Romanian weapons modified in the U.S. become scourge of Mexican drug war

Introduction

Editor’s note: Since the tragic carnage in Newtown, Conn., much of the talk in Washington has focused on reinstating the domestic assault weapons ban that existed from 1994 to 2004. But as the Center for Public Integrity reported last year, powerful imported semiautomatic weapons have also been a problem, despite a long-standing law designed to keep them from U.S. shores —weapons like the Romanian made WASR-10, a fearsome version of the iconic AK-47.

Foreign-made guns without a “sporting” purpose, like hunting or target shooting, are barred from import, but clever importers have found a completely legal way around the law. Foreign guns like the WASR-10 are shipped here stripped of their military features so they can be treated as “sporting” guns. The weapons are then modified with a few U.S. parts, declared to be American-made and shipped through wholesalers to local gun dealers for sale with high-capacity magazines, bayonets and the other features of a bargain assault weapon.The WASR-10 has become a favorite of the Mexican drug cartels and in recent years hundreds of them have been traced to crimes in Mexico.

Back in 2009, more than 50 mostly-Democratic members of Congress pleaded with the Obama Administration to alter its interpretation of the “sporting purposes” law to close what they saw as a loophole—something they claimed the President could do through executive order. But the Justice Department responded that the guns in question—like the WASR-10— “are lawfully entering the country.” On Friday, the leader of that Congressional effort, Rep. Eliot Engel (D-N.Y.), sent a new letter to President Obama, asking him once again to more tightly enforce the “sporting purposes” test. Engel complained that over the past decade, the Bureau of Alcohol, Tobacco, Firearms and Explosives “has almost completely abrogated the ban on imported assault weapons.”

On Dec. 17, Sen. Dianne Feinstein (D-Calif.) announced that on the first day of the new Congress, she would introduce legislation halting the sale, transfer, importation and manufacture of assault weapons. The draft bill would, among other things, target 100 specifically named guns. One of them, said an aide to the senator, is the WASR-10.

Read our original story, reported in collaboration with the Investigative Reporting Workshop at the American University School of Communication, InSight, FRONTLINE and the Romanian Centre for Investigative Journalism:

Camron Scott Galloway, 21, walked into X Caliber Guns in Phoenix, Ariz., on Jan. 30, 2008, and filled out forms for the purchase of six AK-47 rifles.

Reliable and powerful, and a bargain at about $500 each, the Romanian-made gun, a semiautomatic version of the iconic Kalashnikov assault weapon, had become popular with the drug cartels in Mexico.

Galloway, who eventually pleaded guilty to a forgery charge and became a cooperating prosecution witness in a broader case, testified that he agreed to act as the purchaser of the Romanian AKs on behalf of a co-worker’s brother, who was trafficking weapons south of the border. Just for doing the paperwork, he earned $100 per rifle.

Four months later, one of the same guns that Galloway signed for surfaced in a safe house used by the Beltrán Leyva drug cartel in northwest Mexico. The discovery followed a deadly shootout between federal agents and drug dealers in Culiacán, the capital of the Pacific state of Sinaloa. Eight police officers were killed.

In the grim accounting of death and violence from Mexico’s drug wars, the episode might be written off as a footnote. After all, almost 35,000 people have been killed in violence in the four years since President Felipe Calderón began deploying troops and federal police throughout Mexico to ratchet up the fight against the cartels.

Mexican gun laws, among the most prohibitive in the world, continue to drive drug dealers and their agents to the United States and its more permissive laws.

But the Romanian AK stands out, both for the popularity it has achieved with the cartels and for the route it has traveled from Romania through the United States to Mexico — a journey made legally even though for years it has actually been illegal to import high-powered, semiautomatic weapons that do not have a “sporting purpose” into the United States.

U.S. gun laws have been interpreted by federal regulators in a way that affords importers a way around the ban. Foreign guns like the Romanian AKs are shipped into the United States stripped of their military features so they can be treated as sporting guns.

The weapons are then modified by an importer with a few U.S.-made parts, declared to be American-made and shipped through wholesalers to local gun dealers for sale with high-capacity magazines, bayonets and the other trimmings of a bargain assault weapon.

The Romanian AKs — sold by Florida-based Century International Arms as the WASR-10 — have become the most common gun purchased in the United States since 2006 to be traced to crimes in Mexico, according to a review by the Center for Public Integrity, InSight, the Investigative Reporting Workshop at the American University School of Communication, PBS’ FRONTLINE and the Romanian Centre for Investigative Journalism.

Reports from the Justice Department’s Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) show that over the last four years, more than 500 of the WASR-10s imported into the United States by Century were recovered in Mexico after being purchased in the United States. That is the most of any rifle or pistol purchased, recovered and traced during that four-year span, accounting for more than 17% of the total guns recovered, the reports show. While Century does sell an unmodified version of the WASR-10 in the U.S., most of its guns showing up in the smuggling cases have been upgraded to include high-capacity magazines and other military features, according to law enforcement officials, investigative documents and court records.

Other popular models identified in the ATF reports include several American-made versions of the AR-15 assault weapon, and two guns made by Fabrique Nationale Herstal of Belgium, including a sleek, compact rifle called the PS-90.

The relatively modest price of the WASR-10, and the large premium it fetches in Mexico, where it is valued for its durability and firepower, has contributed to demand for the gun. Sold for as little as $400 in gun shops on the U.S. side of the border, the rifle can fetch upwards of $2,000 to $3,000 in Mexico, officials said.

A matter of legal interpretation

The Obama administration says the process is perfectly legal.

“There is no evidence that rifles entering the country fail to match the description of the weapons authorized for importation on the import permits issued by ATF,” Justice Department spokeswoman Tracy Schmaler said. “To the extent that semiautomatic rifles in non-sporting configuration are going across the Southwest border, they are likely being reconfigured following importation.”

To law enforcement on the front lines of the drug wars, that interpretation of U.S. gun laws is the source of the problem.

“They let in just about anything,” said Gerald Nunziato, a former ATF official, who is now an independent consultant.

Added Arizona’s former Democratic Attorney General Terry Goddard, “We’re declaring ourselves … to be the allies of the Mexican government and fighting against the cartels. And yet through official inaction, the United States is, in fact, arming the cartels.”

Some members of Congress have been frustrated in their efforts to get the Obama administration to change its position.

A picture of the X Caliber storefront in Phoenix, Ariz. The store was shuttered after authorities arrested owner George Iknadosian for conspiracy, money laundering and fraud, among other alleged crimes. The charges against him were later dismissed. Credit: ATFA group of more than 50 mostly-Democratic members of Congress, led by then-House Foreign Affairs Western Hemisphere subcommittee chairman Eliot Engel, wrote Obama in February 2009 that the ATF’s interpretation of the law and its reaction to the reality of the situation has effectively abrogated the ban on imported non-sporting weapons. A similar letter was written just this week by Sen. Dianne Feinstein (D-Calif.).

The lawmakers claim that Obama could close the existing loopholes using executive powers — and avoid a battle over gun-control legislation with congressional Republicans. But the President, they say, seems unwilling to do so.

“We are contributing to the instability in Mexico, and we are sowing the seeds of potential instability in the United States,” Engel said in an interview. “It doesn’t make sense to me … It is not defensible.”

Gun rights advocates note that the U.S. already has a host of laws that apply to every link in the trafficking chain.

“Strong enforcement of existing U.S. firearm laws, and cooperative enforcement programs with Mexican authorities, are likely to be more productive than added restrictions,” the National Rifle Association says in a statement on its website. The NRA declined comment for this story.

For the time being, the Justice Department appears comfortable with the status quo.

“ATF is committed to vigorous enforcement of the import restrictions on non-sporting firearms, but the restrictions under current law do not amount to a complete ban,” Ronald Weich, the assistant attorney general for legislative affairs, wrote back to Engel in December 2009. “ATF believes that the vast majority of the firearms you cite in your letter are lawfully entering the country …”

The gap between law and regulation

After an epidemic of urban crime and political violence, the Gun Control Act of 1968 banned imports of most guns other than those with a “sporting” purpose, such as hunting or target shooting.

Originally applied to handguns, this “sporting purposes” test was extended to so-called assault weapons, including semi-automatic variants of the AK-47, under the administrations of both George H.W. Bush and Bill Clinton.

When it was enacted as part of the Gun Control Act of 1968, the sporting purposes test was seen as a way to keep the U.S. from becoming a dumping ground for surplus military weapons from around the world.

Federal customs and firearms authorities were empowered to block guns from coming ashore unless they were “generally recognized as particularly suitable for or readily adaptable to sporting purposes.”

Gun owners and manufacturers saw it another way. The NRA has called the language “the single most dangerous and elastic phrase in the federal gun law,” a threat to citizens’ Second Amendment rights, and said just last week that the provision needs to be changed. Importers have viewed the ban as a kind of unfair protectionism for domestic gun makers.

In 1989, the administration of George H.W. Bush first attacked the problem of imports of assault weapons, after five children were killed in a Stockton, Calif., schoolyard by a man wielding an imported Chinese semi-automatic AK variant.

The new rules banned the import of semiautomatic rifles that had what were considered “military” features. The prohibited parts included pistol grips and folding stocks and flash suppressors, and magazines holding more than 10 shots. The defining language and reasoning were reflected in the domestic assault weapon ban enacted in 1994.

The industry complied — and assault weapons still kept pouring in. The Bush era rules left a loophole for importers to bring in rifles whose only military feature was a detachable magazine holding more than 10 shots.

The Clinton administration tightened the import rules further after finding that even some gun clubs and hunters felt the high-capacity magazines — defined as those with more than 10 rounds of ammunition — were not well suited for hunting or competitive target shooting.

It fashioned a regulation that made the large magazine alone a disqualifying feature for semi-automatic imports. The industry sued, but the administration prevailed in federal court in 2002, and the ban remained in effect even after the domestic assault weapon ban expired two years later.

But importers had another card to play. Ironically, that turned out to be a provision of the Crime Control Act of 1990 that was intended to limit abuses of the import ban in cases where rifles were assembled in the U.S. using foreign parts.

A Tucson-based importer of AK-47s from China was able to skirt the ban by tearing apart the weapons and re-assembling them using a U.S.-made receiver, which includes the trigger and firing mechanism. At the same time, there was concern that individual gun owners might be exposed to prosecution for using a few foreign parts in domestic weapons that were functionally similar to the banned imports.

Regulations later developed to implement the crime law laid out some basic ground rules, identifying a list of key parts used in the rifles and limiting the number that could be used. The effect: if you use more than 10 of the foreign-made parts in the assembly of the weapon in the U.S. you are really making a foreign gun and, depending on the parts you are adding, you are breaking the law.

But the opposite was also true — that using 10 or fewer foreign parts in the manufacture of a firearm made it American — at least for purposes of the import ban. The emphasis thus shifted to replacing foreign parts with American parts — the cheaper the better.

Importers had turned the law on its head.

Import business booms

Since the assault weapon ban expired, imports have surged. In 2009, 2.96 million rifles and handguns were imported into the United States, more than double the 1.32 million imported in 2005, Commerce Department and International Trade Commission data show.

Domestic firearms production grew 80% to 4.5 million arms in 2009, compared with 2.5 million in 2005, ATF data show.

Importers like Century have a well-honed process for some of their guns.

They start with slimmed-down “sporting” versions of their foreign rifles that can pass the import test. Then, once the weapons are legally in the United States, a few foreign parts are replaced with American ones.

The alchemy yields a gun that — at least according to regulations enforced by ATF — is American-made. It can then be loaded up with more features such as a high-capacity magazine and bayonet because under the law it is no longer an import.

Mark Barnes, an attorney in Washington who represents Century, said the closely held company had “elected not to comment” for this story.

Romarm SA, the state-owned arms and ammunition firm in Romania that supplies the weapons to Century, said its policies ensure that the arrangement comports with U.S. law.

“Century buys guns destined for the civilian market, guns which are based on the well known military models known by Century’s clients,” the company said in a statement. “The guns are modified in accordance with the severe legislation in the U.S.; these models were approved by the specific institution in the U.S. that monitors all the imports of guns and ammunition.”

Century is not the only importer selling a high-powered rifle from abroad that, as altered, would be barred under the import laws. The PS 90 made by FN Herstal undergoes a similar transformation. A fully automatic version of the rifle was originally designed for NATO as a lightweight option for delivering high-velocity ammo capable of piercing body armor.

In a statement, the U.S. unit of FN Herstal said that it is in full compliance with all ATF regulations, including the one covering imported and domestic parts, known as Section 922(r).

“The PS90 meets ALL BATF 922(r) regulations and is approved by BATF as a sporting firearm,” the company said.

The Century Arms success story

Like many other gun companies, Century is a small business, but one with outsized influence.

Its founder, William Sucher, got his start overhauling and selling old office equipment. He turned to firearms in the early 1960s after a cash-poor customer offered to swap some old carbines for office machines. Sucher turned a quick profit and never looked back.

With his brother-in-law and partner — a garrulous Canadian named Manny Weigensberg — he would scour the warehouses of Europe and Asia for surplus military arms. Sucher told government officials in 1964 that he had bought “hundreds of thousands of rifles” by the pound from the Italian government.

Sucher died in 1976, and Weigensberg in 2004.

Century had operations both in Canada and the United States. It set up a warehouse and manufacturing plant across the Canadian border in Vermont, which it has maintained to this day in the town of Georgia, even after moving its corporate offices to Florida years ago. Its headquarters are currently in Delray Beach. Century has long been considered the largest importer of surplus firearms and accessories in North America.

In the late 1980s and early 1990s, Century was one of the largest importers of SKS rifles from Russia and China, variants of a semi-automatic carbine that was once a staple of the Soviet military before being eclipsed by the AK-47. The guns, which at one point sold for as little as $125, were marketed by some dealers as a way for ordinary citizens to own a semi-automatic weapon.

Perhaps its best-known sale was when Weigensberg procured a shipment of arms for the Nicaraguan contras in the 1980s. He and the company were questioned by the Canadian government after a photo of a rebel with his foot on an empty case of ammo marked “CIA, Montreal, Canada,” turned up in Soldier of Fortune magazine.

Business boomed in the 1990s, after the collapse of the Warsaw Pact sent massive stockpiles of arms and ammunitions onto the market. Mining new sources of supply in Eastern Europe, the company was reportedly buying and selling 50,000 rifles a month, including many home-grown versions of the AK-47 made by the former Soviet satellites.

Today, Century advertises a broad assortment of rifles, including versions of classic guns originally from Poland, Czechoslovakia and Israel. The company also makes what it describes as a “100% American made” AK called the Centurion which, at about $749.95, retails online for almost twice the price of the Romanian rifle.

The Romanian connection

The company’s Romanian supplier is located in the town of Cugir, in a region long famous for its iron resources. Over the years, factories in the area have turned out everything from washing machines and sewing machines to military components.

In the 1980s, Romania was one of the world’s largest arms exporters, supplying weapons to member countries of the Soviet-led Warsaw Pact and to Arab nations. Today, the Fabrica de Arme Cugir is part of the state-owned arms and ammunition firm, Romarm SA, and the conglomerate’s only unit to focus principally on rifles and handguns.

Its primary American customer: Century Arms.

The relationship goes “way back,” even predating the fall of dictator Nicolae Ceauşescu, a former Century manager says.

When the U.S. eased restrictions on imports from Eastern Europe in the mid-1990s, the relationship expanded. Romarm says it signed its first contract with Century in 1997.

A version of the WASR-10. Credit: Teknorat.The weapon that became the WASR-10 was built for the U.S. market with an eye towards the limits U.S. law placed on imports. Romarm says the rifles are produced with a fixed 10-shot magazine to comply with the U.S. import law. “The subsequent modification is the owners’ problem,” Romarm said.

A review in American Rifleman, an NRA publication, said the WASR-10 “represents an exceptional deal to those in the market for a short- to mid-range semi-automatic rifle that is both extremely reliable and highly affordable.”

Rifle imports from Romania to the United States have more than doubled since the domestic assault ban expired in 2004 to 82,312 in 2009, from 37,239 in 2004, Commerce Department and International Trade Commission data show.

Financially, the Romania plant struggles, officials say. It fell into an insolvency proceeding a few years back, and the government weighed offers to have private firms take it over. Century was among several potential investors that expressed interest in such a transaction, a newspaper in Cugir reported in 2005, but the plant for now remains in state hands.

Brisk business for Century

Century grabbed headlines in 2004 after it tried shipping 7,500 Romanian AK-47s on a Turkish flagged ship bound for New York. These firearms — fully automatic machine guns, according to a federal law-enforcement worker — were illegal in the United States. Authorities halted the ship in an Italian port.

It turned out that Century was taking advantage of a customs rule that permitted imports of banned guns into bonded warehouses so long as the guns were destroyed. Century was scrapping the firearms for parts, and had a license, an ATF spokesman said at the time. It is unclear what happened to the parts.

The company also builds a wide variety of weapons aside from the WASR-10. One of them, featured in the September issue of Small Arms Review, is a semi-automatic version of a Soviet machine gun that was introduced at the height of World War II. It comes with two 250-round ammo belts, and is designed to be mounted on a rolling carriage with an armor shield.

Century’s recipe for the WASR-10 is straightforward: Start with a legal imported weapon. Break it down. Apply some Yankee ingenuity.

The American Rifleman article described the process. After arriving in the U.S., the rifles are disassembled, and six U.S.-made parts, including a trigger, hammer, and gas piston, are added. (That trims the number of foreign parts so the gun can be considered American-made, and not subject to the sporting purposes test.) The magazine wells are machined out to accept a larger “double-stack” high-capacity magazine that can hold 30 or more rounds of ammo.

The article goes on to say that the expiration of the domestic “assault-weapons ban” means U.S.-made guns can have features such as threaded muzzles, folding or collapsing stocks and bayonet lugs. But since the import laws continue to restrict those features, Century threads the muzzles and welds on and machines new bayonet lugs after they have entered the United States.

The rifle also comes with a batch of accessories, including two 30-round magazines, and a bayonet, according to the American Rifleman report.

J&G Sales — a top online dealer based in Prescott, Arizona — sells a Romanian WASR-10 with a 30-round magazine for $409.95, with a discount for multiple purchases. On its website the retailer lists almost a dozen iterations of semi-automatic AK-47s — all Century products.

“The WASR-10 proves that Mikhail Kalashnikov came up with such a fantastic design that even a low-cost importer who has to cheaply modify it in order to comply with ridiculous government regulations can’t screw it up,” an online reviewer wrote of the gun last spring.

Wheeling and dealing at the border

Far removed from Century’s import facility, WASR-10s are showing up in border crime cases.

In March of last year, a 48-year-old Mexican was stopped in the southbound lanes of the Anzalduas port of entry in Mission, Texas, allegedly with five Century WASR-10 rifles and 10 high capacity magazines stuffed in the cargo panels and front and rear bumpers of his Chevrolet suburban.

In May, a 20-year-old Wilcox, Ariz., man was stopped walking to Mexico at the Douglas port of entry when officers noticed a bulge in his clothing — a bulge that turned out to be a Romanian AK with a pistol grip and collapsible stock strapped to his body. He also had a 20-round magazine in his sock. He told authorities he was walking to Mexico to close a deal with a man who requested he purchase the rifle for him. He pleaded guilty and his sentencing is scheduled for later this month..

Last week, indictments were unsealed in federal court in Del Rio, Tex., charging three men with attempting to smuggle at least 40 assault weapons from San Antonio to Mexico last summer. The guns included several WASR-10s as well as a Romanian-made assault pistol imported by Century that some gun owners consider a sawed-off version of the WASR-10, court documents show.

Experts say the reasons driving the demand for the WASR-10 are manifold. The gun can be fitted with a folding stock that makes it shorter and more concealable. It can also be easily upgraded. A study by the Woodrow Wilson International Center for Scholars last summer found that many of the rifles recovered in Mexico had been converted to select-fire machine guns.

The economics are also compelling. An AK-47 sold in Mexico fetches three to four times its purchase price along the U.S. Southwest border, or between $1,200 and $1,600, according to the study. In the interior of Mexico, the authors found, the rifles are even more desirable, fetching a $2,000 to $4,000 premium above their purchase price.

The straw buyer problem

The case that ensnared Galloway exposed the problem of trafficking networks disguising their purchases through straw buyers as well as the complications of bringing prosecutions against dealers and buyers allegedly involved in the distribution chain.

George IknadosianGeorge Iknadosian, the dealer who owned X Caliber Guns, sold more than 700 guns to two networks that were trafficking firearms to Mexico, prosecutors alleged.

At least 320 of the guns were the same Romanian AK model that Galloway signed for, investigative reports show.

Dozens of the Romanian guns purchased at X Caliber later surfaced at crime scenes in Mexico, according to ATF reports. In some instances, they helped fuel battles between warring cartel factions that were the most intense in Sinaloa history.

In 2008, Iknadosian was arrested, and X Caliber was shuttered. Along with two alleged traffickers, he was charged with fraud, conspiracy and money laundering, among other crimes. Iknadosian was tried several months later in state court in a case that investigators thought was air-tight.

Iknadosian, who previously owned a gun store in southern California, had grown impatient with strict gun laws there, which include a ban on high-capacity assault weapons. Arizona offered a more gun friendly environment. Soon, federal authorities allege, he became the go-to dealer for two groups smuggling arms to Mexico.

One of the networks, authorities allege, was run by two brothers, Cesar and Hugo Gamez, who appeared to have little trouble finding young adults willing to front large purchases of guns for them.

Hugo worked at a vehicle emissions testing station in Scottsdale, where he enlisted Galloway and other co-workers. Cesar solicited people at big box stores and parties, where he impressed with his red Camaro. Another recruiter was a woman known as “Peekachu.” Most of the so-called straw buyers were in their late teens or early 20s.

Steven Fouts, 19 at the time, told investigators he was approached by Cesar in a Walmart. Cesar promised all he would have to do was sign for some guns at the X Caliber shop and deliver them to him. Fouts completed the paperwork and delivered 16 Century rifles.

Another straw buyer, Grant Dorman, told investigators he was dyslexic and could not read or write, but would bring along a friend, Anthony Uzeta, to help fill out the forms. Dorman and Uzeta, who worked together at the emissions center, purchased 49 Century AK-47s for Cesar and Hugo.

Galloway, who signed for 13 of the guns, was tripped up when he claimed to investigators that he had purchased the firearms for $400 to $500, sold them for $150 and made a profit. When ATF agents pointed out he could not have made a profit selling the firearms for less than he had paid for them, he admitted to being part of the scam.

The routine was followed over and over again. More than 170 of the WASR-10 rifles were processed through the straw buyers between November 2007 and April 2008, ATF records show.

“My job is to sell,” Iknadosian was heard to say, in a secretly recorded conversation with a federal informant in early spring 2008. “When you guys buy them, I run the paperwork. You’re okay; you’re gone. And I get the money, and I don’t give a crap.”

When he was arrested on May 6, according to an ATF report, agents interviewing Iknadosian at his home in Glendale asked whether he knew where all the AK-47s were going.

Iknadosian: “They were going south.”

ATF: “How far south?”

Iknadosian: “Mexico.”

Iknadosian declined to be interviewed. His attorney, Thomas Baker, subsequently argued at trial that the conversation had been mischaracterized, and that Iknadosian was merely guessing that the guns were going to Mexico. He said Iknadosian believed the guns were really going to gun shows for resale.

According to Baker, Iknadosian was “baited” by the ATF informant, and was merely passing along information about other cases he had learned about from ATF agents.

Carnage south of the border

May of 2008 would be registered as the most violent month in Sinaloan history.

As 20 federal police served a warrant to search a security company known as “Culiacán del Pacífico” in the heart of Culiacán, tensions were running high. Just two days earlier, on May 8, 25 gunmen, wielding AK-47s and reportedly a bazooka, descended from five cars and opened fire on a small group of people leaving a shopping center. In a matter of minutes, four people were dead, among them Edgar Guzman Lopez, the son of Joaquin Guzman Loera, the infamous head of the Sinaloa Cartel.

ATF documents say that one of the AK-47s recovered by authorities after the May 26th firefight in Sinaloa was a ROMARM/CUGIR model GP WASR 10/63 7.62 rifle, serial number SBH-4629-85 — the gun purchased by Camron Galloway on January 30 from X Caliber. Credit: ATFThe gunmen were eager to send a message: Hundreds of spent cartridges were found at the scene of the crime. The death of the younger Guzman ended any hope of a truce between the warring factions of the cartel — Guzman’s and that of the Beltrán Leyva brothers.

The atmosphere was such that anyone in uniform had become a target, and as the police served their warrant at the security firm, they came under fire. A short gun battle ensued. Two suspects were injured, including Alfonso Gutierrez Loera, the cousin of Joaquin Guzman Loera, as police overran what was a weapons safe house. Among the recovered cache: one .50 caliber rifle, one grenade launcher, three grenades, eight bullet-proof vests, more than 3,500 rounds of ammunition, one H&K G-3 rifle, and 12 AK-47s.

Six of these AK-47s, including five Romanian-made WASR-10s that were imported by Century, had been purchased at X Caliber in February 2008 through straw buyers working for the Gamez brothers.

But the carnage wasn’t over. On May 26, police received a call close to 11 p.m. that an armed group had fired shots in a residential neighborhood of Culiacan. Upon arrival, the cops were ambushed by suspected members of the Beltrán Leyva Organization wielding AK-47s. A firefight ensued.

Hundreds of backups from the police and army arrived as the battle intensified, covering two city blocks and stretching into the early hours of the morning. When the battle ended seven policemen were dead, another died later, and three were injured. Authorities captured two suspects and killed another. They also seized seven AK-47s, 36 magazines, and 500 rounds of ammunition. Subsequent investigations revealed that one of the AK-47s was ROMARM/CUGIR model GP WASR 10/63 7.62 rifle, serial number SBH-4629-85 — the gun signed for by Galloway on Jan. 30, 2008 from X Caliber.

The case goes awry

Less than a year later, in March 2009, Iknadosian went to trial. Prosecutors from the Arizona attorney general’s office used his conversations with the federal informant and the comments he had made at the time of arrest to argue Iknadosian knew the guns he sold were headed to Mexico.

Among the evidence, Galloway and other straw buyers testified that they had participated in an elaborate ruse, signing for the guns but never paying for them with their own money or intending to take ownership of them. At the same time, the witnesses testified they never heard Iknadosian talk about Mexico.

ATF has long taken the position that since an accurate record of dealers’ firearms sales is required by federal law as an aide in the tracing of crime guns, untrue statements on those records — known as Form 4473 — are sufficient to prosecute dealers.

“It is a no brainer,” Jack Patterson, a retired senior ATF lawyer says of the Iknadosian case. “During my time at ATF, this would seem to be a case begging for federal prosecution,” he said.

But some federal courts have started taking the position that more is required — that the true purchaser must himself be legally prohibited from receiving or possessing firearms, because of a previous criminal conviction, for example, in order for the dealer to be prosecuted.

It turned out that neither Cesar nor Hugo Gamez had criminal records. In theory, they could have legally purchased the weapons. It also turned out that one of the federal courts taking a harder line was the 9th U.S. Circuit Court of Appeals, which covers Arizona.

Federal prosecutors declined to bring the case. But Arizona state prosecutors were eager to step in, and they thought they had found a winning strategy.

At Iknadosian’s trial, they argued that since the case was brought in state court in Arizona the federal court precedent was irrelevant. And, they argued, Iknadosian’s complicity in the straw purchases, as evidenced by the undercover recordings and testimony of the straw buyers, was a crime under the state fraud statutes.

But Maricopa County Superior Judge Robert Gottsfield took the same view as the 9th Circuit, that buying for someone who himself could legally purchase weapons did not constitute fraud. On March 18, 2009, he dismissed the charges. The state considered appealing but determined that a new trial would be barred by the Fifth Amendment’s protection against double jeopardy.

The ATF has notified Iknadosian that it does not intend to renew his license, which is up for renewal. According to Baker, Iknadosian has requested a hearing.

Iknadosian is also fighting to recover his assets, estimated at $2.2 million, which were seized when he was arrested. He has sued the state of Arizona for wrongful and malicious prosecution and for refusing to return the assets.

Meanwhile, the evidence grows of the flow of weapons from U.S. gun shops through straw buyers to Mexican criminals.

In late January, federal authorities charged 34 Arizona residents with buying some 700 guns for the Sinaloa cartel. Some 560 weapons were recovered. Many of them were traced back to buyers after they were confiscated by customs inspectors at the border or following their use in crimes in Mexico. Among the guns purchased were dozens of AK-47-type rifles — including many of the Romanian WASR-10s.

Steven Dudley, William W. Cummings, Sorin Ozon and Adrian Mogos contributed reporting to this article.

This story was funded in part by a grant from the Joyce Foundation.