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Industry News: Suit Reveals ATF’s Inconsistencies
By Robert M. Hausman

The second denial of a Bureau of Alcohol, Tobacco, Firearms & Explosives motion for summary judgment in a suit brought against it by a licensee, underscores some of the reasons why three U.S. senators (two from Idaho and another from Louisiana), have placed a hold on the confirmation of Michael J. Sullivan as director of the industry’s regulator.

The suit, Jim’s Pawn Shop, Inc. d/b/a/ Jim’s Gun Jobbery v. Carton Bowers, Director of Industry Operations, Charlotte Field Division, Bureau of ATF, filed in the U.S. District Court for the Eastern District of North Carolina, stems from the June 2005 revocation of the shop’s FFL for allegedly “willfully violating the Gun Control Act of 1968 (GCA).”

The suit could be important for all licensees as its outcome hinges on the definition of actions constituting a “willful” violation of the regulations. The suit also seemingly confirms (though ATF has long-denied it) that the agency may indeed have a “zero tolerance” policy for record-keeping errors on the part of licensees. An affidavit filed in the case quotes an ATF inspector as saying licensees cannot make mistakes. This standard is higher than the standard ATF itself is able to achieve.

The retailer does not dispute the various violations found by ATF, but contends that the violations were not willful, as is required for revocation of a license.

In the latest hearing on ATF’s motion for summary judgment (a motion made to have the case dismissed), the agency argued that “a willful violation of the administrative provisions of the GCA occurs when a federal firearms licensee displays a “purposeful disregard or plain indifference to a known legal obligation” and cited another firearms case from 2006, RSM, Inc. v. Herbert, which ATF claimed supported its “willful” definition.

The court, however, disagreed, stating that “while willfulness may be inferred from an individual’s plain indifference to a legal requirement, a licensee’s repeated violations of the GCA do not necessarily compel a finding of willfulness as a matter of law.

The court distinguished between the present case and that of RSM, which involved a dealer who had been cited for over 900 violations after having been twice counseled for previous violations. The violations for which Jim’s Pawn Shop was cited did not rise to the level of those involved in RSM, the court found.

During the hearing, evidence was presented countering the willfulness claims, such as the licensee’s attempts to be helpful in addressing issues raised during ATF’s inspections. A report was also cited by an ATF hearing officer who said the retailer “went to great lengths” to determine the disposition of all firearms acquired but not found on the premises.

Particularly important was an affidavit filed by the retailer whose daughter had asked an ATF inspector how she could correct a mistake that she might make...and his response was that she “could not make a mistake,” giving credence to the view that the agency has a zero tolerance policy for errors on the part of licensees.

The court further noted that Jim’s Pawn sold about 4,000 firearms annually. While 1,600 violations were found during ATF’s 1996 inspection, the number “dropped considerably” in subsequent inspections. The court noted that this was evidence that Jim’s was not indifferent to the requirements of the GCA.

In conclusion, the court found ATF had failed to meet its burden to show evidence of genuine issue of material fact as to the willfulness of the licensee’s actions. A bench trial of the matter is scheduled.

U.S. Firearm Production Gained in 2006

Firearm production during the year 2006 increased in all categories according to the latest available statistics compiled by the Bureau of Alcohol, Tobacco, Firearms & Explosives.
  • Pistol production increased to 1,021,260 during 2006, compared to a total of 803,425 during 2005.

  • Revolver manufacture totaled 382,069 in 2006, versus 274,205 the year before.
  • Rifle production witnessed a more modest gain to 1,496,505 as opposed to 1,431,372 in 2005.
  • Shotgun manufacturers produced 714,618 in 2006 as compared to 709,313 in 2005.
  • Miscellaneous firearms produced in 2006 totaled 35,872 compared to 23,179 the year before.
  • Firearm exports from the U.S. saw very significant gains. Some 144,779 pistols were exported from the U.S. in 2006 versus 19,196 in 2005.

  • Revolver exports dipped slightly to 28,120 in 2006 from 29,271 in 2005.
  • Rifle exports jumped to a total of 102,829 in 2006 versus 92,098 in 2005
  • Shotgun exports were 57,771, a significant increase over the 46,129 exported during 2005.
  • Miscellaneous firearm exports came to 34,022 in 2006 compared to 7,988 in 2005.
Sanetti Chosen to Lead NSSF

Sturm, Ruger & Company, Inc. has announced that its President, Stephen L. Sanetti, has left the company to accept the position of President and Chief Executive Officer of the National Shooting Sports Foundation, the trade association for the firearms industry.

Sanetti was hired by Bill Ruger in 1980 to be Ruger’s first general counsel and rose up through the executive ranks to become, in 2003, president and chief operating officer and vice chairman of the Board of Directors. A founding member of the industry’s Firearms Litigation Support Committee, Sanetti helped direct the successful coordinated response to municipal lawsuits that threatened the firearms industry in the late 1990s.

The connection between the NSSF and Ruger has always been strong. Bill Ruger was a founding member of its Board of Governors in 1961. It is the trade association for the shooting, hunting, and firearms industry, with a membership of over 4,000 manufacturers, distributors, retailers, sportsmen’s organizations, and publishers.

“I am delighted that the NSSF Board has chosen Steve Sanetti to be its next CEO,” said Ruger CEO Michael Fifer. “His knowledge of the industry and the issues confronting it, together with his vast product acumen make him a natural for this important and publicly visible position. I look forward to continued close ties between Ruger and the NSSF with Steve Sanetti as its CEO, as we all strive to preserve our heritage of hunting, shooting, and responsible firearms use. While Steve’s vast industry experience and passion for firearms will be missed by Ruger, we will share in the industry’s good fortune of having Steve lead the NSSF,” Fifer concluded.

“It was no easy decision to depart Sturm, Ruger, since I’ve devoted my life to it since I left the Army 30 years ago,” said Sanetti. “But I feel an even higher calling where I can, I hope, be of assistance to the entire firearms industry.”

There was widespread praise within the industry for the choice of Sanetti to replace semi-retiring Doug Painter at the NSSF helm. Trade sources within the industry indicate that Sanetti’s decision to leave Sturm, Ruger after so many years was reportedly due to conflicts in management style between Sanetti and Ruger’s board, which has taken a more active role in managing the company as of late.

AR-15 Rifles Strong Sellers

AR-15 style rifles are said to be selling strongly - particularly in the southwest. One retailer, who had frequently exhibited at gun shows to obtain much needed revenue to keep his business going, has since discontinued attendance at the shows as his shop has become so busy selling the black rifles.

Micro-Stamping Bill Stalls in Connecticut

The General Assembly has set aside a proposal requiring any newly made semiautomatic pistols sold in Connecticut after Jan. 1, 2010, to employ a fledgling technology that would brand an alphanumeric code on bullet cartridges when fired. The industry made a unified stand against the bill with companies such as Colt’s, Marlin, O.F. Mossberg, Sturm, Ruger, Remington, Smith & Wesson, ATK-Federal Cartridge, and Winchester Ammunition taking part.

Prominent Anti-Industry Lawyer Sentenced

William S. Lerach, a former partner of the law firm Milberg Weiss, responsible for representing numerous cities in litigation against the firearms industry, has been sentenced to two years in federal prison and ordered to forfeit $7.75 million for concealing illegal payments to a plaintiff, following his guilty plea to a charge of conspiracy to obstruct justice.

The frivolous lawsuits against the industry filed by Milberg Weiss led to the passage of the Protection of Lawful Commerce in Arms Act.

Lerach, of La Jolla, California, admitted to an arrangement in which his law firm made payments to people to be on call as plaintiffs in class-action lawsuits that were filed against publicly-traded companies when their stock prices dropped.

Prosecutors for the U.S. Attorney’s office of the Central District of California, who worked on the case for seven years, say that Lerach and others lined up the plaintiffs ahead of time to gain an illegal advantage over other law firms engaged in the same suits. By being designated the lead plaintiff, the law firms stood to reap a larger share of any eventual lawyers’ fees awarded.

Prosecutors say that in more than 150 of the firm’s class-action cases from the 1970s to 2005, the law firm earned more than $216 million in attorneys’ fees, and paid out $11 million to the on-call plaintiffs.

Lerach will serve his time in a minimum-security federal prison in California.

Background Checks Rise

Data released by the FBI’s National Instant Criminal Background Check System (NICS) shows 942,556 checks were reported in January, a 5.3% increase from the 894,608 reported in January 2007.

Adjusted state figures show background checks up by 3.4% year-over-year. In 2007, NICS reported a total of 11,177,335 background checks, an increase of 4.1% compared to 2006.

The increase in background checks coincides with an increase in excise tax collections from firearms and ammunition manufacturers, another key economic indicator for the firearms industry.

The author publishes two of the small arms industry’s most widely read trade newsletters. The International Firearms Trade covers the world firearms scene, and The New Firearms Business covers the domestic market. Visit www.FirearmsGroup.com. He may be reached at: FirearmsB@aol.com.

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