Detailed Comments by Eric M. Larson on reports by the Office of Inspector General, Department of the Treasury (IG): Report No. OIG-99-009 dated October 26, 1998, and Report No. OIG-99-018 dated December 18, 1998 In these comments, I am limiting myself to two sources of evidence, all known by or provided to the IG during the period that evidence was gathered during both investigations:. These sources are: 1. The published hearing records of my testimony before the House Subcommittee on Treasury, Postal Service and General Government Appropriations in 1996, 1997, and 1998 (references in my comments will be to "1996 testimony, page xx," and so forth).[Footnote 1] 2. Evidence I provided to the IG on October 22, 1997, during a personal interview with three Certified Fraud Examiners from the IG's Chicago office, at their request. For ease of reference I have attached a copy of my original complaint to the IG dated May 10, 1997, as reproduced in ATF's internal report dated September 8, 1997 (1998 testimony, pages 98-101) that responded to this complaint. I will respond directly to each of the IG's audit findings, as appropriate. Special Report on Allegations Concerning the Bureau of Alcohol, Tobacco and Firearms' Registration and Recordkeeping of the National Firearms Registration and Transfer Records. Report No. OIG-99-009, October 26, 1998. 28 pages. Allegation 1. Destruction of Documents The IG did not completely investigate Allegation 1, and doing so is critical. The reason is that the Department of Justice determined, in a 1979 memorandum, that if a lawful owner possessed a valid registration document that was not in the NFRTR due to its loss or destruction by ATF, the only solution to this problem would be to establish another amnesty period. The basis for this allegation is the sworn testimony, in federal court in 1996, of an ATF specialist who testified that NFA Branch clerks had thrown away documents rather than process them, and specifically linked this destruction to the 1995 time frame and to the defendant in the case, and other evidence described below. The ATF specialist testified that NFA Branch clerks could have destroyed the defendant's registration documents, and as a result several charges against the defendant of possessing unregistered firearms were dismissed outright by the presiding Judge. Although the IG's investigation determined that the ATF specialist was actually referring to the destruction of documents in 1988 by contract employees, [Footnote 1] For each year, my testimony appears in Part 5: Statements of Members of Congress and Other Interested Individuals and Organizations. My 1996 testimony appears on pages 35-274; my 1997 testimony on pages 19-139; and my 1998 testimony on pages 25-145. page 2 the IG did not provide any evidence that the specialist's testimony was corrected or amended, or clarify why the ATF specialist had referred specifically to a 1995 time frame (and the defendant's NFA documents) in his sworn testimony. Because of my concern about the destruction or loss of registration or transfer documents, I asked the ATF specialist who testified as noted above, whether ATF had added firearms to the NFRTR after being confronted with original registrations, and he stated: "Yes. I assume that's happened" (1996 testimony, pages 92-93; 1997 testimony, page 97). I also looked for independent evidence to collaborate the ATF specialist's statement, and found that ATF had apparently added firearms to the NFRTR during the 1995 time frame after being confronted with original registrations. As my original allegation states: In analyses of data made public by ATF, I found that during 1992 to 1996, ATF may have added 119 or more firearms to the NFRTR which were originally registered on Form 1 or Form 4467 during 1934 to 1971, for which ATF lost or deliberately destroyed the original records. [For my detailed analyses, see 1997 testimony, pages 63-67]. There is no evidence that the IG asked anybody at ATF about these 119 firearms or more or tried to independently ascertain the validity of my allegation using NFRTR records, although the IG's representatives asked me numerous questions regarding this matter at our October 22, 1997, meeting. For example, in response to the question: "Has anyone you know been harmed by the loss of these records?", I responded with the specific example of the confiscation and destruction of Noel Napolilli's firearm, an MP-40 for which Mr. Napolilli possessed an ATF-issued/approved transfer. Because ATF could not find a record of this firearm in the NFRTR, ATF destroyed Mr. Napolilli's firearm despite the fact that Mr. Napolilli possessed a valid transfer document. I provided the IG's representatives with a copy of a civil lawsuit stating facts of the case, and pointed out that Mr. Napolilli dropped the lawsuit because of its cost and fear of retaliation by ATF. I included it in my 1998 testimony (pages 34-39); Mr. Napolilli testified about this matter (1998 testimony, page 33), and told me he had previously sent a letter similar to his testimony to the IG. Allegation 2. Illegally Registered Firearms Based on inspection of data publicly released by ATF during 1992 to 1996, I alleged that ATF employees illegally registered nearly 2,500 firearms on Form 4467 after December 1, 1968, without proper Congressional authorization. As of September 30, 1997, the IG found that 2,496 registrations were shown in the NFRTR for years 1969 through 1986, and relied upon the belief of "NFA Branch supervisors" that "the majority of the 2,500 . . . were processed in 1969 because of a backlog due to the number of forms received during the amnesty period." There is valid and reliable evidence that the 2,500 do not represent processing dates of 1969. Inspecting these data directly would have clearly determined if most of the 2,500 were a "backlog" processed in 1969, but the IG apparently did not do so and the "belief" of NFA supervisors is clearly not "best evidence" to answer this allegation, because ATF's practices in this area are known and page 3 relevant documents could have been physically inspected. Specifically, as noted and documented in my testimony, there are three dates associated with a processed Form 4467: (1) the date of application for registration by the person seeking to register the firearm, which appears in data block #1 of the form; (2) the date the Form 4467 was received by ATF, which is stamped on the back of the form with a date/time stamp; and (3) the date the firearm was actually registered in the NFRTR by ATF, which is stamped in data block #20 of the form. Under a Freedom of Information Act request, I determined that the date of application for registration by the person seeking to register the firearm (that is, data block #1), is the date ATF uses in the NFRTR for the date of original registration (1997 testimony, pages 61-62; 74-77). Consequently, the IG may be misrepresenting the year of original registration. Since the law requires a notice of any amnesty period to be placed in the Federal Register, and the IG determined that ATF did not do so, it is still unclear whether any of the nearly 2,500 post-December 1, 1968, Form 4467 registrations are currently in compliance with the law. That is, the provision of law which authorizes future amnesty periods clearly states that a notice of intention to do so must be published in the Federal Register. This is a critical point, because any firearm registered or transferred in violation of the National Firearms Act is contraband and subject to seizure and forfeiture, regardless of when the violation occurred. Since ATF did not comply with the legal requirement regarding future amnesty periods by publishing a notice in the Federal Register, the Form 4467 registrations ATF accepted after December 1, 1968, are illegal. Importantly, the IG does not state that these Form 4467 registrations are currently legal. Finally, the IG selectively investigated an allegation that was not included in my original complaint (see page 13 of the IG report). Specifically, the IG determined that a 28 gauge H&R Handy-Gun that I own, which bears serial number 29691, was registered on Form 4467 in 1972 by an owner who had provided a letter written to the Internal Revenue Service in 1968, stating he was out of the country at the time of the amnesty period. Since the Supreme Court specifically prohibited such registrations on April 5, 1971 (see United States vs. Freed, 401 U.S. 601), there still appears to be no legal basis for the registration of serial number 29691, but the IG's review is perhaps more noteworthy for what it excludes. Specifically, while the IG correctly noted that I raised the issue of the legality of registration of serial number 29691 in my 1998 testimony, the IG fails to note that I also raised it at the same time for three additional H&R Handy-Guns that I own which bear serial numbers 5592, 50885, and 53637 and which were apparently illegally registered by ATF in 1986.[Footnote 2] In that same testimony, I included copies of exchanges of letters wtih NFA Branch Chief Nereida W. Levine [Footnote 2] These registrations occurred when ATF approved a Form 3 transfer by the manufacturer to a federally licensed dealer--and a clever way to inconspicuously place unregistered NFA firearms into the NFRTR. This probably resulted from NFA Branch clerks not following procedures, i.e., checking if the firearms were registered and thus legal to transfer. Failing to follow such procedures means the firearms were registered in violation of the NFA and, thus, are contraband. Two additional H&R Handy-Guns bearing serial numbers 43950 and 52551 were illegally registered at the same time as those identified above, and are currently owned by private citizens who may have no idea that the legal validity of their possession of these firearms has beenn compromised by the Government. page 4 asking her whether ATF intended to confiscate these firearms because ATF had illegally registered them (1998 testimony, pages 130-136). Why did the IG investigate the legality of the registration of serial number 29691 and not of 5592, 43950, 50885, 52551, or 53637? In my judgement, ATF and the IG are refusing to say if these firearms are contraband because (1) if ATF or the IG says these firearms are contraband because ATF illegally registered them, then ATF or the IG will have admitted at least some of what I have alleged, namely, that the accuracy and integrity of the NFRTR has been compromised by ATF; and (2) if ATF or the IG states that these firearms were legally registered, I have already proven that they were not legally registered, and ATF or the IG would be institutionally flat out lying. The fact that neither ATF nor the IG is apparently willing to state in writing whether or not my four H&R Handy-Guns identified above are contraband and subject to seizure and forfeiture raises fundamental questions about the legal validity of title of NFA firearm registration or transfer documents issued by the Government. Allegation 3. ATF Employees Committed Felony Perjury I made this allegation in good faith based upon credible evidence; namely, that ATF stated that a drug trafficker was in possession of an H&R Handy-Gun while committing drug violations. The IG confirmed what I learned via the Freedom of Information Act request upon which I based my allegation. Namely, that the gun was seized from an acquaintance of the trafficker, not the trafficker, and that no evidence other than the word of the acquaintance existed to establish that the trafficker owned the H&R Handy-Gun, or that anyone was carrying it while committing crimes. I am not a lawyer, and I understand that lawyers can and do differ in their opinions as to what constitutes perjury. In my judgement, ATF's statement was extremely misleading and possibly perjurous. Allegation 4. Registration Categories May Be in Error The IG stated that it did not find, in samples of "Other" and "LTR" categories, any transactions representing registrations which were contrary to law, although the IG encountered some errors and missing documents. Because of the nature of the audit work performed, I believe the IG has satisfactorily responded to this allegation, and agree with the findings and recommendation. Allegation 5. NFA Weapons May Be Registered to Deceased Persons The IG agreed that NFA weapons may still be registered to persons who are deceased, and stated that the law does not require ATF "to confirm or update information in the registry." The IG also documented that ATF has advised the public of registration requirements. I regard this matter as evidence of serious mismanagement of the NFRTR by ATF, because ATF has been specifically aware of registrations to deceased persons since at least 1981, a fact confirmed by the IG. The fact that ATF has not acted in this problem area, through regulations or communications with the Congress for legal authority that may be required to resolve this issue, defies common sense. At the least, ATF's inaction conflicts with the Congress' intention that NFA firearms be strictly regulated. page 5 Conclusion The issue of ATF losing or destroying NFA documents, or not following procedures in processing them, must be openly and publicly resolved to assure that all NFA firearm registrations or transfers are legally valid. The only solution may be to establish another amnesty period. The fact that many thousands of NFA firearms have been registered to deceased persons for decades, and that ATF has known this since at least 1981, conflicts with Congress' intent that NFA firearms be strictly controlled. Audit Report on Allegations Concerning the Bureau of Alcohol, Tobacco and Firearms' Administration of the National Firearms Registration and Transfer Record. Report No. OIG-99-018, December 18, 1998. 50 pages. According to the IG, the purpose of this report is to supplement the October 26, 1998, report noted above, and discuss "additional issues related to the maintenance of the registry." As previously stated, I believe that the IG has not satisfactorily responded to my allegations that the accuracy and integrity of the NFRTR have been compromised by mismanagement or misconduct by ATF. As a "supplemental" report, this report is seriously deficient for its failure to conduct a review of the accuracy of the NFRTR, in my judgement. Since the IG concluded (on page 11) that "ATF did not always control or process checks, forms, and other documents in accordance with procedures because employees did not always adhere to the procedures," this is particularly puzzling. Even more difficult to understand is the fact that the IG tested only "a limited part of the [NFRTR] for completeness," and "did not include the accuracy of ATF registry searches which support ATF's certification in criminal prosecutions that no record of a registration of a particular weapon could be found in the [NFRTR]." Also, obviously, if a legally registered firearm is not in the NFRTR because ATF destroyed or lost the registration, no search of the NFRTR can identify the firearm. There is plenty of independent evidence of serious errors in the NFRTR. I devoted an entire section of my 1997 testimony to specifically describing and documenting seven major examples of serious problems with NFRTR data. This section is entitled "Some Current (1992 to 1996) NFRTR Data are of Questionable Accuracy and Integrity, and the Meaning of Some of These Data is Unclear" (1997 testimony, pages 92-121). Summarizing each of the seven examples would make this review too long, so I will limit myself to one example—documents created by ATF which describe errors in the NFRTR. During its "March 1995 project to clean-up (review and amend) the entire National Registry," ATF created misleading definitions of errors, and blatantly engaged in data manipulation for the purposes of trying to artifically make its NFRTR statistics look good. page 6 Consider that an ATF document from the NFA Branch dated June 19, 1995, identifies six different "Significant errors": 1. Mispelled [sic] and/or incomplete names. 2. Voided application—didn't indicate current firearm possessor. 3. $200/$5 remittance not posted. 4. Never mailed approved form to transferor. 5. Approved wrong firearm to transferee. 6. Approved form never updated in NFRTR. This same document also states: "Since 6/30/94 reviewed 25611 Errors 1567 Significant errors 373" and "Common Error rate .01% Significant error rate .01%" (underlines and boldface appear in the original document). The "Common Error rate" and the "Significant error rate" that I have quoted from this document appear to be incorrect. Specifically, 1,567 / 25,611 = .0611846, or 6.1 percent; while 373 / 25,611 = .0145641, which may be 1 percent or 1.4 percent or 1.5 percent depending on the criterion established for rounding the value up or down. A second document, dated October 30, 1995, reveals a startling change in ATF's definitions of errors. Specifically, virtually all of the six errors noted previously (that is, on the documented dated June 19, 1995) defined as "Significant errors" have now been redefined simply as "Errors." According to the document dated October 30, 1995, the 36,903 documents reviewed "since 6/30/94" contained 2,155 errors, producing an error rate of 6 percent. How many people has that affected? Viewed together, these documents indicate that sometime between June 1995 and October 1995, "Significant errors" were downgraded to and redefined as "Errors" by somebody at ATF. I suppose that one way to lower a "Significant error" rate would be to simply redefine that term as an "Error" rate—and that's apparently exactly what happened at ATF. So, how accurate is the NFRTR? Reproductions of these two documents, and a more extensive discussion of errors in the NFRTR, associated with ATF's March 1995 project, appear in my 1997 testimony (pages 98-106). Conclusion As both an intelligence and a law enforcement agency, the Department of the Treasury possesses some of the keenest minds in the Government. The failure of the IG to evaluate the accuracy and integrity of the NFRTR after being confronted with substantial, credible, documented evidence that the NFRTR has been seriously compromised by ATF is, in my judgement, a deliberate omission and dereliction of professional duty to perform "due diligence" and go where the evidence leads. Enclosures: Letter from Eric M. Larson to the Honorable Valerie Lau, Inspector General, Department of the Treasury, dated May 10, 1997. Detailed Comments by Eric M. Larson on reports by the Office of Inspector General, Department of the Treasury: Report No. OIG-99-009 dated October 26, 1998, and Report No. OIG-99-018 dated December 18, 1998