[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
BUREAU OF ALCOHOL, TOBACCO, FIREARMS AND EXPLOSIVES' USE OF STOREFRONT 
                               OPERATIONS

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON CRIME, TERRORISM,
                 HOMELAND SECURITY, AND INVESTIGATIONS

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 27, 2014

                               __________

                           Serial No. 113-68

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov


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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT, 
LAMAR SMITH, Texas                       Virginia
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
SPENCER BACHUS, Alabama              SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 JOE GARCIA, Florida
BLAKE FARENTHOLD, Texas              HAKEEM JEFFRIES, New York
GEORGE HOLDING, North Carolina       DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia
RON DeSANTIS, Florida
JASON T. SMITH, Missouri
[Vacant]

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

Subcommittee on Crime, Terrorism, Homeland Security, and Investigations

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman

                  LOUIE GOHMERT, Texas, Vice-Chairman

HOWARD COBLE, North Carolina         ROBERT C. ``BOBBY'' SCOTT, 
SPENCER BACHUS, Alabama              Virginia
J. RANDY FORBES, Virginia            PEDRO R. PIERLUISI, Puerto Rico
TRENT FRANKS, Arizona                JUDY CHU, California
JASON CHAFFETZ, Utah                 LUIS V. GUTIERREZ, Illinois
TREY GOWDY, South Carolina           KAREN BASS, California
RAUL LABRADOR, Idaho                 CEDRIC RICHMOND, Louisiana

                     Caroline Lynch, Chief Counsel


                            C O N T E N T S

                              ----------                              

                           FEBRUARY 27, 2014

                                                                   Page

                           OPENING STATEMENTS

The Honorable F. James Sensenbrenner, Jr., a Representative in 
  Congress from the State of Wisconsin, and Chairman, 
  Subcommittee on Crime, Terrorism, Homeland Security, and 
  Investigations.................................................     1
The Honorable Robert C. ``Bobby'' Scott, a Representative in 
  Congress from the State of Virginia, and Ranking Member, 
  Subcommittee on Crime, Terrorism, Homeland Security, and 
  Investigations.................................................     3
The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary     4

                                WITNESS

Thomas E. Brandon, Deputy Director, Bureau of Alcohol, Tobacco, 
  Firearms, and Explosives
  Oral Testimony.................................................     7
  Prepared Statement.............................................     9

                                APPENDIX
               Material Submitted for the Hearing Record

Response to Questions for the Record from the Bureau of Alcohol, 
  Tobacco, Firearms, and Explosives..............................    24


BUREAU OF ALCOHOL, TOBACCO, FIREARMS AND EXPLOSIVES' USE OF STOREFRONT 
                               OPERATIONS

                              ----------                              


                      THURSDAY, FEBRUARY 27, 2014

                        House of Representatives

                   Subcommittee on Crime, Terrorism, 
                 Homeland Security, and Investigations

                       Committee on the Judiciary

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 10 a.m., in room 
2141, Rayburn Office Building, the Honorable F. James 
Sensenbrenner, Jr. (Chairman of the Subcommittee) presiding.
    Present: Representatives Sensenbrenner, Goodlatte, Coble, 
Gowdy, Conyers, Scott, and Chu.
    Staff present: (Majority) Allison Halataei, Parliamentarian 
& General Counsel; Jason Cervenak, Counsel; Alicia Church, 
Clerk; (Minority) Joe Graupensperger, Counsel.
    Mr. Sensenbrenner. The Subcommittee on Crime, Terrorism, 
Homeland Security, and Investigations will come to order.
    Without objection, the Chair is authorized to declare 
recesses of the Subcommittee at any time.
    I will recognize myself for 5 minutes for an opening 
statement.
    I want to welcome everyone to today's hearing on ``The 
Bureau of Alcohol, Tobacco, Firearms and Explosives' Use of 
Storefront Operations.''
    A little over a year ago, The Milwaukee Journal Sentinel 
published a very disturbing article concerning an undercover 
storefront operation run by the BATF&E in Milwaukee. To say 
that the operation was extremely flawed would be a vast 
understatement. It certainly was the Keystone Cops in 
operation. The operation was an abysmal failure that put on the 
street a stolen fully automatic M-4 rifle as well as other 
stolen firearms and numerous other failures.
    The operation began in Milwaukee in early 2012, more than 3 
months after Todd Jones took over as Acting Director of ATF and 
more than a year after the failed Operation Fast and Furious 
was exposed. The operation began when ATF agents opened 
``Fearless Distributing'' in a rented property in the Riverwest 
neighborhood of Milwaukee. Soon thereafter, they hired a brain-
damaged individual with an IQ of 54 to promote the business by 
distributing fliers. They also pressured this individual to 
facilitate gun and drug buys for the operation.
    The agents proceeded to conduct various gun and drug buys 
through the storefront. The agents paid quite a premium for the 
firearms. In one case, a defendant purchased a rifle for $700 
from Gander Mountain and turned around and sold it to the ATF 
agents a few hours later for $2,000. One has to wonder if this 
firearm would have even been out on the street if it were not 
for the enticing deals being offered by ATF.
    From there, the operation went from bad to worse. ATF 
agents allowed an armed felon to leave the store. The operation 
was burglarized, losing more than $35,000 in merchandise. ATF 
damaged a rented building and refused to fix it or compensate 
the landlord. They left behind law enforcement-sensitive 
documents that included the names, vehicles and phone numbers 
of undercover agents. They had their government-owned guns, 
including a machine gun, stolen from an agent's vehicle. The 
automatic rifle has never been recovered.
    ATF would like to point out in their testimony that this 
operation and others like it led to a number of arrests and 
convictions. I think it is important to take a look at these 
arrests and conviction numbers. In the botched Milwaukee 
operation, an analysis by the Milwaukee Journal Sentinel found 
that of the 34 cases charged in state and Federal court in 
Milwaukee, 16 of the defendants--nearly half--ended up with no 
incarceration. Eight cases were dismissed because the agents 
arrested the wrong people or the prosecutor could not go to 
trial because the lead ATF agent could not be called to 
testify. The other eight defendants received probation or 
stayed or deferred sentences.
    The Journal Sentinel also found that of the 26 cases that 
resulted in conviction, the median sentence was about 2 years 
behind bars. Very few of the cases involved individuals with 
violent criminal records. Most had drug or nonviolent offenses 
such as burglary. In fact, one of the prosecutors in the case 
admitted that the flawed operation was not ``the best use of 
resources.'' He even indicated that it failed to catch the 
violent offender it was designed to take off the street.
    Even more disturbing are the recent revelations that these 
same tactics were used in various cities across the country. In 
Albuquerque, agents gave a brain-damaged drug addict with 
little knowledge of weapons a ``tutorial'' on machine guns, 
hoping that he could find them one. And in Portland, Oregon, 
ATF agents paid $150 to a mentally disabled individual to get a 
large tattoo of a squid on his neck smoking pot to promote 
their phony storefront operation. This does not appear to be 
one operation gone bad but a systemic problem plaguing the ATF.
    After Operation Fast and Furious, we were told numerous 
times that changes were coming to the ATF under the new 
leadership. I certainly hope this operation and others like it 
are not indicative of those changes, because they are not 
changes for the better at all. I intend to continue to 
vigorously oversee ATF until I am confident that the public 
knows the whole truth and that the agency's mismanagement has 
been corrected.
    I welcome our witness today and look forward to hearing his 
testimony.
    And now I recognize the gentleman from Virginia, Mr. Scott, 
for his opening statement.
    Mr. Scott. Thank you, Mr. Chairman. I appreciate you 
calling the hearing today.
    Today the Subcommittee will examine one of our most 
important but often neglected Federal law enforcement agencies, 
the ATF. The ATF has a multifaceted mission, and today we are 
here to hear testimony about the past use of storefront 
operations as a tactic to pursue that mission.
    Press accounts, I.G. reports and inquiries by this 
Committee have revealed missteps and poor judgment with several 
of the storefront operations in recent years in places such as 
Milwaukee, Wisconsin; Portland, Oregon; Pensacola, Florida; 
Albuquerque, New Mexico; and Wichita, Kansas. Undercover 
operations of these storefronts involve incidents that were 
both embarrassing and at times dangerous to public safety, such 
as placing one operation in close proximity to a school.
    Of course, undercover operations by their very nature 
involve a precarious and unique type of engagement with 
criminals in order to discover their crimes and uncover various 
levels of their organizations. However, such operations which 
often engage the general public and may impact the rights of 
citizens generally can be subject to excesses and abuse. 
Therefore, it is critical that we examine the policies and 
procedures governing such operations and that we question those 
managing the investigations.
    Management situation at the ATF has been uncertain during 
much of the period in which these operations were conducted. In 
2005, Congress transferred the law enforcement functions of the 
ATF, which had since its inception been part of the Department 
of Treasury, to the Department of Justice and required the 
appointment of a director to be subject to Senate confirmation.
    Between 2006 and July of last year, the ATF had five acting 
directors. During that time, the Senate was unable to confirm 
the nominees of both President Bush and President Obama, at 
least partly due to opposition from those who would like to 
weaken the agency generally from regulating the firearms 
industry.
    While Todd Jones had been serving as acting director since 
2011, he was formally nominated in January last year for the 
permanent position and confirmed in July. It appears that 
Director Jones has begun the type of leadership and stability 
at the ATF which has been sorely lacking. Early in his tenure 
as Acting Director he recognized the serious management and 
policy issues confronting the ATF. He took action to replace 
two-thirds of the top supervisors in Washington and began to 
implement the Monitored Case Program, which had been initiated 
just prior to his arrival at the agency.
    Under his leadership, oversight and approval of the 
undercover operations has become much more rigorous. And while 
we have to wait until after this hearing and the pending 
examination by the Department of Justice I.G. before we arrive 
at a comprehensive set of conclusions about these issues, I 
want to emphasize that we still need an effective and 
accountable ATF.
    Furthermore, I believe it is long overdue for this 
Committee to consider legislation to strengthen our firearms 
laws, although I recognize there will be a difference of 
opinion on what approach to take. However, I hope that we will 
all agree that we need to work together to support and 
reinforce this agency so that it can enforce whatever our 
firearm laws may be, as well as implement its other missions as 
effectively as possible.
    Thank you, Mr. Chairman. I yield back.
    Mr. Sensenbrenner. I thank the gentleman from Virginia.
    I now recognize the other gentleman from Virginia, the 
Chair of the full Committee, Mr. Goodlatte, for an opening 
statement.
    Mr. Goodlatte. Thank you.
    I want to thank Chairman Sensenbrenner for holding today's 
hearing on the ``Bureau of Alcohol, Tobacco, Firearms, and 
Explosives' Use of Storefront Operations.''
    Last year, after a series of articles published in the 
Milwaukee Journal Sentinel outlining the problems associated 
with ATF's failed storefront operation in Milwaukee known as 
Fearless Distributers, I along with Chairmen Issa and 
Sensenbrenner and Senator Grassley drafted a letter to the ATF 
Director, Todd Jones. In that letter, we asked the Director to 
reveal the details of the flawed operation. In response to that 
inquiry, ATF officials provided a briefing to congressional 
staff and Members on April 15, 2013. Additionally, the 
Department of Justice provided a written response on April 
30th, 2013.
    In the response from the Department of Justice, they 
acknowledge that Director Jones is ultimately responsible for 
all ATF Operations, yet claim he was not aware of this 
operation, which began 4 months after he assumed his duties at 
ATF, until January of 2013, a full year after it began. 
Throughout the duration of Operation Fearless, Director Jones 
had opportunities to be made aware of the systemic problems 
afflicting the operation in Milwaukee. We have heard Chairman 
Sensenbrenner outline the numerous issues with Operation 
Fearless, so there is no need to recount them here.
    What I would like to find out is at what point does the ATF 
believe the Director should become aware of such a flawed 
operation? One would think that the theft of three ATF 
firearms, including a fully automatic rifle, would trigger a 
reaction from the Director. But even if that somehow failed to 
get his attention, the burglary of an undercover storefront 
where nearly $40,000 in merchandise was stolen would surely 
rise to the level of the Director's office.
    Well, one would think so, but according to the response 
from the Department of Justice, Director Jones was not made 
aware of the serious questions about the manner in which 
Operation Fearless was conducted until he was informed that a 
reporter for the Milwaukee Journal Sentinel had inquired about 
the operation. I believe this calls into question either the 
information that Director Jones' subordinates are giving him or 
the level of involvement to which Director Jones is willing to 
engage. I do not expect Director Jones to be involved in the 
minute details of every operation being run by the ATF. 
However, when issues such as these arise, I expect swift and 
immediate action to take place.
    Perhaps equally as disturbing as the lack of executive 
oversight of this flawed operation is the lack of candor that 
ATF exhibited when briefing Congress on Operation Fearless last 
April. The information ATF conveyed regarding Operation 
Fearless left the impression that the problems were an isolated 
incident.
    However, according to another Milwaukee Journal Sentinel 
article in December of 2013, the problems facing the storefront 
operation in Milwaukee were not isolated. In fact, at around 
the same time Operation Fearless was being conducted, there 
were five other flawed storefront operations taking place in 
Portland, Oregon; Wichita, Kansas; Pensacola, Florida; Atlanta, 
Georgia; and Albuquerque, New Mexico. In an almost identical 
fashion, each of these operations suffered from a lack of 
supervision and control.
    Just last week, the Department of Justice's Inspector 
General announced that it will initiate an investigation that 
will examine the systemic deficiencies of these storefront 
operations.
    Like many, I question whether these operations attracted 
more crime than they prevented. I look forward to hearing from 
today's witness and I am committed to getting to the bottom of 
these serious problems and ensuring that they do not happen 
again.
    Thank you, Mr. Chairman.
    Mr. Sensenbrenner. I thank the Chairman of the full 
Committee for his statement.
    Without objection, other Members' opening statements will 
be made a part of the record.
    And also without objection, the Chair will be authorized to 
declare recesses during votes on the House floor.
    Our one witness today is Thomas E. Brandon, who was 
appointed Deputy Director of the Bureau of Alcohol, Tobacco, 
Firearms, and Explosives in October 2011. He is responsible for 
leading an agency of men and women charged with enforcing laws 
and regulations relating to firearms, explosives, arson, and 
alcohol and tobacco trafficking.
    Prior to being appointed Deputy Director, Mr. Brandon 
served as the Special Agent in Charge of the Phoenix Field 
Division, directing operations for field operations of the ATF 
in Arizona and New Mexico. He began his ATF career as a special 
agent in Detroit. He served in many management positions, 
including Special Agent in Charge and Assistant Special Agent 
in Charge of the Detroit Field Division, Supervisory Special 
Agent of the Detroit Arson and Explosives Enforcement Group, 
Special Agent with the Office of Inspection in Washington, 
Supervisory Special Agent of the Achilles Enforcement Group in 
Los Angeles, and the Division Intelligence Officer with the 
Phoenix, Arizona Field Division. Mr. Brandon also held the 
position of Chief of the ATF's National Academy in Glynco, 
Georgia.
    Mr. Brandon proudly served in the United States Marine 
Corps from 1978 to 1982. He earned his Bachelor of Science in 
Business Administration from Oakland University in Rochester, 
Michigan.
    Mr. Brandon, before you begin to testify, I will swear you 
in. Please rise, raise your right hand.
    [Witness sworn.]
    Mr. Sensenbrenner. Thank you, Mr. Brandon.
    Mr. Scott. Mr. Chairman?
    Mr. Sensenbrenner. Yes?
    Mr. Scott. Can I ask Mr. Conyers be recognized for a 
unanimous consent request?
    Mr. Sensenbrenner. Certainly.
    The gentleman from Michigan.
    Mr. Conyers. Thank you very much. I just wanted to observe 
that today, Mr. Chairman and Mr. Scott, we are conducting a 
hearing about the instances of poor decisions, and I have 
several observations about the situation and where we should go 
from here.
    But overall, we must keep in mind the important mission of 
ATF to protect us from gun traffickers who fuel violence on our 
streets every day.
    The engagement of undercover agents with the public 
sometimes creates situations that are physically dangerous or 
are threatening to our civil liberties, and underground 
operations therefore, of course, require strict guidelines and 
careful oversight. But we have learned that the ATF's 
storefront undercover operations did not have proper oversight 
and were poorly managed.
    The next point is that I am encouraged that the Director of 
ATF, Todd Jones, implemented management and policy changes in 
2011 soon after he was named acting director, and he has 
continued to address management deficiencies since being 
confirmed by the Senate last year.
    Prior to that time, ATF endured a period of acting 
directors when the Senate was unable to confirm a permanent 
director. I am confident that ATF is addressing the 
shortcomings which led to the problems with these operation 
storefronts, and I look forward to hearing from ATF about the 
changes being implemented.
    And finally, if we are truly interested in reducing gun 
violence, we must act now on legislation to strengthen our gun 
laws. I am not happy that more than a year into this Congress, 
this ATF oversight hearing is the only hearing even 
tangentially related to gun violence held by this Committee and 
this Congress, and during this time we have had tragic mass 
shootings in Connecticut, down the street in the Navy Yard, and 
every day in this country 32 people are murdered with a 
firearm.
    So while there is no single solution to gun violence, I 
urge that we adopt legislation to strengthen our gun laws and 
enact after careful consideration H.R. 452, the Gun Trafficking 
Prevention Act.
    So while we examine some of the storefront operations 
today, I hope we remain focused on finding ways to protect the 
public from the harms this agency was established to combat.
    I thank you for your consideration, Mr. Chairman and Mr. 
Scott. I yield back. Thank you.
    Mr. Sensenbrenner. Just as a note, we did invite Director 
Jones, and he decided to send Mr. Brandon instead.
    Mr. Brandon, without objection, your full testimony will 
appear in the Committee record. We would ask you to summarize 
your testimony in 5 minutes. I think you know what the red, 
yellow and green lights all mean, so please proceed.

  TESTIMONY OF THOMAS E. BRANDON, DEPUTY DIRECTOR, BUREAU OF 
           ALCOHOL, TOBACCO, FIREARMS, AND EXPLOSIVES

    Mr. Brandon. Thank you, Chairman Sensenbrenner, Chairman 
Goodlatte, Ranking Member Scott, Members of the Subcommittee, 
for allowing me to appear here today.
    I am pleased to be here to discuss ATF's undercover 
storefront operations, including our successes, the actions we 
have taken to address identified issues, and to correct some 
misunderstandings about these operations.
    A storefront operation is an investigative technique in 
which undercover officers operate a business designed to 
identify and proactively address criminal activity. ATF's 
storefront operations promote public safety as they target 
firearms trafficking and illegal firearms possession in high-
crime areas identified by our fellow state and local law 
enforcement partners and prosecutors.
    Current ATF policy provides that storefront operations are 
undertaken only in response to requests for the technique by 
our local law enforcement partners. Storefront operation 
proposals also require written concurrence from the 
jurisdiction's chief law enforcement officer.
    As a result of our storefront operations in Albuquerque, 
Atlanta, Milwaukee, Pensacola, Portland and Wichita, there have 
been nearly 300 defendants arrested, 259 convicted, and over 
1,300 firearms recovered to date.
    Like any long-term investigative operation, an undercover 
storefront carries risks. A properly managed operation 
minimizes those risks. ATF recognizes our responsibility to the 
public to mitigate the risks with sound management and 
professional execution.
    I acknowledge, Mr. Chairman and Members of the 
Subcommittee, that we could have improved our execution and 
management of some activities in certain storefronts. We have 
since implemented new policies and procedures to minimize the 
risk of such deficiencies occurring in the future.
    I want to assure you that public safety is of the utmost 
importance to Director Jones, me, and our new executive 
management team at ATF. We recognize that storefronts and other 
undercover operations require stringent oversight in all facets 
of planning and execution. Several policy and operational 
changes have been put in place that create a tighter process 
for the authorization, management, oversight and review of 
undercover operations. We have also made improvements to the 
Monitored Case Program designed to enhance coordination, 
communication and analysis between field and headquarters 
personnel. We have created an internal storefront manual 
addressing operational security, location, investigative 
support, status reviews, and closure of the storefront.
    We have taken reports about our storefront operations very 
seriously, particularly the allegation that we took advantage 
of individuals of diminished mental capacity. While we can and 
will improve our interactions with these individuals, let me 
state emphatically that ATF targets criminal conduct and not 
individuals.
    Additionally, it has been suggested that ATF agents paid 
higher than market prices for firearms during storefront 
operations. The market price for a street gun can vary widely 
depending on a variety of circumstances, including offender and 
weapon characteristics and the nature of the interactions 
between the agents and the suspects. Our primary concern is 
protecting public safety, but we also recognize the importance 
of utilizing resources and taxpayer dollars wisely. We must, on 
occasion, pay above market prices for firearms in order to 
reduce the risk that an individual we believe to pose a public 
threat does not leave the storefront with the firearm.
    Also, we conducted a review of the average prices paid for 
all guns in ATF undercover operations over the last 6 years. 
Our review indicated we paid less on average for firearms in 
the above-referenced storefront operations than in all other 
undercover operations over the same time period.
    Mr. Chairman and Members of the Subcommittee, I want to 
conclude by saying that ATF is proud to be at the front line 
against violent crime. We are recognized across the country for 
our expertise and take great pride in our successes that reduce 
gun violence and remove violent offenders from the streets. I 
am proud of the exceptional work done every day by ATF special 
agents, investigators and support staff combatting violent 
crime.
    I am happy to be here today to answer your questions but 
need to point out limitations on my ability to respond in 
certain respects. As you know, the Office of the Inspector 
General has announced that it is examining several specific 
storefront operations, and ATF is cooperating with the OIG's 
review.
    We also are in the process of reviewing large numbers of 
documents in connection with congressional requests.
    I will answer your questions as well as I can based on my 
knowledge of the matters discussed here today, but it is 
important to note that our understanding could change as we 
learn more from our ongoing document reviews and the OIG. Thank 
you.
    [The prepared statement of Mr. Brandon follows:]

    
    
    
    
    
    
    
    
    
    
                               __________



    Mr. Sensenbrenner. Well, thank you very much, Mr. Brandon.
    I guess your last statement disturbs me because the 
Milwaukee operation has been out there for a while, and you 
knew that somebody would be coming and testifying sooner or 
later before this Subcommittee, and you are still doing a 
document review.
    Let me ask you first, when did you first know about 
Operation Fearless?
    Mr. Brandon. It was during the planning for taking the 
operation down with the enforcement activity for the arrests. I 
knew that there was a storefront in Milwaukee and that there 
was a planned enforcement activity, and I believe that was 
September or October of 2012.
    Mr. Sensenbrenner. Was this before or after the articles 
started appearing in the Milwaukee Journal Sentinel?
    Mr. Brandon. That was before.
    Mr. Sensenbrenner. Okay. When did the first article appear 
in the Journal Sentinel? Does anybody know? Was it December? 
Okay. I would like to know why I learned about this from my 
hometown newspaper if the storefront was already being taken 
down prior to the appearance of the first article. After all, I 
am the Chairman of your oversight subcommittee, and it was not 
in my home town but very close to it.
    Mr. Brandon. Mr. Chairman, personally I want to apologize 
to you for that. This whole process was new to me, dealing with 
Capitol Hill, and with what I know now, I would have made sure 
you were aware of it.
    Mr. Sensenbrenner. Surely someone in the shop has been 
dealing with Capitol Hill because I have been here for a while, 
and again I do not like to hear about people tripping over 
their shoelaces on the front page of the Sunday paper.
    In December I like to watch Packer games without other 
things on my mind.
    Mr. Brandon. My family are big Packer fans. But again, to 
answer your question, sir, you should not have heard about it 
in the newspaper, period.
    Mr. Sensenbrenner. Okay. When did you learn about the other 
storefront operations?
    Mr. Brandon. That would be through the newspaper article.
    Mr. Sensenbrenner. Okay. When were you led to believe that 
Milwaukee was not an isolated incident?
    Mr. Brandon. That would be through the newspaper article.
    Mr. Sensenbrenner. You are talking about the Journal 
Sentinel articles?
    Mr. Brandon. Yes.
    Mr. Sensenbrenner. All of them?
    Mr. Brandon. Yes.
    Mr. Sensenbrenner. When did you become aware of the other 
botched storefront operations, particularly those in Pensacola, 
Portland, Wichita, and Albuquerque?
    Mr. Brandon. Mr. Chairman, those five other storefront 
operations all were initiated before the then acting director, 
now director, came on board on August 31st. I do know that 
there was one taken down in July of 2011 and another in October 
of 2011 that culminated the enforcement activity of those. But 
all of them were conducted actively prior to acting director, 
now Director Jones' arrival to ATF.
    Mr. Sensenbrenner. Okay. Well, somebody was acting director 
at the time, and in Portland you opened a gun store across the 
street from a middle school which ends up bringing criminals 
and more guns right in the vicinity of a school. That is an 
amazing lack of judgment, at least in my view. How did the 
location of the Portland gun store end up being decided to be 
right across the street from a school?
    Mr. Brandon. From my briefing, they were looking for a 
lease that would tie them to 1 year as opposed to two. But, Mr. 
Chairman, I share your concerns, and that was a mistake, and it 
should have never occurred across from a school. They changed 
the hours when they learned of it and made it in the evening so 
the children would not be at school. But bottom line, it should 
not have happened. We have new reforms now in the storefront 
manual. There is a rigorous review that will prevent that from 
happening.
    Mr. Sensenbrenner. Okay. The other thing that seems to be 
somewhat common is that people of diminished mental capacity 
seem to be recruited for one job or the other. We know of at 
least two of them. Is that going to stop, or are we still going 
to be hiring these folks and maybe giving them tattoos at 
taxpayers' expense?
    Mr. Brandon. Mr. Chairman, again, I share your concern very 
personally and heartfelt about people with diminished mental 
capacity. The ATF targets criminal conduct, not people with low 
IQs. But in the case with the defendant that had the tattoo, 
they came into the storefront wanting to get the tattoo. The 
undercovers actually were trying to talk them out of it and 
were saying, hey, let us hold off, let us check with our 
business manager or something, because it is our logo. And then 
they, in fact, came back into the storefront with the tattoo 
artist and left and got them. So it was not something approved.
    But also, ATF, the undercover agents, to enhance their 
undercover capacity, gave them each $150. Again, that was not 
great judgment. A Federal judge has ordered us to remove the 
tattoo. We are happy to comply with that. The defendant has had 
two sessions where he was supposed to go. He did not show up. 
But we remain ready to comply with the judge's order.
    Mr. Sensenbrenner. It shocks me that it has to become a 
Federal case to get a tattoo removed.
    The gentleman from Virginia, Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Brandon, you indicated that the present process for 
setting up one of these storefront operations involves 
concurrence with a request from the local law enforcement 
agency?
    Mr. Brandon. That is correct, sir.
    Mr. Scott. What else is in the process? That can not be the 
only thing.
    Mr. Brandon. No. For any undercover operation for a 
storefront, in this case, to go forward, it has to go before an 
undercover review committee. That was my direction as far as it 
now includes someone from the Department of Justice, an 
attorney from the Criminal Division who is a voting member on 
the undercover review committee. That puts us in line with FBI 
and DEA on their policies. And then also the rigorous look at 
compliance with our standard operation and procedures, the 
storefront manual that I said that was published by Assistant 
Director Ron Turk.
    Mr. Scott. Do the people involved in it have any special 
training, or do they just learn on the job?
    Mr. Brandon. Well, that is another thing I directed, is 
that before an undercover storefront operation can go, they 
have to have training from the management team online down to 
the case agents by people that have experience in this, and 
also have proven successes in it.
    Mr. Scott. Have you seen a difference in the storefront 
operations, the sting operations now than in the past?
    Mr. Brandon. Well, our activity has gone down. Right now we 
have zero, but we have gone to controlled undercover 
environments, and that is the whole purpose of the storefront. 
It enhances the public safety, the undercover agents' safety, 
and also is able to get good evidence on audio and video. We 
keep refining and retooling to enhance getting violent 
criminals off the street.
    Mr. Scott. These incidents we have been reading about have 
clearly been an embarrassment. Have you fixed it so we will not 
have to read about these in the future?
    Mr. Brandon. Yes. I mean, I would like to put some of them 
in context, but absolutely. We are reforming under Director 
Jones' leadership, and the oversight from headquarters has been 
significantly enhanced.
    Mr. Scott. Now, are there any problems with enforcing--do 
we need to have any legislation to help you enforce your gun 
laws, like background loopholes, including the gun show?
    Mr. Brandon. Sir, we enforce the laws that you give us, and 
we will continue to do so.
    Mr. Scott. How does the gun show loophole and other 
loopholes in the background check hurt your ability to keep 
guns out of the hands of people who should not have them?
    Mr. Brandon. Well, in general, the purpose of a storefront 
operation is to absorb the black market supply of guns on the 
street. It is never to go after people and firearms in legal 
commerce.
    Mr. Scott. What kind of statutes are available to help in 
preventing gun trafficking?
    Mr. Brandon. Again, I think it is well known, but we use 
the laws we enforce to address violent crime, and we will 
continue to do so, and if you give us new laws, we will apply 
them accordingly.
    Mr. Scott. What about a straw purchase where someone buys a 
firearm on behalf of someone else? Are the laws strong enough 
in that area?
    Mr. Brandon. Again, I just leave it up to us for enforcing 
it. It has been well known that that is viewed as being a soft 
penalty for those things. But again, we just investigate the 
criminal activity.
    Mr. Scott. What is the penalty now for someone who 
purchases a firearm on behalf of someone else?
    Mr. Brandon. I believe under the Gun Control Act it can go 
up to 10 years, but under the sentencing guidelines it is 
usually a very minor thing and it is usually a minimal 
sentence.
    Mr. Scott. One of the high-profile cases involving ATF was 
the Boston Marathon bombing. A lot of agencies were involved. 
Was there a problem in coordinating your efforts?
    Mr. Brandon. No. In fact, I remember where I was in the 
Detroit airport when I learned of that, and I immediately 
contacted my counterpart, Sean Joyce, who is the deputy 
director of the FBI, and I said, hey, this is clearly in my 
view an act of terrorism, but any and all resources are 
available to ATF to work collaboratively with the FBI. The FBI 
drew on our resources, and we had a very good working 
relationship to share our expertise with explosives and post-
blast incidents.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Sensenbrenner. Thank you.
    The gentleman from Virginia, Mr. Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Brandon, welcome. I also want to thank you for meeting 
me in Front Royal, Virginia last year to visit your canine 
training facility, which is an impressive operation, and you do 
good work in making sure that law enforcement agencies around 
the world have dogs capable of detecting explosives and 
firearms and so on. So, thank you for that.
    I do want to focus, however, on what happened in Milwaukee. 
When this program began in January of 2012, Director Jones was 
also serving as U.S. Attorney for Minnesota. In fact, he served 
as both ATF Director and U.S. Attorney for much of 2012; is 
that not correct?
    Mr. Brandon. That would be correct.
    Mr. Goodlatte. How many days per week was Director Jones in 
the ATF office?
    Mr. Brandon. He would arrive on Monday morning, flying in 
from Minnesota, and then I believe fly out late Thursday 
evening.
    Mr. Goodlatte. And this was every week?
    Mr. Brandon. Yes.
    Mr. Goodlatte. What percentage of his time would you say 
was dedicated to ATF business?
    Mr. Brandon. Well, he was doing double duty. I mean, the 
man was working I would say 18, 16, 17 hours a day. So he was 
fully committed to being the director, acting director.
    Mr. Goodlatte. Well, jobs like these and jobs of Members of 
Congress are definitely double-duty jobs. I mean, all of us 
work 80, 90 hours a week as well, for one job. So do you think 
the director of the ATF should be a part-time position where 
you are responsible for carrying out another, clearly full-time 
operation as the U.S. Attorney for the entire state of 
Minnesota?
    Mr. Brandon. No. I think we were happy that he was 
confirmed as our director.
    Mr. Goodlatte. Given all of the controversy that was 
surrounding the ATF at the time, do you not think the agency 
needed a full-time director?
    Mr. Brandon. Yes. It was needed, but he was fully engaged.
    Mr. Goodlatte. Why did the ATF fail to disclose to Congress 
the numerous other flawed storefront operations when they 
provided briefings in April of last year?
    Mr. Brandon. Mr. Chairman, I share your concern on that. 
The assistant director, Michael Gleysteen of Office of 
Professional Responsibility and Security Operations, the 
briefing was just for Milwaukee and was delivered in that 
context.
    Mr. Goodlatte. We were given the impression as a part of 
that briefing that Operation Fearless was an isolated incident.
    Mr. Brandon. I am unaware of that impression, but I knew 
that the goal was to deliver the information. In fact, that 
investigation, when I learned of it, I brought Michael 
Gleysteen into my office and talked to him and it was kind of a 
culture change in ATF. I said, hey, get down to the bottom of 
this, and he had a team there flying overnight, and it was a 
programmatic review of how the investigation was conducted. I 
know that his intention in delivering that briefing was solely 
on Milwaukee.
    Mr. Goodlatte. All right. Well, let us expand it beyond 
Milwaukee, which is what this hearing is about today.
    In your testimony, you claim that the ATF conducted 37 
storefront operations between 2009 and 2013. We know of at 
least six operations that had serious problems associated with 
them. Right now, are you prepared to tell us that these were 
the only six operations with serious problems?
    Mr. Brandon. Mr. Chairman, I know the OIG is looking at 
some of those storefronts. So with the information I have right 
now, I would say that.
    Mr. Goodlatte. Would you call a program where one in six 
operations has significant problems a successful one?
    Mr. Brandon. Well, I do. I mean, putting this into context, 
there were deficiencies, like I said in my opening statement, 
with some of these storefronts, but there have been many 
successes. It still remains a viable investigative technique 
when managed well.
    Mr. Goodlatte. Right. That last part is key, though, 
adequate supervision, right?
    So right now you say you are down to zero. What are your 
future plans going forward? Because it seems to me that the 
technique, which is not a new one, has not been used 
exclusively by ATF. I am familiar with other operations in 
other places at other times used by law enforcement to deal 
with fencing of stolen goods and other things that have 
successfully led to a lot of good prosecutions. They are 
difficult to maintain for a long period of time, and they do 
require very significant supervision. What are the ATF's plans 
moving forward?
    Mr. Brandon. Mr. Goodlatte, again, I share your concerns. 
Some of the reforms have been with the ATF's storefront manual. 
What happened here is I know from being a career ATF agent over 
25 years, you had earnest, hard-working undercover ATF agents 
having successes in various states, and the policy was lacking 
for this undercover activity. It is now in place. From my 
observation of this, that is how----
    Mr. Goodlatte. The policy is in place, but there are no 
operations in place. What are your future plans?
    Mr. Brandon. Well, we are receptive to the storefront 
investigative technique. My observation is just because they 
are so resource intensive, and then getting them all 
prosecuted, the cases, there is an ebb and flow of activity 
because the divisions are staffed to a certain level. Lately we 
have been under-staffed in many divisions. So I could picture 
it picking up as we bring on new people and get them properly 
trained.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Sensenbrenner. The gentleman from Michigan, Mr. 
Conyers, the Chairman Emeritus of the Committee.
    Mr. Conyers. Thank you, Mr. Chairman.
    Deputy Director Brandon, the vast majority of licensed gun 
dealers seem to abide by the law, but a small percentage of 
dealers violate the law and supply a disproportionate amount of 
guns used in crime.
    Now, is it not correct that the ATF is generally limited to 
inspecting gun dealers to once per year?
    Mr. Brandon. That would be correct, sir.
    Mr. Conyers. And due to resource constraints, how 
frequently are most dealers actually inspected?
    Mr. Brandon. I recall I think it is once every 7 years.
    Mr. Conyers. Well, that is, to me, a very important 
consideration in this discussion this morning.
    Is the ATF allowed to require gun dealers to physically 
check their inventory against their records, which would, of 
course, help deal with instances of missing guns and the 
successful tracing of guns used in crime?
    Mr. Brandon. Congressman, they are not required.
    Mr. Conyers. Well, then the natural question that follows 
is why not?
    Mr. Brandon. We are prohibited from requiring that.
    Mr. Conyers. Prohibited by whom?
    Mr. Brandon. It is in the appropriations, I believe.
    Mr. Conyers. Well, I think I am going to have to have staff 
research this because I am not sure if that is correct or not.
    Is that correct?
    Okay. Staff assures me that that is a correct response.
    If a gun dealer is found to have committed serious 
violations and is in jeopardy of losing their Federal license, 
is it not true that they may transfer their license to a store 
employee or a family member so that the business may continue 
operating without accountability for the violations?
    Mr. Brandon. Congressman, that is handled on a case-by-case 
basis, and I do know of licensees trying to do that.
    Mr. Conyers. Well, I am hopeful that that will be looked 
into carefully here on the Committee and by you and the 
operation itself. I think that is an important consideration.
    Thank you, Mr. Chairman. That ends my questioning of the 
witness.
    Mr. Sensenbrenner. Well, thank you very much.
    The gentleman from North Carolina, Mr. Coble.
    Mr. Coble. Thank you, Mr. Chairman.
    Mr. Brandon, good to have you with us. Let me combine or 
consolidate three or four questions into one, Mr. Brandon. How 
many firearms have been stolen from ATF agents' vehicles over 
the past, say, two or 3 years?
    Mr. Brandon. I do not know the exact number, sir, but I 
would be happy to take that back and get the answer for you.
    Mr. Coble. That would be fine if you could do that. And 
also, I would like to know how many were fully automatic. And 
if any firearms stolen from ATF agents' vehicles particularly 
fully automatic firearms, which individuals at headquarters 
would be notified?
    Mr. Brandon. I was notified of the incident in Milwaukee 
when the rifle that belonged to a special response team member 
who was also doing the undercover. That firearm was stored in 
an SUV that was alarmed and locked, and also in a vault that is 
bolted to the car, or to the SUV in this case. The people that 
broke into the vehicle, it was in broad daylight, parked in an 
area that had pedestrian traffic. But that would be the one 
instance, to answer your question, sir, that I know of, of an 
automatic firearm, in this case a three-round burst, that was 
stolen.
    Mr. Coble. And if you could get back to us about the total 
number that was stolen, I would be appreciative to you for 
that.
    Mr. Brandon. Yes, sir.
    Mr. Coble. I am told, and I do not recall who told me or 
where I read it, but that one individual purchased a firearm 
for a few hundred dollars at Gander Mountain and turned around 
and sold it to the ATF for a couple of thousand dollars a few 
short hours later. Are you familiar with this?
    Mr. Brandon. Yes, sir.
    Mr. Coble. Elaborate a little bit more, if you will.
    Mr. Brandon. Sure. Again, that was a concern to me, and 
also it is part of the reforms in the storefront manual. The 
firearms were not being traced when they were purchased because 
they were afraid to alert and compromise the undercover 
location through the trace process. We have methods to be able 
to trace it but not alert the firearms dealer so that we could 
be aware if there is any type of trend that people are going 
into a licensee, buying it, and turning around and bringing it 
to us. But the reform is in the storefront manual to address 
that.
    Mr. Coble. I thank you, sir.
    I yield back, Mr. Chairman.
    Mr. Sensenbrenner. Thank you very much.
    The gentleman from South Carolina, Mr. Gowdy.
    Mr. Gowdy. Thank you, Mr. Chairman.
    Special Agent Brandon, I was told this morning by my friend 
of 20 years, Special Agent C.J. Hyman, that you are a good 
person and a stand-up guy. So I am going to ask the same 
questions that I was going to ask, but I will ask them in a 
different tone of voice given C.J. Hyman vouching for you.
    I want to start by asking you this. They had a very 
successful storefront operation in Greenville, South Carolina, 
led by Special Agent C.J. Hyman and a prosecutor by the name of 
Lance Crick. Why not get those guys to come do training? It 
should not be that tough to run a storefront operation the way 
that Chairman Goodlatte and Chairman Sensenbrenner and Mr. 
Scott and others would expect it to be run.
    So when you have a group that has done it successfully, my 
advice to you--you do not have to take it--get C.J. and Lance 
to come to Glynco or wherever and train your folks on how to do 
it the right way.
    Mr. Brandon. Congressman, again, it is a pleasure meeting 
you here. and C.J. spoke highly of you, and I think the world 
of him.
    But your point we already incorporate in the storefront 
manual. That was an obvious thing of, hey, why do not we have a 
mentoring process of people who have been successful where we 
have done them all around the country and teach that. So now 
that is part of our standard operation procedures. I agree 
completely with you.
    Mr. Gowdy. I am, by far, the worst lawyer on this panel, 
but I do not think even I indicted someone who had the alibi of 
being in prison at the time the crime was committed. If I did, 
I do not recall doing that. How does that happen?
    Mr. Brandon. I am unfamiliar with the example you are 
stating.
    Mr. Gowdy. There was a report that one of the folks 
arrested or indicted was actually in prison at the time the 
alleged crime was committed, which is a really good alibi.
    Mr. Brandon. I have to agree with you.
    Mr. Gowdy. Well, if you do not know, then it is not fair to 
ask you about it.
    Mr. Brandon. I do know about the things in Milwaukee where 
there were four instances. Again, I was not pleased when I 
heard this. It is addressed in the storefront manual, proper 
identification. This goes back to that operation, not having an 
outside cover team. That was a deficiency. It should have been, 
because then you would follow the people away. I know the 
experience of some of you as prosecutors, that you do it to 
identify them without compromising the storefront.
    So in complete candor, that is how I tracked it down, and 
there were deficiencies. I will add, not that it minimizes 
anything, the people were not jail, you know booked and jailed, 
when they questioned them saying, hey, I am not that guy, they 
were taken to the command post, and then when it was confirmed, 
they were released and driven back to their homes. So I agree 
with you, there is no justification for that.
    Mr. Gowdy. Well, my colleagues have done such a good job of 
asking you about the storefront operations, I want to switch 
gears in the little bit of time we have left.
    Mr. Conyers, the Ranking Member from Michigan, asked again 
about additional gun legislation, and I had a group of moms 
come and meet with me in Greenville last week, actually, 
incredibly conscientious moms who wanted to meet with me about 
closing whatever loopholes remain with respect to background 
checks.
    It just strikes me, as an old, washed-up prosecutor, that 
before we talk about new weapons in your arsenal, it is fair to 
ask how are we doing enforcing the ones that we already have. 
You can not do it this morning, and you may not be able to do 
it in a month, but at some point it would help me, and I 
presume other Members of the Judiciary, to see a list of 
referrals from local law enforcement.
    924(e) is a perfect example. That is a mandatory minimum 15 
years. I mean, even for a Department of Justice that does not 
like mandatory minimums, that is a big hit.
    So how many referrals from locals did we not accept? How 
many did the AUSA decline prosecution on? We could do it with 
924(e)s, we could do it with 924(c)s. I know lying and buying 
cases do not carry a lot of bang for the buck, but let us fix 
that part of it. If that is why we are not prosecuting lying 
and buying cases or current background check failures, let us 
fix that. Let us make it where it is more attractive to your 
agents to investigate those cases, or more attractive to the 
prosecutors to prosecute them.
    But at some point it would be helpful to us to know whether 
you are getting the referrals from local law enforcement and 
not investigating or not adopting the case, or whether you are 
and working them up and the prosecutors are declining to 
prosecute it. That would be helpful to me. If we are going to 
discuss new weapons, I would really like to know how we are 
doing with the ones that we currently have.
    And with that, give my best to the agents in Greenville.
    Mr. Brandon. Congressman, I agree with you, and I will take 
that back to the Department. I just want to add that in 
Milwaukee, there were four 924(e) defendants in the Milwaukee 
storefront. And as a career guy, those are great cases, great 
targets.
    Mr. Sensenbrenner. I thank the gentleman from South 
Carolina.
    There are a couple of loose ends that I would like to ask 
you, Mr. Brandon, to provide the Subcommittee with some more 
information. The information that I received indicate that 
there are about 60,000 Federal firearms licensees, and ATF has 
got about 500 inspectors. Now, if there is an inspection that 
is taking place once every 7 years, that means that those 500 
people do an average of 18 inspections a year. Certainly, we 
want to make sure that the inspections are done in an adequate 
and timely and frequent-enough manner.
    So can you provide the information on how many active 
inspectors there are, and can you also have some kind of a log 
on how often or how much of their time the inspectors actually 
do inspecting?
    Mr. Brandon. Yes, Chairman, I will take those back to the 
Department and get you the specific numbers. But again, to put 
it in context, as far as inspections through the trace process, 
we prioritize. If a number of crime guns are being traced to a 
specific FFL, in the interest of public safety those will be 
inspected more frequently.
    Mr. Sensenbrenner. I understand that. But there seems to be 
a disconnect on the numbers on that, and we are going to need 
to have the numbers to make a determination on that.
    The other point I would like to make is we are going to 
have somebody from the ATF back, hopefully Mr. Jones or you or 
both of you, after the Inspector General's report on storefront 
operations, largely to see how many of the recommendations of 
the Inspector General, whatever they may be, will end up being 
adopted; and if not, why not; and if they are not being fully 
implemented, why not. So be advised; we will see you again.
    Mr. Brandon. It has been a pleasure, sir.
    Mr. Sensenbrenner. Thank you very much.
    And with that, without objection, the Subcommittee hearing 
is adjourned.
    [Whereupon, at 10:53 a.m., the Subcommittee was adjourned.]


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