ATF’s struggle to close down firearms dealers

Introduction

The federal agents who visited Scott Taylor’s rural Pennsylvania gun shop in early January 2010 — to conduct the store’s first inspection in more than three decades — found thousands of violations of firearm sales laws.

Taylor couldn’t properly account for more than 3,000 guns he had bought or sold during the previous three years, according to agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives. These and other violations led ATF to revoke his license to sell guns in November 2011. But that wasn’t the end of the story. Far from it.

Taylor blamed the infractions on his poor health and a computer crash that wiped out his business records. The gun shop, located in the basement of his Biglerville, Pa., home, remains open 14 months later while Taylor appeals the ATF action in federal court. Taylor had no comment. His lawyer, Scott L. Braum, said the violations have been corrected and “no rational person would expect them to reoccur in the future.”

A controversial process

The ATF case against Taylor’s Trading Post — one of a dozen reviewed by the Center for Public Integrity — offers a rare look inside the federal government’s contentious and, some critics say, weak-kneed, procedure for policing gun dealers nationwide.

Some dealers don’t see an ATF inspector for eight years or more. By law, ATF can inspect dealers once a year only and may revoke a license only when it believes the dealer “willfully” violated gun control laws. Some revoked dealers have handed their business off to a relative, or stayed open while their cases lumbered through the courts. Others have converted their inventory to a “personal” collection, which they can then sell without doing background checks of prospective buyers.

As the Obama administration presses for stricter gun controls in response to the killings of 20 schoolchildren in Newtown, Conn., last December, ATF’s oversight of the gun industry — particularly its secretive dealer inspection and revocation process — faces criticism from all quarters.

The process often drags on for years after ATF inspectors discover what they consider serious violations of firearms sales laws. Dealers notified of ATF’s intent to revoke their license are entitled to an informal hearing to contest the action. Senior ATF officials review the recommendations of the hearing officer before making a final agency decision. Dealers can appeal that decision in federal courts, and ATF often doesn’t oppose allowing the dealer to remain open pending the outcome of the court appeal.

Gun control advocates argue that the program has been crippled by inadequate funding and congressional meddling and that as a result ATF can’t assure the public that gun dealers are doing their best to keep weapons out of the wrong hands. They argue that the laws favor dealers over public safety and that ATF has too few inspectors to do its job properly.

One group favoring tighter gun controls meeting at the Johns Hopkins Bloomberg School of Public Health in Baltimore in January recommended that ATF be “required to provide adequate resources” for more inspections and “develop a range of sanctions for gun dealers who violate gun sales or other laws.”

Becca Knox, director of research for the Brady Campaign to Prevent Gun Violence, added in an email that federal law “handcuffs” ATF by “barring it from conducting more than one spot inspection a year for gun dealers, or from requiring store inventories.”

ATF criticized

By contrast, some gun-rights groups, including the National Rifle Association, have blasted ATF oversight as arbitrary and unfair — and are lobbying to make it harder for ATF to drive dealers out of business.

The National Shooting Sports Foundation, the firearms industry’s trade association, also questions whether dealers accused of misdeeds are afforded due process in ATF revocation hearings. But the trade group stresses that it tries to work with ATF to keep dealers on the right side of the law.

“We want retailers to stay in business and assist law enforcement,” said Lawrence Keane, the foundation’s senior vice president and general counsel. He said “the vast majority of licensees take that responsibility seriously.”

ATF spokesman Mike Campbell in Washington defended the inspection process, saying, “I think ATF is doing the best job they possibly can with the resources and priorities that we have set to reduce violent crime.”

Federal law obligates licensed dealers to record all transactions so that guns connected to a crime can be traced. This means that dealers must faithfully log all “acquisitions and dispositions” by manufacturer, model, serial number, caliber and the date they bought and sold the gun and to whom.

Gun dealers, from local pawnshops to big-box retailers such as Walmart, also must submit buyers’ names for background checks to confirm they aren’t felons or other prohibited buyers, like those who have been declared mentally ill by a judge. Records must be kept on file for 20 years and be available for inspection, even if ATF agents seldom drop by to check.

An uneven record

ATF’s track record in making sure dealers follow the law is difficult to assess, because its inspection and disciplinary actions occur almost entirely behind closed doors. ATF had licensed some 65,000 firearms dealers as of fiscal 2011, when it conducted 13,159 “compliance” inspections. ATF doesn’t release detailed inspection findings for each dealer, but says about half were “in full compliance.” The most common violations are failures to record gun transactions properly. The ATF revoked 71 dealers’ licenses in 2011, but what these dealers did to warrant that penalty isn’t disclosed either. The allegations usually surface only after a dealer decides to fight the revocation in federal court, where pleadings are public record.

The dozen revocation cases reviewed by the Center for Public Integrity were all filed in, or decided by, federal courts since January 2010. Most of the dealers who sued to keep operating had been cited repeatedly for violations that could impact public safety.

One Wichita, Kan., dealer admitted selling a gun to a man who answered “yes” when the dealer asked him if he’d ever been convicted of a crime of domestic violence, among other violations. A Tennessee pawnshop had sold guns to 16 people despite “reason to believe” (from their answers to a questionnaire) that they were prohibited from buying them. A Wisconsin pawnbroker with a history of infractions allegedly sold two rifles to a “straw buyer.” A straw buyer is a person with a clean record who makes a purchase on behalf of someone who is legally prohibited from doing so.

Federal judges sided with the ATF in all three of these cases. But each case took three years or more from the discovery of the violations until the court ruled. All three dealers were repeat offenders who had been warned after previous inspections that further violations could cost them their licenses. For instance, ATF cited the Wisconsin dealer in 2004 for seven instances of selling a firearm to persons who “had indicated they were prohibited from purchasing firearms,” according to court records. In March 2007, ATF inspectors returned and found two similar cases as well as the rifle sales to straw buyers. The results of the 2007 inspection prompted the revocation order.

For the most part, dealers who take the ATF to court don’t dispute that the violations occurred. Rather, they argue that most infractions were paperwork errors or oversights, not “willful” violations that warrant revocation of a license. Three dealers cited ill health to partly explain why they fell behind in their paperwork and should be given a second chance. One Maine dealer cited by ATF for repeatedly failing to keep and locate sales records cited multiple infirmities, including ADHD, which he said made it “extremely difficult to focus and stay on task.” He lost his license.

Back in Biglerville

Taylor, the Pennsylvania dealer, said he was struggling at age 60 with diabetes and simply “overwhelmed” trying to keep up. He couldn’t produce a registry to fully account for 3,732 guns in his inventory when ATF agents inspected his shop Jan. 4, 2010 — his first inspection in more than 30 years, court records show.

After working for months to unsnarl his paperwork, agents concluded that 168 firearms were “missing.” Taylor couldn’t locate sales and acquisitions records for 2007, 2008 and 2009, either, a period when he sold or disposed of 2,856 firearms, according to court records.

In his defense, Taylor said he began entering sales data into a computer in 2004, only to see it crash and wipe out his records. At an ATF hearing in Harrisburg in August 2011, Taylor was apologetic and promised to turn things around. But he met with little sympathy from the agency.

“He didn’t stop selling guns. He continued to sell guns. In fact, he sold thousands of guns and he bought thousands of guns, but he stopped keeping records of the acquisition and disposition of those firearms despite knowing that the law required him to keep those records,” ATF attorney Kevin White argued, according to a hearing transcript.

Taylor sued in January 2012 to keep his license. He lost the first round in late December, when a federal magistrate recommended a judgment for ATF. The magistrate noted that more than 100 firearms acquired by Taylor had “disappeared without a trace,” which, he said, “presents significant potential concerns for public safety.” But Taylor’s lawyer said he is challenging the magistrate’s decision.

Taylor said he remains open and his website advertises “a full line of gunning and shooting accessories and gunsmithing to the general public.”

ATF has long faced criticism that its inspection program isn’t tough enough. In July 2004, the Justice Department inspector general reported that most dealers were being inspected “infrequently or not at all.” The report said that without regular inspections ATF “cannot effectively monitor” whether dealers are following the law. The report recommended that inspections be done at least once every three years, but the agency has not been able to meet that goal. Spokesman Campbell said ATF hopes to visit dealers once every five years.

In fiscal 2011, ATF had 776 investigators in its inspection branch.

Though ATF revoked just 71 dealers that year, about 12 percent of the more than 10,000 inspected dealers were issued “warning letters,” which indicates serious violations whose recurrence could prompt revocation.

The sloppy record keeping by some dealers may well have helped put guns on the streets. In 2007, when ATF agents reviewed about one of 10 dealers, they found 30,000 guns missing. During fiscal 2011 inspections, ATF identified nearly 177,500 “unaccounted for” firearms, which could not be located either in inventory or in sales records. The agency worked with dealers and eventually was able to account for all but 18,500 of the firearms, which the agency called a “significant threat” to public safety.

ATF critics see other major gaps in the oversight program, such as loopholes allowing some dealers to stay in business even after their licenses are revoked and they lose their court appeals.

An investigative report in the Milwaukee Journal Sentinel in December 2010 identified more than 50 stores in 20 states in which a revoked dealer was able to turn operations over to a relative or friend, for example.

In addition, dealers who exhaust all appeals can as a last resort convert their stock to a personal collection, which they can sell privately. U.S. Rep. David N. Cicilline, D-R.I., has filed a bill to end this “fire sale loophole.”

“Closing the fire sale loophole is a commonsense first step Congress should undertake in order to prevent guns from getting in the hands of criminals and the seriously mentally ill,” Cicilline said in a statement.” It’s not at all clear, though, how much support the bill has in Congress.

‘Wildly one-sided’

Some in the gun industry remain deeply suspicious of ATF and strongly oppose granting it more power. They argue that petty violations can result in dealers’ undeservedly facing a revocation hearing and that ATF needs to follow proper legal procedures to protect dealers’ rights.

Christopher M. Chiafullo, a New York attorney whose firm defends gun dealers at revocation hearings, calls the process “wildly one-sided” and argues that it “makes a mockery of the legal system.” He said dealers cited for violations aren’t given a chance to settle or accept probation, only revocation. Their only recourse, he said, is to file suit in federal court to overturn a decision by ATF, but these cases are often unsuccessful.

The Justice Department in February of 2012 published draft regulations that it hoped would clarify the inspection program by guaranteeing dealers the right to submit “facts, arguments, offers of settlement, or proposals of adjustment for review and consideration.”

The Justice Department is expected to act on the regulation, which the NRA has soundly criticized, in June.

Christopher A. Conte, the NRA’s legislative counsel, in a May 3, 2012, letter to ATF said that the current system for revoking the licenses of dealers is “directly contrary to what Congress intended for these hearings.”

He argued that dealers are entitled to “formal proceedings where the agency has the burden of proof, where the evidence offered must be reliable, probative, and substantial, and where the applicant may present evidence and conduct cross-examination of the agency’s witnesses.”

In the past, the NRA has unsuccessfully supported congressional bills that would rewrite the licensing law so that ATF could levy fines and other penalties short of revocation. The NRA argues that changes in the law are necessary to prevent what it says are “all-too-common situations” in which ATF has revoked a dealer’s license for “insignificant technical violations.”