U.S. audit finds lack of oversight in ATF probes of cigarette smuggling

Reuters News
Posted: Sep 25, 2013 10:25 PM

By Lisa Maria Garza

(Reuters) - Federal agents conducted dozens of income-generating tobacco sting operations without approval during the last seven years and misplaced more than 2 million cartons of cigarettes, according to a report released by the U.S. Department of Justice on Wednesday.

Inspector General Michael Horowitz criticized the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) in the report for "a serious lack of oversight", citing 35 "churning" investigations that were not reviewed by the agency's Undercover Review Committee for prior approval.

The committee did not meet between February 2005 and January 2012, the report said, although it did not give an explanation for the lack of meetings.

Despite the lack of required prior approval, churning investigations are allowed under statutory authority, according to the report, and are conducted to generate funding from illegal transactions to pay for expenses incurred during the investigations.

More than 2.1 million cartons, containing 420 million cigarettes, purchased during at least 20 separate ATF sting operations, are missing, according to the audit. The estimated retail value of the cigarettes is $127 million, according to the report.

ATF disputes the numbers in the inspector general's audit, an agency spokeswoman said.

"The OIG report inaccurately implies ATF cannot account for 2.1 million cartons of cigarettes or that the cigarettes are missing," Colbrun said in an email.

The ATF did a reconstructive inventory that showed 447,218 cartons were not accounted for because of "insufficient documentation," Colbrun said.

The black market value, which the cigarettes were sold at during the sting operations, is estimated at $7.2 million, according to the ATF.

Colbrun did not directly address the report's conclusion that the investigations were carried out without prior approval, but she said a new policy would require churning investigations to be approved by a team of management officials, including a Justice Department official and the U.S. Attorney's Office.

The inspector general identified one unapproved investigation that allegedly allowed a tobacco distributor working for ATF as a confidential informant to pocket more than $4.9 million in profits from cigarette sales to criminal suspects without submitting an expense report.

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ATF officials explained that the money was necessary to cover the informant's expenses, the report said.

"Churning has been and continues to be an effective tool for ATF in combating the illicit trade in tobacco products with a significant impact on violent crime," Colbrun said.

The ATF has been under significant scrutiny after U.S. Border Patrol agent Brian Terry was killed in a shootout in the Arizona borderlands in December 2010.

His death was linked to an ATF sting operation dubbed "Fast and Furious," which allowed weapons to slip across the border to Mexico.

A number of guns bought in the scheme were later recovered from crime scenes in Mexico. Two tracked by the ATF were also retrieved from a remote spot in southern Arizona where Terry was killed in a shoot-out with suspected bandits.

(Reporting By Lisa Maria Garza; Editing by Ken Wills)