ATF sting in Milwaukee flawed from start

From the outset, an undercover gun-buying sting by federal agents in Milwaukee was plagued by confusion.

Local ATF agents wanted to target their longtime nemesis, the Outlaws. They had been going after the aging motorcycle gang with what they dubbed "Operation Smokin’ Piston," breaking up untaxed cigarette operations on the south side, but were having little success nailing the gang.

It was 2011. Fellow agents with the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives familiar with the Outlaws elsewhere in the country came to Milwaukee to offer some advice: Ditch the tobacco operation. The Outlaws were savvy to that type of sting. Instead try a fake storefront, a “surplus shop” and sell T-shirts, motorcycle parts and other goods as a front.  Situate the store in the gang’s prime territory: Police District 2.

That’s how to get the Outlaws, the experienced agents advised.

But higher-ups in the agency wanted a broader focus to the operation. With a violent crime rate double the national average, Milwaukee had more pressing problems. An ATF supervisor wanted the operation to target all gun violence in the city.  The sting should be located on the north side, closer to a majority of the firearms violence in Milwaukee, they said.

After the plan had been approved and without permission from headquarters, the location of the storefront was changed and Operation Fearless Distributing was hatched — not in District 2 but in a former sign factory north of downtown on a quiet street in Riverwest.

It was just the beginning of an operation marred by mismanagement and mistakes that would ultimately spark major reforms in how the federal agency conducts undercover storefront stings.

Those details and others were released in a report issued by the Justice Department's Office of the Inspector General last week, three years after a Milwaukee Journal Sentinel investigation exposed major problems with the Fearless sting and other similar undercover operations nationwide.

The inspector general’s 112-page reportconfirmed the depth of the problems, calling them “avoidable,” and said significant reform was needed for such operations to be done correctly.

Investigators with the office also found the ATF and other federal law enforcement agencies were in violation of a 43-year-old disabilities law. Although they said they found no evidence that agents targeted people with disabilities, they found that operations in "Pensacola, Wichita, Milwaukee, and Portland storefronts each had one or two persons who regularly frequented the storefront, provided assistance to the undercover agents at times, and who were later alleged to have an I/DD (intellectual or developmental disabilities)."

The Justice Department has formed a group to study how to comply with the law.

The ATF has stopped running storefronts for now, but leaders stand by the tactic as an effective way to combat gun violence, noting the many guns and drugs seized in such operations and charges filed.

The inspector general report noted such operations are costly — the cash outlay for each one examined exceeded $200,000, excluding salaries and overtime. In addition, the stings can actually encourage people to commit crime and they typically succeed only in snaring low-level criminals, the report says.

The goal was to gather intelligence for bigger cases. But the investigators said based on the way the operations were conducted they "were not surprised that ATF’s storefronts did not lead to the arrest of leading gang figures or the dismantling of criminal organizations."

Target: Biker gang

In Milwaukee, the U.S. attorney’s office had been briefed on the storefront plans before the operation was launched. Prosecutors later told inspector general investigators they were initially skeptical, in light of ATF’s failures in “Operation Fast and Furious,” where agents on the Mexican border allowed thousands of guns to pass into the hands of criminals. One ended up at the scene of the murder of a border patrol agent.

But ATF officials assured federal prosecutors the Milwaukee storefront would be safely run. Milwaukee Police Chief Edward Flynn and District Attorney John Chisholm’s office also were briefed, the report says.

Yet Flynn later told investigators he “did not recall any mention of the Outlaws motorcycle gang,” when he endorsed the plan.

The FBI was invited to collaborate with the ATF in the Fearless Distributing storefront, but the agent assigned had reservations about the planning, security and intelligence gathering. An FBI supervisor told investigators she was "uncomfortable" with the entire operation. The FBI pulled out fewer than three weeks after the store opened, the report says.

Fearless opened its doors in January 2012 with agents posing as a motorcycle gang from New York. They handed out cards and merchandise in high-crime neighborhoods but had trouble attracting customers to the store on a corner in a mostly residential neighborhood with little foot traffic.

It took three months for the agents to buy their first gun, and after five months they had taken in just five firearms, according to the Justice Department inspector general’s report.

They started using a confidential informant, but he turned out to be unreliable. That informant disappeared and led to the dismissal of three cases.

Agents started paying a local African-American man named Chauncey Wright in cigarettes, clothes and cash to hand out fliers and bring people to the store to sell guns and drugs. Wright, who had suffered brain damage as a child , was what the agent called an “unwitting informant.”

Wright’s family warned him that the storefront was suspicious, but he insisted the men running it were his friends.

In the report, the agents said Wright seemed “completely normal,” an “articulate” man who was just lonely and considered the agents his friends. The federal prosecutor who handled the case said he didn’t notice Wright had any deficiencies. It was Wright’s attorney who first asked for an assessment that ultimately showed he had an IQ of 54, about half of a normal IQ.

He was charged, pleaded guilty and received house arrest and probation.

Once traffic in the store picked up, problems mounted. An armed felon with armor-piercing bullets in a loaded revolver who was threatening to shoot someone was allowed to leave the store. He refused to sell his gun, saying he needed it to retaliate against those who shot his cousin. And he left.

'An obvious flaw'

The agents had no cover team outside to stop him. Officials don’t know if he ever shot anyone. The man was arrested and charged eventually. The lack of a cover team was later called “an obvious flaw" by an ATF supervisor, but the report noted that so many supervisors changed during the operation that there was a lack of consistency and accountability.

The agents in Milwaukee had consulted with agents from other cities about how to set up their fake store, including from those in Portland, Ore., where the operation was opened across from a school and agents paid a man with low IQ to get a tattoo of the store's logo on his neck. Some of the merchandise in Milwaukee came from the Portland sting.

Agents also overpaid for guns, leading people to bring in firearms they had bought hours earlier in stores, enticed by the opportunity to turn a quick profit.

The operation was shut down after nine months when an agent’s guns, including a machine gun, were stolen from his vehicle parked at a coffee shop and the store itself was burglarized of $40,000 in merchandise, a ballistic shield and a Drug Enforcement Administration cash-counting machine, the report says.

The machine gun and a handgun have not been recovered. After the theft, a witness told an ATF supervisor that he knew of people who were selling guns to some "white, undercover, ATF person."

After the burglary, the agents left a messy building with damaged walls and doors and then refused to pay landlord Dave Salkin, who did not know they were agents. They also were behind in rent and utility payments. The agents also left behind sensitive operations plans that included undercover officers' names, vehicle information and cell phone numbers.

When Salkin pressed to be paid, ATF officials threatened him. Eventually, the agency settled with Salkin for $25,000.

The agents seized 144 guns and 34 people were charged. Nearly half ended up with no time behind bars. Eight cases were dismissed because agents arrested the wrong people or the prosecutor could not go to trial because she said she could not call the lead ATF agent to testify. Of the 26 cases that resulted in convictions, the median sentence was about two years behind bars, the Journal Sentinel found.

Five people received minor punishments as a result of their conduct in the operation.

In Milwaukee, ATF officials touted the 2012 operation as a success, but the report noted that the agency had little proof of that.

“…It does not appear that ATF attempted to determine through reviewing crime statistics or otherwise whether and to what extent it made an impact on the crime problems it was intended to address.”

Following the operation, the ATF vowed its operations would be better controlled.

Same story, another town

As in Milwaukee and Portland, white agents in Wichita, Kan., paid an African-American man who had a low IQ to promote the operation.

But the new report says investigators saw numerous videos provided by the ATF that did not appear to show anything out of ordinary about the man they referred to by a pseudonym. The agents said he was able to “negotiate very well.” The man, Tony Bruner, has an IQ in the mid-50s. After his arrest, U.S. marshals contacted the prosecutor and told him Bruner was behaving strangely while in custody, "continually talking to himself." The prosecutor told the inspector general investigators that he informed the judge. Bruner was sentenced to three years in prison.

The store in Wichita, along with one in Pensacola, Fla., allowed in juveniles while others did not. One supervisor said keeping out juveniles was “common sense,” but there were no rules on it.

The Wichita operation spent $245,000 and 243 guns were purchased along with drugs. There were charges against 47 people.

One prosecutor called the operation a success and a "great investigative tool," but some federal prosecutors were skeptical, calling the cases “marginal,” noting 20 of the defendants ended up with a year or less in prison or probation — far less punishment than the typical cases they pursue.

In addition, the operation did not land any big busts of organized crime or even intelligence gathering that might lead to such.

Operation close to day care

The storefront in Pensacola, known as "Anything for a Buck," was run by a felon working as an informant.

The store, which purchased almost anything, including guns, was opened within 1,000 feet of a Salvation Army day care center. Officials said they didn’t know it was there. However, state prosecutors said stiffer penalties were possible because of the location.

In other operations including Portland, Ore., and St. Louis, storefronts were opened near schools or churches, which allowed for greater penalties.

The agents told investigators they were wary of buying stolen goods, but the Journal Sentinel investigation found that the storefront openly bought stolen goods. One man stole a bike and rode it right to the store and was able to sell it, for instance. After the operation, the Sheriff’s Department held an open house to return stolen items to people.

Jeremy Norris, who has a low IQ, was ensnared in the operation. Agents called him “Little Squirrel,” according to court records. Agents told inspector general investigators they thought Norris was normal, just strung out on drugs. Citing Norris’ low IQ, a judge gave him probation.

The informant working in a storefront in Pensacola was arrested shortly after that operation was shut down, on gun charges after pointing a loaded gun at someone and fleeing from police. He received six months behind bars.

After the Journal Sentinel reported problems in Milwaukee, ATF officials said changes would be made. They pointed to St. Louis as the example of a well-run operation. Then-Director B. Todd Jones was personally assured, "Operation Fearless would not be repeated in St. Louis," the report found.

But the inspector general uncovered several problems in the 2013 St. Louis operation, dubbed “Operation Hustle City.”

The storefront was a tattoo parlor and the agents used an informant who had worked a storefront in Kansas City. The informant used drugs and told his girlfriend he was working for the ATF.

Still, he was used in the St. Louis operation during which he continued to use drugs, had sex with prostitutes as well as people coming to the store and also facilitated prostitution. The informant was later charged with sexually assaulting a child.

The St. Louis store was opened near a Boys & Girls Club. An ATF supervisor didn’t see a problem with the location, saying “the children likely were safer with ATF agents close by.”

But other agency officials said they didn’t know and would not have allowed it to operate when children were present.

The St. Louis operation was supposed to close gaps uncovered in Milwaukee, but as in that operation agents failed to stop an armed felon from leaving the storefront.

The St. Louis storefront cost $260,000 and yielded 129 guns along with heroin, cocaine and other drugs. Thirty-two people were arrested with two dozen going to the federal system.

The operation was shut down when agents learned of a pending robbery by suspects. The St. Louis sting did not lead to any other major cases, the report said.

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John Diedrich and Raquel Rutledge
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