To: Rick Smith, CEO, TaserInternational (NASDAQ:TASR)

Dear Rick,

Like a good number of others did, I saw yesterday morning's news that the Securities and Exchange Commission has expanded its informal probe into a full-scale investigation. Based on investor reaction -- your stock was down more than 13% by the close -- the assumption is that you're guilty, guilty, guilty.

I'm inclined to agree. Your press release leaves me no choice. Allow me to be specific. The announcement says that the probe was "expanded to now include examining the possible unauthorized acquisition of material non-public information by individuals outside of the Company in an effort to manipulate the company's stock price." So let me get this straight: The SEC is seeking subpoena power to investigate you because someone is manipulating your stock? Please, tell us more.

But you didn't. Instead, you repeated what informed investors have known for months now: That Taser -- like Overstock (NASDAQ:OSTK) and ShandaInteractive (NASDAQ:SNDA) -- has been a longtime member of the Regulation SHO threshold list. And you said there may be a large naked short position in your stock. OK, but ... big deal. We've had more than enough circumstantial evidence to support this theory for months now. Foolish colleague Karl Thiel named your company as a suspected victim of naked shorting back in March.

Rick, to me, highlighting naked shorting in yesterday's very serious announcement appears to be an attempt to lure readers away from harsh realities. Principally: that, as many have speculated, public statements about the safety of your products may have been more hype than truth, and that Taser may have improperly booked a $1.5 million deal at the end of last year. It's at least curious that, according to your own 10-K (see page 15), the event has been cited in securities class action lawsuits still pending.

So, Rick, tell us:

1. What was Taser's relationship to companies that performed safety tests related to your products? How many did you pay for? How much?

2. What, specifically, was this "unauthorized acquisition of material non-public information," and who did it? Please don't blame this on an undisclosed Sith Lord.

3. The deal the SEC is referring to is described in this press release, issued last Dec. 20. It says that Davidson's was going to buy 1,000 Taser X26 guns for $1.5 million and that the order would be shipped during Q4. The quarter ended 11 days later. Were all 1,000 guns shipped by then? If not, when did Davidson's ultimately take delivery?

These aren't easy questions. But they deserve answers. The ball, as they say, is in your court.

Foolish best wishes,


Taser joins Shanda Interactive and Overstock as formal recommendations of Motley Fool Rule Breakers . You'd think that would have us down. But in spite of the stun gun maker's poor performance, the portfolio of selections is beating the market by nearly 8 percentage points. Get in on the action by taking a risk-free trial today.

Fool contributor Tim Beyers would still rather own a Taser than a handgun. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has an ironclad disclosure policy.