Fake News: Reporters got Wells Fargo Gunwerks Lawsuit Story Wrong
Aaron Davidson, founder and CEO of the high-end custom rifle manufacturing company Gunwerks, said a report on a lawsuit filed by banking giant Wells Fargo against his company on May 20 contained wrong information that spurred erroneous reports about the company’s financial health.
“Claims in court aren’t true until you prove them,” Davidson said in an exclusive interview with International Sportsman on May 22. “There are quite a few things in that allegation that aren’t true.”
Casper, Wyoming-based news talk radio station KTWO first reported on the lawsuit when it was filed in the U.S. District Court in the same city. The radio station based its report solely on information that Wells Fargo included in the official filing, which can be viewed here.
In their coverage of the lawsuit, KTWO spells out claims Wells Fargo makes against Gunwerks, including $2.78 million in unpaid loans and interest, as well as another $1 million in unpaid sales tax and money owed to vendors. Wells Fargo also requested that Gunwerks turn over assets, including equipment, inventory, and intellectual property, which Gunwerks used as collateral against an operating loan from Wells Fargo.
Davidson said KTWO ran with the one-sided story, rather than waiting for Gunwerks representatives to return phone calls from the reporter that were made at 5 p.m. the day the article was posted. The article spurred widespread coverage of the one-sided story within the gun industry and a few other mainstream news outlets.
Now, Davidson wants to clear the air. He said that the issue stemmed from the bank’s misunderstanding of what a firearms manufacturing company actually produces. When Gunwerks first started doing business with Wells Fargo, he said the bank offered an operating line of credit that was based on the amount of inventory the company had on hand. When the local branch closed and Gunwerks began working with a bigger corporate team based in Denver, Colo., Davidson said Wells Fargo changed how it defined “inventory,” For example, a rifle action was no longer considered a finished good, so it changed the ratio of how much inventory would be counted toward Gunwerks’ line of credit.
“According to their new calculations, we had over-advanced our credit line above what our inventory was,” he said. “They changed their mind midstream.”
Davidsons said Gunwerks attempted to resolve the situation over the next seven months, but without reaching an agreement with the bank. Wells Fargo called the loan on May 18 and filed the lawsuit on May 20.
“They gave us a day and a half to pay the loan,” he said.
It turns out, Gunwerks had the cash on hand to pay the loan, thanks to increasingly strong sales.
“We’ve sold more in the first five months of this year than we ever have in the history of our company. We’ve nearly doubled our sales year-over-year from last year,” he said. “We are crushing it. Our team is absolutely delivering the goods.”
Davidson said Gunwerks reached a settlement with Wells Fargo, and the bank is expected to file a dismissal of the lawsuit on May 22.
“We are paying the line of credit to take out the debt and resolve it. The fight’s over, but the PR damage is done,” he said.
Davidson said the reporters got two points wrong in their coverage of the lawsuit: one, that Gunwerks was arrears on its sales tax, and two, that vendors had gone unpaid.
“They were total inaccuracies,” he said. “I felt like it was one of the most damaging things in those reports because A. it’s not true and B. it indicates some kind of financial distress.”
Davidson said the company is, and has always been, current on sales tax and uses the same system that Amazon and other companies that handle online sales use to manage collecting and filing sales taxes. He also said that all vendors are paid up according to the terms of their agreements, and he praised his partners’ ability to see through the noise.
“The story that circulated painted us in an absolute bad light and would have cause vast concern for any kind of vender that would offer terms in credit,” Davidson said. “I had all of the big guys, like Leupold and Swarovski, call up and say, ‘Hey man, what can I do to help?’ It really makes a big difference when you have good partners who can work with you and don’t believe the fake news that’s out there.”
So what does the future look like for Gunwerks now that the lawsuit is behind them? If current sales trends are an indicator, it’s bright:
“I like to put a little silver lining on this,” Davidson said. “I’ve got eight figures of assets and hardly any debt now. Everything looks pretty good to me.”
Gunwerks’ most recent Skunkwerks rifle the BlastR sold all 150 limited edition rifles in less than nine days. Most of the rifles were sold to previous Gunwerks customers before the rifle was officially announced. As for future products, Gunwerks has ten new products scheduled for 2020 launch, including new rifles, laser range finders, and scopes.
The future looks bright for Gunwerks; in spite of the events that transpired, Davidson believes Wells Fargo acted in good faith. “I think we could have found a resolution that was better and more-professionally handled than what it was, but it’s done now,” Davidson said.
Jeremy Mallette is co-founder of International Sportsman, and an avid hunter and outdoorsman. His father taught him to shoot at age six, and he received his first firearm at age eight — a 1942 Colt Commando .38 special revolver. Jeremy enjoys collecting unique firearms, and shooting them.