered by a different problem: liability claims.

Of about 35 claims filed since 1994, Lorcin has settled two dozen through payments ranging from a few thousand dollars to $495,000. But more than $11 million in claims are still pending.

Those claiming they were injured by defective guns appear to receive some support from Gun Tests, a magazine that serves as a firearms Consumer Reports.

In a critique last year of Lorcin’s L-22 pistol, it wrote: “We wouldn’t pay any amount of money for a gun that self-destructs in a couple of hundred rounds. Stay away from this one.”

Of the Lorcin L-25, Gun Tests said its “best attribute was that it didn’t bite the shooter’s hand.”

But Waldorf disputed these opinions in his bankruptcy deposition, saying Lorcin’s guns “are as reliable as any gun in the world.” And he angrily denounced the damage claims as a sham.

“Some of this stuff is ludicrous,” he said. “Nobody ever said they pulled the trigger. Nobody. The gun always ‘goes off.’ ”

Rival manufacturers who didn’t buy insurance maybe were right, Waldorf mused.

“Not carrying product liability insurance . . . puts the trial lawyers right in the dirt,” he said. “When they [gun makers] say they don’t have insurance policies, they [the lawyers] figure, ‘Well, shoot, we can’t screw them out of any money.’ ”

Nonetheless, Lorcin’s reorganization plan calls for settling remaining claims with cash from future sales and the firm’s current $3-million-a-year insurance policy.

*

Creditors, however, say they are not satisfied the insurer will perform.

The insurer is Leeds & London Merchants Insurance--not to be confused with Lloyds of London. Leeds was based in the Turks and Caicos Islands, then incorporated in Costa Rica in 1994. Records filed in the bankruptcy case show it was capitalized at 20,000 Costa Rican colones--about $83.

Leeds officials did not return phone calls.

While stating in bankruptcy papers that Leeds has always defended or paid past claims, Lorcin acknowledged being uncertain “whether the carrier . . . is of sufficient solvency to satisfy the multitude of pending litigation.”

The litigation could grow, moreover. At a recent hearing in the bankruptcy case, lawyers for a handgun control group said they expect to help victims of crimes committed with stolen Lorcin guns file negligence claims.

*

Yet for Lorcin, not all the news is bad. The firm recently dodged a bullet when Gov. Pete Wilson vetoed legislation to ban handguns that do not meet safety standards on foreign-made guns. The measure could have forced Lorcin and other “Ring of Fire” producers into costly retooling and price rises.

Moreover, Waldorf, ever the super-salesman, is tapping a new market where urban crime is on the rise: South Africa. Lorcin’s sales there have climbed to about 25,000 guns a year and are expected to rise.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

SCENE OF THE CRIME

Among the nation’s top gun makers, Lorin Engineering’s L380 pistol was traced to more crime scenes last year than any other gun, according to the Bureau of Alcohol, Tobacco and Firearms. “Traced” guns are those usually used in crimes or are otherwise linked to crime scenes.

*--*

TYPE OF NUMBER OF MANUFACTURER FIREARM MODEL TRACES Lorcin Engineering++ Pistol L380 5,436 Davis Industries++ Pistol P380 3,615 Raven Arms++ Pistol MP25 3,013 Smith & Wesson Revolver .38 2,899 Ruger Revolver P89 1,916 Fabrique Nationale Pistol .32 1,900 Lorcin Engineering++ Pistol L25 1,745 North China Industries Rifle SKS 1,690 Mossberg & Sons Shotgun 500 1,650 Hi-Point Firearms Pistol 9C 1,639

*--*

++ One of the “Ring of Fire” companies, as Southern California producers of cheap handguns are known.

Footnote: All numbers are for Fiscal 1997