The private-equity firm that recently bought one of the largest safety-net health systems in New England is also the owner of the nation's largest gun-manufacturing corporation—but that's about to change, following last week's horrific schoolhouse massacre in Connecticut.
Cerberus Capital Management acquired New England's largest Catholic health system for nearly $900 million, consolidating two more hospitals into the system and renaming it Steward Health Care System. The widely noticed transaction was one of two urban-hospital "megadeals" involving investor-owned companies in 2010.
Meanwhile, Cerberus' Freedom Group has become the nation's largest manufacturer and wholesaler of guns and ammunition by acquiring companies like Remington and Dakota Arms. In 2006, Cerberus acquired Bushmaster of Madison, N.C., and merged it into Freedom Group.
Bushmaster is the maker of the AR-15 semiautomatic rifle that fires .223-caliber bullets and was used by Adam Lanza during the Newtown, Conn., shooting spree that left 27 people dead, most of them school children aged 6. Lanza also used two handguns in the Dec. 14 attack at Sandy Hook Elementary School.
Spokespeople for Cerberus and Steward would not comment on whether there was any conflict in philosophy by having the same private-equity firm own a large arms-maker and eight formerly charitable urban hospitals.
However, Cerberus announced in a statement
that the firm was making plans to sell off Freedom Group and return the proceeds to investors. “It is apparent that the Sandy Hook tragedy was a watershed event that has raised the national debate on gun control to an unprecedented level,” the statement said.
“As a firm, we are investors, not statesmen or policymakers. Our role is to make investments on behalf of our clients who are comprised of the pension plans of firemen, teachers, policemen and other municipal workers and unions, endowments, and other institutions and individuals. It is not our role to take positions, or attempt to shape or influence the gun control policy debate. That is the job of our federal and state legislators. There are, however, actions that we as a firm can take.”
The statement came on the same day as an announcement by the nation's largest educator-only pension fund, the California State Teachers' Retirement System, which said it was reviewing its investments in Cerberus and Freedom Group in light of the shootings. Pension fund officials
said the massacre prompted its managers “to determine what we can do differently to help ensure the unthinkable never happens again,” including questioning investments in gunmakers. CalSTRS said it owns 2.4% of Freedom Group through its Cerberus investments, through a portion of its $154.8 billion portfolio. Several healthcare groups have called for a strengthening of gun-control laws
, including the American Nurses Association and the American College of Emergency Physicians. Meanwhile, American Medical Association President Dr. Jeremy Lazarus reiterated his group's opposition to laws, like the one on the books in Florida, that prohibit doctors from asking families about guns in the home during medical appointments.