Special Report on Allegations Concerning the Bureau of Alcohol, Tobacco and Firearm's Registration and Recordkeeping of the National Firearms Registration and Transfer Records OIG99-009 OCTOBER 26, 1998 Office of Inspector General United States Department of the Treasury [new page] DEPARTMENT OF THE TREASURY WASHINGTON DC 20220 October 26, 1998 MEMORANDUM FOR JOHN W. MAGAW, DIRECTOR BUREAU OF ALCOHOL, TOBACCO AND FIREARMS FROM: Richard B. Calahan Deputy Inspector General SUBJECT: Audit Report on Allegations Concerning the Bureau of Alcohol, Tobacco, and Firearms' Administration of the National Firearms Registration and Transfer Record The attached report presents the results of our review on Allegations Concerning the Bureau of Alcohol, Tobacco, and Firearms' Administration of the National Firearms Registration and Transfer Record. The overall objective of this audit was to determine the accuracy of specific allegations that Alcohol, Tobacco, and Firearms' (ATF) employees had engaged in mismanagement, misconduct and improper record keeping of the National Firearms Registration and Transfer Record (registry). Our review found: * In 1988, contract employees had improperly disposed of certain documents; * ATF granted amnesty National Firearms Administration (NFA) registrations to individuals after December 1, 1968 on a limited basis providing certain conditions were met. ATF had the authority to grant amnesty periods but did not publish its intent to grant amnesty; * No evidence of felony perjury by ATF employees in letters to the complainant; * Registration activity that ATF classifies as "other" did not include firearm registrations that were contrary to law; and * registrations that may include persons who are now deceased. Page 2 - John W. Magaw In a September 8, 1998 response to our draft report ATF officials agreed with the overall content of the draft report. As a result, ATF has initiated certain actions to strengthen their administration of the registry. The details of these actions are described in this report. A complete text of the response is included in Appendix 2. Should you have any questions, you may contact me at (202) 622-1090 or a member of your staff may contact Roberta N. Rickey, Regional Inspector General for Audit, Central Region, or Robert K. Bronstrup, Audit Manager at (312) 886-6300. We appreciate the courtesies and cooperation provided to our auditors during our review. Attachment cc: James E. Johnson, Under Secretary of the Treasury for Enforcement Richard Hankinson, Assistant Director, Office of Inspection [new page] Overview This report presents the result of our review of specific allegations by Eric Larson in a letter dated May 10, 1997 to the Office of Inspector General and in a separate letter dated June 15, 1997 to the Chairman, Committee on Government Reform and Oversight. In his letters, Mr. Larson alleged that Alcohol, Tobacco, and Firearms' (ATF) employees had engaged in mismanagement, misconduct and improper record keeping of the National Firearms Registration and Transfer Record (registry). Accordingly, the overall objective of our review was to determine the accuracy of the specific allegations and to provide recommendations to strengthen ATF's registration and record keeping of the registry. Our review of the allegations showed that: 1. National Firearms Act (NFA) documents had been destroyed about 10 years ago by contract employees. We could not obtain an accurate estimate as to the types and number of records destroyed. 2. ATF granted amnesty NFA registrations to individuals after December 1, 1968 on a limited basis providing certain conditions were, met. ATF did not publish its intent to grant an amnesty period as required by the Gun Control Act, however ATF had the authority through the Secretary of the Treasury to establish amnesty periods after December 1, 1968. 3. Contrary to Mr. Larson's allegations our review found no evidence that ATF employees committed felony perjury in letters to Mr. Larson. Our review found no evidence of an intent by ATF officials to deceive Mr. Larson. 4. Registration activity that ATF classifies as "Other" did not include firearm registrations by ATF employees that were contrary to law. The "Other" category consists of data entry errors, movie transfers, and registration documents. 5. The registry may include registrations of NFA firearms to persons who are deceased. ATF officials stated that the law imposes no obligation on ATF to confirm or update information in the registry. Instead, ATF works with executors of estates to assist them in properly transferring and registering firearms. In a September 8, 1998 response to our draft report, ATF officials concurred with the overall content of our draft report. As a result ATF has initiated certain actions to strengthen their administration of the registry. The details of these actions are described in this report. Background ATF's NFA Branch is responsible for the effective administration of the National Firearms Act (26 U.S.C. Chapter 53). Congress had enacted the NFA in 1934 with a purpose to: ...provide for the taxation of manufacturers, importers, and dealers in certain firearms and machine guns, to tax the sale or other disposal of such weapons, and to restrict importation and regulate interstate transportation thereof. The implementing regulations are found in Title 27, Code of Federal Regulations, Part 179, with numerous cross-references to 27 C.F.R. Part 178. The NFA in Title 26 U.S.C. Chapter 53 requires the Secretary of the Treasury to maintain a central registry of all firearms in the United States which are not in the possession or under the control of the United States. This registry is known as the National Firearms Registration and Transfer Record. The types of firearms that must be registered under the NFA are defined in 26 USC section 5845 (See ATF Publications 5300.4 Page 25). These weapons include machines guns destructive devices, silencers, short barreled rifles, short barreled shotguns and a class of firearms defined as "any other weapons." The phrase 'any other weapon" is defined as: Any weapon or device capable of being concealed on the person from which a shot can be discharged through the energy of an explosive, a pistol or revolver having a barrel with a smooth bore designed or redesigned to fire a fixed shotgun shell, weapons with combination shotgun and rifle barrels 12 inches or more, less than 18 inches in length, from which only a single discharge can be made from either barrel without manual reloading, and shall include any such weapon which may be readily restored to fire. Such term shall not include a pistol or revolver having a rifled bore, or rifled bores, or weapons designed, made, or intended to be fired from the shoulder and not capable of firing fixed ammunition. The NFA Branch maintains the registry which includes the identification of the firearm, the date of registration, and the identification and address of the person entitled to possess the firearm. The NFA Branch conducts record searches and provides certifications for use in Federal Court relating to the registration status of a firearm. The NFA Branch employees also testify on the registration status of NFA firearms. The NFA Branch also receives and acts upon all applications to make, export, transfer, and register NFA firearms, and notices of NFA firearms manufactured or imported. The Branch is responsible for making adjustments to the registry to reflect: * changes in address of registrants; * lost or stolen firearms; * modifications to the description of firearms; and * destruction of firearms. The following table summarizes the types of registration activity in the registry from June 26, 1934 through June 30, 1997. TABLE 1 NFA REGISTRATION ACTIVITY (By Type) FORM DESCRIPTION NUMBER TYPE F1 Application to Make and Register a Firearm 43,138 F2 Notice of Firearms Manufactured or Imported 1,000,964 F3 Application for Tax-Exempt Transfer or Firearms 405,949 and Registration to special (Occupational) Taxpayer F4 Application for Tax Paid Transfer and 115,147 Registration of a Firearm F5 Application for Tax-Exempt Transfer and 552,753 Registration of a Firearm F6 Importation of a Firearm 9,613 F9 Application and Permit for Permanent 268,764 Exportation of Firearms F10 Application for Registration of Firearms 16,618 Acquired by Certain Governmental Entities LTR Letters 5,505 4467 Registration of Certain Firearms During 57,221 November 1968 OTHER Other Correspondence 9,554 Total 2,485,226 Objectives, Scope, and Methodology Our objective was to determine if the five allegations made by Mr. Larson to the Office of Inspector General and to the Chairman, Committee on Government Reform and Oversight, were accurate. In a letter dated May 10, 1997 to the Inspector General and in a letter dated June 15, 1997 to the Chairman, Committee on Government Reform and Oversight, Mr. Larson alleged: 1. ATF employees deliberately destroyed original firearms registration documents. 2. ATF employees improperly registered almost 2,500 unregistered NFA firearms on Form 4467 after the cutoff date of December 1, 1968. 3. ATF employees committed felony perjury in letters to Mr. Larson. 4. Certain registration activity that ATF classifies as "other" could include registrations of firearms that may be registered contrary to law. 5. It appears that a significant number of NFA weapons are currently registered to persons who are deceased. Accordingly, the scope of our review was limited to the allegations and it did not constitute a complete review of all the activities of the NFA Branch. We conducted our field work at ATF Headquarters in Washington, D.C. and at the ATF Tracing Center in Falling Waters, WV. We interviewed individuals From the National Firearms Act Branch, Office of Inspections, Firearms Technology Branch, Legal Counsel, Acquisition Management Branch, Mr. Larson, and other individuals necessary to conduct our work. Review work was performed From October 1997 through May 1998. Our review covered selected NFA records from 1934 to 1997. The methodology used for each allegation is as follows: Allegation I - We interviewed the Acquisition Management Branch Chief, Counsel, and NFA Branch employees, and attempted to determine to what extent registration documents were destroyed. Allegation 2 - We reviewed Form 4467s corresponding to computer registry records dated 1968 and years after based on our personal judgment and document availability (judgmental sample). We also statistically sampled the entire population of Form 4467s to determine whether errors existed within that population (discovery sampling). The General Accounting Office assisted us in developing our sampling methodology. The Office of Inspector General (OIG) Counsel reviewed our sample results to evaluate ATF actions to register NFA weapons after December 1, 1968. Allegation 3 - OIG investigators and Counsel reviewed and evaluated an internal report by ATF's Office of Inspection. In addition, the OIG's Office of Counsel interviewed an ATF Special Agent and a former ATF Associate Chief Counsel. Allegation 4 - We evaluated a discovery sample of documents that ATF had classified as "Other". We also interviewed the NFA Branch Chief, and reviewed transactions. Allegation 5 - We reviewed policies and procedures pertaining to the registry and interviewed NFA Branch officials to determine if any type of confirmation had been done on NFA registrants. A more detailed description of our sampling methodology is provided in Appendix 2 of this report. Our work was conducted in accordance with Government Auditing Standards issued by the Comptroller General, and included such audit tests as were determined necessary. Allegation 1. Destruction of Documents "ATF employees have deliberately destroyed original firearms registration documents that they are required by law to maintain, as noted in sworn testimony in 1996 by [an ATF Specialist]." In May 1996, the Specialist testified in a criminal case before the United States District Court Eastern District of Virginia. [footnote 1] In his testimony, the Specialist did acknowledge, in response to a question, that clerks in the NFA Branch had thrown away documents. The Specialist also stated the employees were not immediately fired or transferred but the employees eventually quit. In response to another question, the Specialist reaffirmed that ATF did allow someone to continue in a job with monitoring, after ATF knew the individual threw something away or destroyed it. In an October 16, 1996 letter to an individual, the Chief, Firearms and Explosives Regulatory Division clarified statements made by the Specialist in his May 1996 testimony. The Chief stated that the Specialist: ...was referring to an incident in 1988 when NFA Branch management suspected that two contract employees were disposing of documents. These contract employees were immediately removed from their assignment to the NFA Branch. The employees could not be hired or fired by ATF since they were employed by a contractor. An ATF internal investigation dated September 8, 1997, reported that the Specialist's May 1996 testimony referred to certain documents being destroyed at the NFA Branch. The investigation included an interview with the Specialist. The report stated that the Specialist: ...made reference to certain documents being destroyed at the NFA Branch. [Employee) ----------------------- 1. U.S. v Leasure, Crim. No. 4:95cr54 Tr. pp. 42, 43 (E.D.Va. May 21, 1996.) stated [that] he made reference to thousands of Title II firearms manufactured by [a domestic company] that were being exported to Saudi Arabia....It was suspected that some of the contract employees had destroyed some of the documents in an effort to reduce case load. This report of investigation also included an interview with an employee who was the Chief of the NFA Branch in 1986 and 1987. The Chief was "...unaware of any documents being destroyed by any ATF employee. At that time, some paperwork was missing and some contract employees hired by ATF were suspected of misplacing ATF paperwork. " According to the Chief, Acquisition Management Branch, there apparently was a contract in place for ADP support services from 1984 through 1988. A new contract was put in place during July 1988. Some of these contract employees were detailed to the NFA branch to help microfilm NFA records. Contract employees are still used at the NFA branch for various administrative tasks. For example, contract employees are currently imaging and indexing NFA documents. In summary, ATF officials believed the destroyed documents were primarily Form 2 "Notices Of Firearms Manufactured Or Imported" and Form 9 "Application And Permit For Permanent Exportation Of Firearms". Officials believed that these documents would have been replaced by the manufacturer of the firearms upon discovery that their forms were missing. ATF Actions To Strengthen Record Security No system will give 100 percent assurance that documents will not be destroyed. Since documents had been destroyed, we evaluated the controls that the NFA Branch currently has over registry documents that would help prevent and detect the destruction of documents. The following summarizes our observations and shows the steps ATF has taken to reduce the risk of inappropriate destruction of records: Revised Record Keeping System Effective September 17, 1997, the NFA Branch implemented a new record keeping system over the registry. The Branch Chief as of October 30, 1997, required employees to enter all documents that are received into the system as "pending" within 5 days of receipt by the Branch. The Branch is updating procedures for processing forms, quality reviews, and record searches. At the date we completed fieldwork, however, the system was unable to generate reports which showed the total number of documents received and that were entered in the system as pending. Consequently, supervisors will have difficulty in monitoring the status of documents entered as "pending" in the system. The system cannot generate these status reports because the report is part of additional enhancements yet to be implemented for the database. An Information Systems Development employee indicated work is to begin soon on Phase II of NFA enhancements with a scheduled completion date of May 1999. However, this work may be impacted by Year 2000 testing. We recommended that ATF develop time frames for completing the actions necessary to generate these reports and for completing the standard operating procedures manuals. Imaging of Original Documents To further protect the integrity of the registry, the NFA Branch is imaging all original NFA forms so that these forms can be brought up on a computer screen for viewing. Should an original document be destroyed, ATF will still have the imaged copy of the original. As of June 30, 1998, ATF had imaged original documents back to those documents approved in 1983. Access to the NFA database is limited Access is limited to branch employees, information systems employees, and one employee that processes refunds of payments. ATF explained that access is controlled because information contained in the registry is subject to 26 U.S.C 6103, "Confidentiality and Disclosure of Returns and Return Information". Willful, unauthorized disclosure of return information is a felony punishable on conviction of both fine and imprisonment. Both ATF and contract employees am subject to background investigations before they are allowed to work at ATF. Training Emphasized Record Security In addition, ATF developed an internal training program for indexing NFA documents that includes an instructor's manual for the class. One section in the instructor's manual states that instructors should stress the importance of the records in the NFA database, and that these records should be kept secure. NFA Branch employees and contract employees working on NFA records received training in this area in 1997. Records Are Secured NFA records are stored at ATF's National Tracing Center in Falling Waters, WV. During our visit to the facility in February and March 1998, we observed that NFA records were locked when they were not in use. Allegation 2. Illegally Registered Firearms "ATF employees registered almost 2,500 unregistered NFA firearms on Form 4467 after December 1, 1968, without proper authorization by the Congress." The Gun Control Act of 1968, Public Law 90-618, 82 Stat. 1227, 1234 amended the NFA by modifying the registration requirement for firearm owners. It also provided for an amnesty period for individuals who had not previously complied with the NFA. The amendment specifically barred prosecution for failure to comply with the law for individuals who registered their firearms during the period November 2, through December 1, 1968. Treasury Form 4467 was used to register weapons. The Form stated "This form cannot be accepted for registration of firearm except when received by [the] Director during the time period November 2, 1968, through December 1, 1968." Our review showed, however, that ATF did adopt a policy to allow other amnesty registrations of NFA firearms after December 1, 1968, if the following three conditions were met: 1. The applicant could produce documentation (military orders, etc.) that he/she was out of the country during the entire amnesty period; 2. The applicant could establish that the firearms to be registered were in the United States during the amnesty period; and 3. The applicant contacted the Bureau within a reasonable time after first returning to the United States. The law provided that such amnesty periods could be granted "after publication in the Federal Register of (the Secretary of the Treasury's) intention to do so." ATF advised us that the Bureau never issued a notice in the Federal Register. Instead, after the passage of the Gun Control Act, ATF granted amnesty on a very limited basis to applicants who could meet the three conditions described above. To support ATF's decision to grant amnesty, ATF officials provided us a former section of the IRS manual entitled 'Amnesty Guidelines", dated April 16, 1969, and a letter to an applicant seeking amnesty after December 1, 1968. Both documents present essentially the same late registration policy, and indicate that ATF applied the policy consistently. Additionally, ATF letters to an Assistant U.S. Attorney on November 1, 1974 and to an ATF Regional Director on March 4, 1975 state that no more than 20 applications had been approved under these guidelines and that the late registration policy had been discontinued. ATF, however, was unable to locate documents that establish the precise date ATF discontinued the policy. The IRS Amnesty Guidelines also state that the late registration policy was the product of an understanding reached at a conference of ATF Assistant Regional Commissioners. The November 1, 1974 letter declares that the policy was adopted based on the theory that absence from the country tolled the statutory period. ATF Counsel advised our counsel that a temporary grace period was authorized as an inherent corollary of the statute. ATF, however, was unable to locate any documented support for its limited conferral of amnesty beyond the statutory period exclusive of the IRS Amnesty Guidelines. We took a random discovery sample of Form 44679 to determine if registrations occurred in accordance with the guidelines. Our initial random sample of 141 forms showed that 134 had application dates between November 2, 1968 and December 1, 1968. Six forms had application dates after December 1, 1968. We could not determine if these six registrations met the Amnesty Guidelines established by ATF because of insufficient documentation. One form contained an apparent bad application date of November 31, 1968. In order to more specifically address Mr. Larson's allegation, we selected an additional 98 amnesty registrations from the total of 2,496 registrations shown in the registry for years 1969 through 1986. Our review showed that 65 of the 98 Form 4467s had application dates after December 1, 1968. A more detailed review of the 65 registrations showed: * 36 registrations did not have sufficient documentation to clearly show if the registrant met the criteria for amnesty. * 27 registrations were submitted by one individual who proved he was out of the country from before the time of the amnesty until 1973. Then he filed for registration of a number of firearms but ATF did not approve these applications until 1976. * 2 registrations were misclassified in this category. During our review, we also researched Mr. Larson's allegation made during his April 8, 1998 testimony before Congress. Mr. Larson questioned whether ATF illegally registered a "28 gauge H & R Handy Gun, serial number 29691." We found an owner had originally registered the gun on a Form 4467 in 1972. The individual provided a letter to the Internal Revenue Service in December 1968 stating the individual was out of the country at the time of the November 2 through December 1, 1968 amnesty period. In summary, our review shows that nearly all of the registrations recorded on Forms 4467 were made over 27 years ago. ATF may have failed to follow procedures by failing to publish the amnesty extension in the Federal Register, required by the Gun Control Act. However, the Bureau, through the Secretary of the Treasury, did in fact have the authority to establish amnesty periods after December 1, 1968. There is evidence that the late registration policy was continued between 1974 and 1976 in a small number of cases. However, there is no evidence to suggest that ATF has been granting amnesty for at least 22 years. NFA Branch supervisors believe that the majority of the 2,500 "post-1968" registrations on Form 4467 were processed in 1969 because of a backlog due to the number of forms received during the amnesty period. Further, because of the backlog, processing and approval extended into 1969. Thus, the dates of approval entered into the registration database reflect 1969. In these instances ATF registered the firearms with proper authorization since ATF received the applications prior to December 1, 1968. Allegation 3. ATF Employees Committed Felony Perjury "ATF employees Edward M. Owen, Jr. and Terry L. Cates committed felony perjury in letters written to me dated March 23, 1992, and July 29, 1993, respectively. Mr. Owen and Mr. Cates each alleged that "an unlawful trafficker in drugs with an extensive criminal record" was in possession of a .410 bore H&R Handy Gun "while committing drug violations". This alleged instance of criminal conduct was used to deny my petition to remove the H&R Handy-Gun from the NFA as a collector's item." OIG Office of Counsel review of this allegation found it to be without merit. Mr. Larson made a request to ATF to remove the H&R Handy-Gun from the NFA as a collector's item which would make it eligible for an exemption under 27 C.F.R. section 179.25. In a March 23, 1992 letter to Mr. Larson, an ATF employer stated, in part, that: Although H & R Handy Guns have not frequently been used in crimes, these weapons have been found in the possession of criminals. The subject of a recent ATF case was an unlawful trafficker in drugs with an extensive criminal record. While committing drug violations, this person was in possession of two NFA weapons, a sawed-off Savage Arms shotgun and a .410 gauge H & R Handy Gun. This passage was restated by a second ATF employee in a separate letter denying another petition by Mr. Larson over a year later. Mr. Larson submitted a Freedom of Information Act request to the agency, and obtained copies of two ATF investigative reports apparently relating to the single "drug trafficker" mentioned in ATF's letters to Mr. Larson. ATF relied on the "drug trafficker" example to deny Mr. Larson's request. The investigative reports do not specifically state either that the perpetrator possessed the Handy Gun or that he committed a drug violation at the same time and place as he possessed the gun. However, the investigative reports do disclose that a .410 gauge H & R Handy Gun was discovered in a house being consensually searched, pursuant to an arrest warrant for the "drug trafficker." The tenant of the house stated that the H & R Handy Gun, as well as the other 26 firearms discovered, belonged to the "drug trafficker." The investigative reports also state that the "drug trafficker" was subsequently sentenced to 60 months imprisonment with 3 years supervised release under drug related indictments. The H & R Handy Gun was not found on the subject, but ATF Counsel pointed out that possession of a firearm can be actual or constructive. Actual possession exists when a person is in immediate possession or control of an object. Constructive possession exists when a person does not have actual possession, but knowingly has the power and intention to exercise dominion and control over an object either directly or through others. The ATF employer who was the author of the disputed language in letters to Mr. Larson explained that the Handy Gun was seized at the home of an acquaintance of the perpetrator. The acquaintance stated it belonged to the perpetrator. Nothing in the file establishes whether or not the acquaintance was telling the truth but the ATF employee said that the acquaintance's statement was evidence that the gun belonged to the subject. The letters to Mr. Larson state that the perpetrator "was in possession" of a Handy Gun, which could imply to a lay person reading them that the subject possessed the gun at the same place he was caught committing drug crimes. ATF has correctly pointed out that if the subject exercised dominion and control over the weapons, he constructively possessed them even if they were stored at his friend's home. If the subject constructively possessed the weapons, the letters would have been true. ATF officials also explained that other individuals may have committed crimes while possessing this type of weapon, and that these instances were not reported to ATF. Most charges involving "use" of a firearm are handled by local authorities, and ATF does not know about them. In summary, there is no evidence that ATF officials were guilty of perjury. First, the allegedly false statement may well have been true, since the "trafficker" could have been in constructive possession of the H & R Handy Gun. Second, the general Federal false statements statute only applies to a person who has taken an oath or certified before a competent tribunal or authority that be or she will testify or certify truthfully, 18 U.S.C. section 1621. The letters to Mr. Larson were not made under oath and contain no certifications. In addition, there is no evidence of an intent to deceive, which would be a requisite for a perjury prosecution. Also, the law that Mr. Larson cites is inapplicable. Under the first Code section he mentions, 26 U.S.C. section 5861(l), it is "unlawful for any person...to make, or cause the making of, a false entry on any application, return, or record required by this chapter [Chapter 53, Title 26 U.S.C.], knowing such entries to be false." ATF provides an important public service by sending letters to individuals explaining why ATF denies petitions for removal of weapons from the NFA. However, it is not something that is "required by this chapter." The regulations pursuant to which Mr. Larson submitted his application for a "collector's item" exemption, 27 C.F.R. section 179.24 and 25, require applicants to provide written documentation and other supporting materials, but thy do not require a written ATF response. ATF stated that the authority to write decision letters derives from their inherent, general powers, but confirmed that there is no legal obligation. In fact, statements of reasons for denying exemption applications are not provided when there is an ongoing criminal investigation or prosecution. We note that the regulations do state that ATF will give reasons for denying an application to make firearms, 27 C.F.R section 179.64, and applications to transfer firearms, 27 C.F.R. section 179.86, even though not required by Chapter 53. At one time, Congress considered mandating written notices on denials and revocations of licenses. Applicants would have been afforded an opportunity for a hearing by the Secretary, ah a judicial review in a U.S. District Court. H.R. Rep. No. 1577, 90th Cong., 2d Sess. 37. However, these procedures were rejected in the final version of the Gun Control Act. The second code section Mr. Larson cites in his allegation letter is 26 U.S.C. section 5871, which establishes the penalties for violations of Chapter 53, including section 5861. It would not cover the ATF letters for the same reason. This section is a part of Chapter 53 which addresses wrongdoing by those possessing or transacting business in firearms, not government officials. It penalizes "[a]ny person who fails to comply with any provision of this chapter..." . It does not cover "any person who...makes...a false entry on any document required to be prepared as a result of administering the NFA," as suggested by Mr. Larson. Allegation 4. Registration Categories May Be in Error "Certain "registration activity" that ATF classifies as "OTHER" could include registrations of firearms that one or more ATF employees registered contrary to law, because ATF has refused to disclose the nature of the "registration activity"." The database for the registry does include an "Other" category. ATF procedures did not formally define what should be in this category. However, ATF officials advised us that the "Other" category typically includes the following registration codes: "NF" - This code occurred when data was transferred from the previous system to the new system and the data did not include a form number. in these instances, the new system assigned the "NF" code to the record. The previous system permitted registration information to be entered without a form number. "TWX" - This code refers to a procedure where movie industry supply houses and movie industry property masters filed applications by telegraph in lieu of filing a Form 3 in order to expedite processing by ATF. ATF approval was required prior to a weapons transfer taking place. In a January 9, 1997 letter to Mr. Larson the Branch Chief also explained that "This category would be comprised of registrations where the form number is different from the other ones tabulated. An incorrect form number would be counted in that column." We randomly selected 70 items in the "Other" category and verified the transactions to the supporting documentation. Table 2 summarizes the transactions we found in the sample. Table 2 RANDOM SAMPLE of 70 "OTHER" TRANSACTIONS Type of Data Original Number of Found Documentation Transactions Missing NF 9 17 TWX 8 40 Data entry errors 0 13 Total 17 70 As Table 2 shows, 40 (57 percent) of the sample were transfers of NFA weapons used by the movie industry in producing movies. Our review of other documents showed errors such as missing names and inaccuracies in weapon descriptions and model numbers. Data entry errors also occurred when ATF forms were not properly entered in the system. For example, an ATF Form 3 was entered as "2F3" and a Form 5 was entered as "F55". These errors also apparently defaulted to the "Other" category. Additionally, we were unable to locate 17 documents supporting transactions in the "Other" category. We provided this information to ATF for their further review. To further determine if registrations contrary to law occurred we also selected a random sample of 179 transactions in the "LTR" (letter) category of the registry database. The OIG auditors defined this category as any correspondence received that is not an official ATF form. Our review of the documents supporting these 179 transactions showed various letters to transfer firearms between individuals, companies, changes of address, and requests to move firearms interstate. From our samples of "Other" and "LTR" we did not find any transactions representing registrations which were contrary to law. However, we discussed all of the errors and missing documents with the NFA Branch Chief. ATF Actions to Correct "Other" Discrepancies The Branch Chief agreed that the "Other" category contains numerous data entry errors and transactions such as those that we found in our sample. The Branch Chief has requested additional overtime funds in 1998 to correct these types of errors. This effort will consist of reviewing and correcting mistakes in the names, weapon descriptions, and other data that is contained in the registry. The Branch Chief advised us that effective in Fiscal Year 1998, movie transfers will have to be executed on ATF Form 3, Application for Tax Exempt Transfer of Firearm and Registration of Special (Occupational) Taxpayer. This requirement should reduce the number of transactions reflected in the 'Other" category. Allegation 5. NFA Weapons May Be Registered to Deceased Persons "It appears that a significant number of NFA weapons are currently registered to persons who are deceased, and that ATF has been aware of this fact since at least 1981 and done nothing about it, as noted in my 1997 testimony." The transfer of an NFA weapon from the estate of a decedent is specifically allowed in the Gun Control Act, Public Law 90-618, Title 18, United States Code. ATF has advised the public of the registration requirement in its Federal Firearms Reference Guide (ATF P 5300.4, 10/95). It states specifically: "It is the responsibility of the executor or administrator of an estate to transfer firearms registered to a decedent." Mr. Larson stated in his April 8, 1997 testimony that based upon his analysis of ATF records as of December 31, 1996, 11,175 NFA weapons are still currently owned by the person or government entity that registered or acquired the weapon between 1934 to 1939. We agree that NFA weapons may still be registered to persons who are deceased when an executor or administrator has not complied with ATF's firearms regulations. In sampling NFA records we found four instances of NFA firearms that either government agencies or individuals had registered between 1934 and 1935 with no subsequent transfer of the weapon. Since the date of birth was not required on the registration form at that time, Form 1 (August 1934), we could not determine the age of an individual still listed as the owner of the weapon. ATF did not have a procedure to periodically confirm information in the registry which could determine if weapons are registered to deceased individuals. ATF officials explained that the NFA imposes obligations on manufacturers, makers, importers, and transferors of firearms to contact ATF and report pertinent information to add to or revise information in the registry. The law imposes no obligation on ATF to confirm or update information in the registry, and the data in the registry is accurate as long as it includes all information reported to ATF in accordance with the law and regulations. Accordingly, an official stated that ATF does not conduct routine checks of names of persons in the registry to determine whether they are in possession of the registered weapon. Rather, the registry is primarily used as an enforcement tool in cases involving alleged violations of the NFA. Officials reemphasized that when registered firearms are part of a decedent's estate, it is the responsibility of the executor or administrator of the estate to properly transfer the registered firearms to a lawful heir. If the firearm is transferred without ATF approval, the heir will be in possession of a firearm not registered to him, in violation of the law. When such unlawful transfers take place, the registry would correctly indicate that the firearm is registered to the decedent. ATF officials stated they constantly work with executors of estates to assist them in properly transferring and registering firearms. For the above reasons ATF officials advised us that they did not act on Mr. Larson's proposals. ATF officials do not intend to send out confirmations or inquiries concerning registered firearms. Appendix 1 ABBREVIATIONS ATF Bureau of Alcohol, Tobacco and Firearms NFA National Firearms Act OIG Office of Inspector General Appendix 2 MANAGEMENT RESPONSE DEPARTMENT OF THE TREASURY BUREAU OF ALCOHOL, TOBACCO AND FIREARMS WASHINGTON DC 20226 SEP 04 1998 F:SD:NFA:GS 179.101 MEMORANDUM TO: Assistant Inspector General for Audit Office of the Inspector General FROM: Director SUBJECT: Draft Audit Report on Allegations Concerning the Bureau of Alcohol, Tobacco and Firearms' Administration of the National Firearms Registration and Transfer Record Your memorandum of July 31, 1998, transmitted the subject draft audit report to us for review. You requested written comments on the content of this draft report. We agree with the overall content of the draft report. Attached to this memorandum are several specific comments that we believe will clarify the content. We appreciate the opportunity to review this draft report. We also appreciate the courteous and cooperative manner in which your auditors conducted the review. Should any additional information be needed, please contact Mr. Walfred A. Nelson, Deputy Assistant Director (Firearms, Explosives and Arson) at (202) 927-7940. John W. Magaw Attachment Comments Regarding the Department of the Treasury Office of Inspector General Draft Audit Report Titled: Special Report on Allegations Concerning ATF's Registration and Record Keeping of the National Firearms Registration and Transfer Record The last sentence of the paragraph beginning with "The NFA in Title 26 U.S.C. Chapter 53 requires -." is not clear. we suggest a revision to read: The types of firearms that must be registered under the NFA are defined in 26 U.S.C. section 5845 (see ATP Publication 5300.4, page 25) and include machineguns, destructive devices, silencers, short barreled rifles, short barreled shotguns, and a class of firearms identified as "any other weapon." The term "any other weapon" is defined in section 5845(e) as: Any weapon or device ... page 8 (Allegation 1) A statement is made that "ATF officials that we interviewed could not provide us any more specific details on the type and number of documents destroyed" In earlier discussions, we noted our belief that the documents involved were primarily Form 2 notices of firearms manufactured or imported and Form 9 applications for export and that these documents would have been replaced by the manufacturer of the firearms upon discovery that their forms were missing. We believe that a revision of the language to reflect this information will show that these issues were resolved. page 9 (Allegation 1) The last sentence of the paragraph entitled Imaging of Original Documents should be revised for clarification to reflect that as of June 30, 1998, we have imaged original documents approved currently back to those documents approved in 1983. page 13 (Allegation 2) The last sentence of the paragraph beginning with "In summary, our review ..." states that "we have no information that Mr. Larson has been treated differently than anyone else who applied for amnesty in recent history." Mr. Larson did not apply for amnesty. We suggest that the sentence be revised to state that the criteria used by ATF to register firearms pursuant to the 1968 amnesty were applied consistently and in accordance with the law. Appendix 3 MAJOR CONTRIBUTORS TO THIS REPORT Central Region Roberta N. Rickey, Regional Inspector General for Audit Robert Bronstrup, Audit Manager Carol Burgan, Auditor Gary Wilk, Auditor Office of Counsel Ric Doery, Deputy Counsel for Inspector General Appendix 4 REPORT DISTRIBUTION Treasury Departmental Offices Office of the Under Secretary of the Treasury for Enforcement Office of the Assistant Secretary of the Treasury for Management Chief Financial Officer Director, Office of Organizational Improvement Director, Office of Strategic Planning Desk Officer, Office of Accounting and Internal Control Budget Analyst, Management Controls Branch Bureau of Alcohol, Tobacco and Firearms (ATF) Director Assistant Director, Office of Inspection Assistant Director, Field Operations