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Category: Chiafullo’s BLOG

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Who is Responsible for Your FFL?

Who is Responsible for Your FFL?

With 2017 firmly upon us, most of us in the firearms industry have found ourselves bouncing from city to city, attending annual events and trade shows. In the past two weeks, FFLGuard was present at United Sporting Companies’ Annual Dealer Show in Columbia, SC and NSSF’s Annual SHOT Show in Las Vegas, NV. And right now we are gearing-up to attend Sports, Inc.’s Annual Outdoor Sporting Goods Show in Phoenix, AZ.

It appears as though we are not traveling alone. Within the first three weeks of this new year, FFLGuard has already been informed of multiple ATF Compliance Inspections opened in the States of IN, IL, ID, NC, NJ and (of course) CA. Your Federal Firearms License (“FFL”) may be immediately under attack if a Responsible Person (“RP”) is not present when the ATF inspectors arrive. I urge all FFL holders to reflect for a moment about who your RPs are and their availability during times like this when outside business calls you away.

If you need assistance adding, removing, or modifying your RPs, contact FFLGuard by email at info@fflguard.com or by calling (888) 335-4731.

An Open Letter to Those Looking for a Real World Definition for “Engaged in the Business….”

As the Founder and National Coordinating Counsel for FFLGuard, I deal with hundreds upon hundreds of Federal Firearms Licensees (FFLs) each day. As part of the FFLGuard Program, these FFLs already do as President Obama has recently asked: they police themselves. In fact, by following FFLGuard’s “Law Plus Guidelines,” these FFLs are already committed to DO MORE in their operations than Federal law, and Bureau of Alcohol, Tobacco and Firearms (ATF) rules and regulations, require them to do. In return, these folks get legal support from me and my team. I have the best lawyer job in the country.

My FFLGuard clients, all FFLs regulated by ATF, face what I perceive to be unfair competition by those who sell guns but who don’t face regulation by the government. It’s a double standard that creates obstacles for honest folks trying to make a living with the very LEGAL business of selling firearms and their accoutrement. Now, this is not to say that honest gun owners who are NOT “engaged in the business” of selling firearms shouldn’t be able to do so. That phrase — “engaged in the business” — has been the subject of scrutiny and interpretation for some time by the government, by the firearms industry, and by gun owners themselves. No one can pin down when someone is “engaged in the business” or not.

Well let me help with that.

If you use a commercial advertising platform to sell firearms, then you are engaged in the business. Period. You should have an FFL.

What’s a commercial advertising platform, you ask? Well, if you’re using the Internet to sell something (like using Facebook, or GunBroker, or ArmsList or Twitter or Match.com or ANYTHING like that)… that’s a commercial advertising platform that a licensed dealer would use. If you’re presenting your wares in a public place… that’s a commercial advertising platform that a licensed dealer would use. If you’re placing ads — either traditional or classified — in the newspaper or a magazine… do I really need to say it? You need an FFL, and you need to get proctological exams — er, I meant “get audited” — by the ATF like everyone else selling firearms. It’s only fair.

This in no way inhibits the casual gun seller and Second Amendment proponent (which I happen to be) from selling an occasional firearm in my collection to a fellow enthusiast from my home state. Or selling one to my neighbor, or to my cousin, or to anyone that they may know, or to any friend-of-a-friend-of-a-friend-of-a-friend who wants to buy my gun. The second that I start to “pretend” that I’m in the business by using a commercial advertising platform, well…. I need a license. Question: What if I inherit a large collection and want to sell them off piece-by-piece? Answer: You sell them as a lot to an FFL and keep a few for yourself, or sell one or two to your friends and kin. You don’t advertise that you have guns for sale, you don’t acquire other guns to sell with the inherited ones, and so on and so on.

Now, if we want to simply replace the “engaged in the business” debate with a “commercial advertising platform” debate instead, then we can run in this vicious, chest-beating circle forever. And since I personally hate when the left tries to tell me what’s reasonable or what amounts to common sense, I’m not even worried about going there. Because if you want to sell guns but can’t figure out what a “commercial advertising platform” is, then there’s a lot bigger issues in play than squabbling over word play. This is not landing a man on the moon stuff. Like Supreme Court Justice Stewart opined famously about obscenity, “I know it when I see it.” That counts here, too.

Let me break it down even further: if you are using anything other than “word-of-mouth,” then you are using a commercial advertising platform… and, hell, even that can be abused. But, as the wise man once said, it is what it is. You gotta start somewhere.

And let’s address the elephant in the room: To suggest that I’m anything but right-leaning and pro-gun puts your sanity in question. My sole job in life is to help FFLs put hundreds of thousands of firearms into the stream-of-commerce and for them to profit handsomely from it. The bottom line is if FFLs need to face down the barrel of an ATF inspection to earn a living, then you do too if you want to sell guns.

Of course, I am happy to discuss my thoughts with anyone on any side of the aisle. I don’t know much about a lot of things, but I happen to know a lot about this one thing.

PS: Adding 250 more folks to work a deficient NICS system is like adding additional pit crew to service a racecar missing a wheel. (That sounds a lot more original than “rearranging (or, in this case, adding) deck chairs on the Titanic.”) Like the National Shooting Sports Foundation has said for a LONG time, let’s #FixNICS first, and then expand that pit crew!

The Moral of Badger Guns– Don’t let a bad sale or bad forms end your days as an FFL: You may not be clairvoyant, but you’re also not untouchable….

Wisconsin Federal Firearms Licensee (“FFL”) Badger Guns was recently ordered to pay almost 6 million dollars to two police officers who were injured when they were shot in 2009. The man who shot the officers used a firearm that was originally purchased from Badger Guns in an alleged straw purchase. A jury found Badger Guns liable in that the FFL “knew, or should have known,” that the purchaser of the firearm was making an illegal straw purchase for the man who ultimately shot the officers.

Gun stores, their distributors, and firearm manufacturers are generally protected from these types of lawsuits. The Protection of Lawful Commerce in Arms Act (“PLCAA”), a federal law enacted in 2005, prevents FFLs from being liable for the criminal misuse of firearms which are lawfully sold. If the FFL, however, acts “unlawfully or negligently,” then they are not immune from such lawsuits because “a bad sale” is considered the responsibility of the FFL.

According to court documents, two men (the purchaser and the ultimate shooter) entered Badger Guns and selected a handgun for purchase. The shooter was apparently too young to lawfully purchase a handgun, so the purchaser conducted the transaction.

Here’s where the devil is in the details: Both men were in the store together, at some point, to select the gun. The shooter ultimately provided some of the purchase funds to the purchaser (who actually left the store mid-transaction to retrieve those funds from the shooter). While filling out the Form 4473, the purchaser originally checked “no” to the question about whether he was the actual purchaser of the firearm. The Badger Guns sales clerk allegedly explained to the purchaser that he could not buy the firearm with that selected answer, and he coaxed the purchaser to change his answer to “yes.” In addition, the purchaser had other errors (and misstatements) on his second, reworked Form 4473 that suggested a lack of attention to detail by the FFL.

Badger Guns’ defense, much as would be the plausible defense of any FFL, was that there was no way they could have known that the transaction was actually a straw purchase. As Badger Guns’ attorney noted in the trial, deception is at the heart of a straw purchase. But the circumstances as a whole suggested a seller with little regard for compliance, weak moral and corporate character, and poor business practices.

The set of facts presented is one that FFLs know well. If Badger Guns had been more vigilant about being aware of and preventing straw purchases, they may not have lost their lawsuit… or even been in one from the start. Additionally, it was clear that Badger Guns provided inadequate training to their employees, and had poor compliance protocols in their store. If they subscribed to heightened standards (like *ahem* FFLGuard’s Law Plus Guidelines) and/or established a good compliance ethic and system (that’s shameless plug #2 for the FFLGuard Program), then they could’ve avoided the entire situation altogether, or at least could have shown that the transaction in question was not the norm. Instead, a jury of this FFL’s peers thought it WAS the norm at Badger Guns, which surely made it easier to whack them for $6M.

Like being the local pub’s bartender, serving any customer is discretionary. And need I remind anyone that there’s no such thing as “ticky-tacky paperwork errors,” because how you conduct your business is extremely important. Sure, one-offs may happen… and short of being clairvoyant, it’s hard to really know when a criminal is committing a con on you… but with this case as a precedent, FFLs need to be even more selective and careful about how they sell firearms and to whom. If a jury decides after-the-fact that an FFL “should have known” a transaction to be inappropriate, then keeping your compliance house in order must be at the top of your list sooner rather than later.

A New ATF Director Imminent?

FFLGuard is the Gold Standard in Legal Services and Compliance Solutions, and uses every available resource to provide sound counsel to over 500 clients.  To do that, FFLGuard engages the most experienced and the most trusted firearms attorneys and former ATF executives to deliver support, assistance, and insight to FFLGuard clients.

FFLGuard has learned from unconfirmed sources that current ATF Director B. Todd Jones will be stepping down by the end of the month, and perhaps even sooner.  Rumor is that Jones will be making a move from guns to sports, as a lawyer for the National Football League.  The good news is that the “acting” personnel who will be elevating to higher positions, albeit temporarily, have historically been receptive to the concerns of FFLs.

But exactly what this change means for the firearms industry and FFLs in particular is not yet known.  It is FFLGuard’s mission to get the most critical information about any issue that will affect our clients as soon as it is available. We will track this situation as it develops, and continue to be on the pulse of what happens at ATF so as to provide FFLGuard clients with second-to-none protection and peace of mind.

First it’s ammo, and then what….?

It’s up to trade organizations to step up to the plate when it matters most.

Although FFLGuard’s wheelhouse is firearms legal services and compliance solutions, I’ve gotten an awful lot of questions from clients related to ATF’s recent move to classify “armor piercing” bullets. It reminded me of the old Chris Rock routine about effectuating back-door gun control by making ammo so expensive that no one could buy it.

On a personal level, my views are best found in one of the better articles that hits the issue square on by Bob Owens… and another by David Codrea that identifies how ATF is using the Administrative Procedures Act to achieve what appears to be an Obama-Administration driven directive down upon ATF. (The irony of that, of course, is that Obama, Holder, et al, don’t seem to mind that they make ATF circumvent the Administrative Procedures Act when conducting a Federal Firearms Licensee’s revocation proceeding, but who’s keeping score?)

In fairness to ATF, they are between a rock and a hard place. They were well aware of the repercussions of this decision, I’m sure. In this case, if they grant exemptions to the law, they will have law enforcement and anti-gun groups on their backs. ATF even explained to us in a recent meeting that they literally had no choice but to issue an opinion because of the extraordinary number of exemption requests that they received. They simply had to act. And you can bet that they got word from Mr. Obama to push this recent opinion through as written.

Of course, ATF informed us they will review all of the comments they get and address them appropriately. If there are any issues that weren’t already considered, they will consider them before a final opinion is issued. Further, my intelligence resources tell me that if this ban goes through, there won’t be an effort by ATF to seize or repossess what AP ammo currently exists out there… but instead to just kibosh the manufacture and import of the ammo going forward. All of this doesn’t make me really breathe easier, but it is what it is.

On a professional level, FFLGuard’s well-documented mandate is to help clients achieve “best-in-class” compliance, and to make life easier for FFLs. With that said, we ALL need to rely on the firearms trade organizations whose very existence is to manage political affairs, and hope that they properly address the AP ammo issue. Whether it’s the NRA, the NSSF, the SAF, or the upstart firearms dealer’s organization, AFRA, it’s time that they all stopped everything else and paid close attention to this issue before it’s too late. This is truly a slippery slope that could have long-lasting effects.

Remember: it wasn’t the asteroid that hit the Earth many moons ago that sent the dinosaurs to extinction, it was the subsequent dust cloud that brought on the ice age. Is this looming ammo ban the asteroid that brings on the dust cloud suffocating firearms owners? I certainly hope not.

Did You Clean-Up Your “Compliance House” During the “New Normal” Adjustment Period?

Considering the “sales swoon” that occurred this year, I’m sure everyone was relieved that Black Friday pushed firearms sales to levels that were not hit any time prior in 2014.  This begs the question, however, as to whether Federal Firearms Licensees took the time during the lull to get your compliance house in order?

As if you needed a reminder, there is a full-time regulator — the Bureau of Alcohol, Tobacco and Firearms — who operates in real-time to enforce firearms compliance laws, rules, and regulations whether firearms sales are up or down.  Only a downturn in sales can provide the time necessary, however, to be sure that compliance is a priority and your Federal Firearms License stays pristine.  Did you seize the opportunity to make firearms compliance a priority?

Like I said earlier in the year: every FFL should go back at least one year and cross all t’s, dot the i’s, and scrub your books. Do a complete firearms inventory. Use the downtime in sales to ratchet up the firearms compliance levels in your operation, while competition gets picked off one-by-one by the government.  If the latest article from the bastion of liberal thought, the New York Times (of all the sources!), is any indication, more Americans are focused on gun rights over gun control than ever before. This should only equate to another period of sales growth leading up to the 2016 elections.

Are you ready to take advantage of that promising future, or will you be mired in potential compliance issues with ATF while your competition concentrates on selling, selling, selling?

No Better Time Than the Present

FFLs should view this lull in sales as a great time of opportunity to get their compliance house in order.

Each January, I speak at various firearms distributor trade shows to discuss the state of firearms compliance and the ongoing regulatory efforts by the Bureau of Alcohol, Tobacco & Firearms. This past year, I added to my normal pro-compliance comments that firearms sales were cresting. If the downturn in the market wasn’t obvious then, it is now. (more…)

Why Do Federal Firearms Licensed Gun Sellers Get the Short End of the Stick?

I have some questions.  As a lawyer, I’m inquisitive like that.

But let me lay a foundation first: I’ve spent my entire legal career educating and defending Federal Firearms Licensed (FFL) gun sellers.  I love what I do, and I wouldn’t trade it for any other lawyer’s job.  Through FFLGuard, I represent over 500 FFL clients on a daily basis, and I am probably responsible for keeping over 100 billion dollars worth of firearms in circulation at any given time. I regularly call FFLs “my people” when talking about them, and I can march a parade of licensed gun sellers before you who will tell you that I “saved their gun business” and who would erect a bust of me in their gun shop to pay tribute.

So if you, yourself, have any questions as to what side of the gun debate I’m on, you either (a) have an agenda or (b) have rocks in your head.

With that as a backdrop, back to my questions:

Why do highly-regulated FFLs continuously get the short end of the stick?  Why do FFLs play by the rules, but too often get treated like the red-headed step-children of the gun world?  Why isn’t the field that FFL gun sellers play on the same playing field that ALL gun sellers play on?

The fundamental unfairness is so ridiculous that it’s hard to believe that FFLs have kept their mouths shut for so long.  FFLs risk an awful lot of their money, resources, time and energy for the “privilege” of being on the hotseat to run legitimate, law-abiding commercial enterprises, while others make a profit for doing the same thing without being regulated at all.   That sucks.

Think about it: externally, FFLs subject themselves to ball-breaking (that’s the NJ in me for “excessive scrutiny”) by ATF for what can be the most sublime recordkeeping errors, and when found to have run afoul of the rules and regulations, are subject to one of the most arcane, one-sided “judge, jury and executioner” proceedings known to man.  And there’s no penalty boxes, or fines, or “time-outs,” there’s simple black-and-white: you either have your FFL, or you do not.  There’s no in between.

Internally, upstream gun sellers are adamant that FFLs sell their product at Minimum Advertised Pricing (MAP) standards so as not to devalue the brand.  If an FFL is identified by an upstream seller’s “MAP Police” for running afoul of the MAP standards in place, then the offending FFL gets cut off from selling that firearm.  Done.

Yet day after day, people are using commercial means to sell firearms, at unfair pricing and outside the regulatory scheme, for profit.  They take market share from FFLs who play by the rules, and sidestep the regulators who keep them in line.  They devalue firearms brands with no care or consequences.   How is this fair?  It isn’t.  It, in fact, sucks.

It’s my view that if you’re going to sell guns, you need a license.  Why that concept doesn’t speak to the masses is beyond me.  It’s like being a lawyer and competing with those who haven’t passed a bar – thus not subject to the same rules and regulations – and to add insult to injury, the non-lawyers get to use commercial means to attract clients away from me!  That sucks!

Don’t get me wrong, if I want to engage in a personal sale to my neighbor, family or friend, then I shouldn’t be regulated… but I’m not using a commercial platform (ADVERTISING) to do that!  If I’m going to use a commercial platform, whether it’s print media or the Internet or an auction or a Lemonade/Gun Stand on my front lawn, then I better have the same commercial license as those FFLs putting their livlihoods on the line day in and day out to do the same thing.  It’s not that weird a concept, is it?  Have I said that it happens everyday?  Have I already said that it sucks for FFLs?

Oh, well… What do I know anyway?

The Worst Advice that an FFL Could Ever Receive

In the past few months, I’ve had clients tell me that ATF representatives (whether inspectors or agents) have offered “advice” to them that “they didn’t need a lawyer” for one thing or another.

If you think about it, I guess no one really needs anybody for anything these days. I mean, not when you have the Internet and some initiative. You probably don’t need an accountant. Plumber or electrician? Nah, Home Depot that can help there. Computer guy? Nope. That’s why we have kids. Mechanic? Can probably do that on your own, too. Doctor? Probably could self-diagnose on WebMD, but trying to perform surgery on yourself could get tricky.

Hmmmm…. You know what? In this day and age, a person can probably do just about anything on their own.

But that’s INSANE!

The nanosecond that someone whose role it is to regulate your business ACTUALLY SAYS “you don’t need” some kind of professional, your hair should immediately stand up. You should hear that DIVE! DIVE! DIVE! submarine horn wailing in your head. If that’s not waiving a red flag, I’m not sure what is.

In FFLGuard, I tell the clients: “I don’t get paid by the hour (normally), I get paid by the year… and you already paid for me, so you SHOULD ABSOLUTELY USE ME!” Granted, FFLGuard has now grown to a point where I rely on other lawyers and professionals working at the direction of counsel to help keep the organization moving forward. But the bottom line is this: When dealing with ATF, there is no substitute for having bona fide legal counsel on your side AT ALL TIMES.

Hiring a non-lawyer, industry consultant – with no lawyer-backing to provide counsel – does not afford an FFL with the attorney-client privilege or legal expertise. If you want TurboTax instead of a CPA, good luck to you when the IRS comes knocking. And relying on someone to refer you to legal counsel AFTER the ATF has already appeared and is poking around is also futile. It’s like already having your chest open on the operating table and asking for the best doctor… while he’s the best, there’s a good chance that – at that point – your fate is a coin flip.

Ongoing wellness visits and check-ups when you feel something’s not right is the norm for your physical and mental health, and should be the norm for your FFL’s health. You can certainly hire a nurse or physician’s assistant to diagnose and treat you when you’re sick, but it’s not as good as a doctor. The same goes for an FFL. Without a lawyer on your team, it’s simply settling for something less than the best possible protection.

At the end of the day, when you hear “I’m from the government and I’m here to help,” that should send a CLEAR signal as to EXACTLY what you need. With all due respect, it’s not the role of ATF to decide what help would be best for you. That’s your call. And an easy one, at that.

A Common Problem for Federal Firearms Licensees: Employees Who Say “What’s My Role Here?”

While your employees may understand that you are the “one who signs the paychecks” in your business, do they understand your role – and their role – in your overall operation?  And how does everyone being told who does what deliver not only consistency but also “best-in-class” compliance levels?

Let’s discuss….

I’m lucky enough to work with Federal Firearms Licensees across the country on various items covering compliance, legal, and business concerns.  Sometimes, it’s just one or two folks running a simple gun shop.  Other times, it’s a multi-tiered organization with an org chart that has one point at the top (“the Boss”) and hundreds of others beneath it.  Many times, however, despite snazzy titles and lofty expectations (many times unspoken), the only thing that everyone, everywhere in an organization knows that the buck stops with the Boss.  But few know what’s in the gray area leading up to that last stop.  And that can be a problem.

Accountability at every level, not just the top, is vital to every organization, big or small.  And when it comes to FFL compliance, the Boss is usually one of the Responsible Persons on the FFL.  This means that if his or her subordinates are mis-firing (no pun intended) on their responsibilities to transfer firearms within the bounds of the Gun Control Act (“GCA”), the ATF- enforced consequences will not always land on them but instead squarely on the Boss.  So it is ultra-important that everyone in your organization knows their role and level of accountability associated with it.

An organizational chart can help.  While many employees in an organization may be cross-trained, most usually have job descriptions that are open-ended or nebulous; superiors that are ill-defined or not empowered by the Boss.  That only leads to a general confusion or malaise as to who is accountable for doing what.  This leads to loose controls, lack of concern, and sloppiness.  This loosy-goosey-ness will surely seep into your compliance fabric, and that, my friends, can only lead to disaster.

Be proactive and draft an org chart today.  Post it in the break room.  Have references to not only where roles are on the chart, but what they mean from a responsibility perspective.  (Don’t worry if the chart isn’t linear or pyramid-shaped.  The FFLGuard Organization, for example, has an org chart that resembles a gearbox, with one gear turning the other to make the business run – yet all of us know our role.)  Let everyone know that accountability runs top-to-bottom in your business, and that includes FFL compliance, which is literally the “core” of your operation.

Not tying up loose ends on every employee’s role only provides an inch of rope that could turn into a yard…  particularly once the yard becomes an ATF compliance noose because responsibility is perceived organization-wide only as a “Boss problem.”  It’s not.  Boss don’t gotta job, no one’s gotta job.  End of story.

Everyone is on the hook for your business concerns as an FFL, and that will – without exception – always include compliance.  Let everyone who works for you know where they stand and what is expected from them, and you will be better off from not only a business point-of-view, but also from fostering a “tight ship” mentality that will insure heightened compliance.  After all, if you’re an FFL, you aren’t selling toasters… compliance is the name of the game.

CT Plea Bargain Opens the Door for FFL’s to Face Jail Time for Recordkeeping Errors

Dave LaGuercia is a solid guy.  A good guy, in fact.  He’s a former firearms retailer in CT that sold thousands of guns from a retail storefront like many other Federal Firearm Licensees across the country.  And because of “simple recordkeeping errors” at his gun store, he now faces potential jail time and massive fines.  Here begins the cautionary tale….

If you’ve read my BLOGS, or followed my tweets on Twitter to date, or heard me speak publicly this year, you know that I’ve talked about the Obama Administration’s gun control movement taking more insidious forms.  Because legislative gun control efforts went the “way of the do-do” in Congress, the executive branch has instead facilitated gun control through executive actions and regulatory enforcement.  These crackdowns don’t catch criminals as much as they cripple FFLs, but who’s really counting?

Jump to LaGuercia, an FFL with whom we are quite familiar at FFLGuardHe came to us HOT (that’s with an ATF matter pending) in 2011, holding a revocation notice in hand from ATF for, among other things, “simple recordkeeping errors” primarily perpetrated by his employees.  Some of the “other things” that LaGuercia didn’t learn until the day of the revocation hearing itself in August 2012 was that one of his employees was under investigation for perpetrating alleged shady sales in LaGuercia’s store.  (During the year-long investigation that predated the hearing, no one ever told LaGuercia about what his employee was doing… but I digress….)

The hearing was like many other revocation hearings that FFLGuard has handled.  “Simple recordkeeping errors,” and bad timing on the filing of forms, and other things that usually end up with an FFL having his license yanked. LaGuercia terminated his rogue employee on the spot, and offered various acts of contrition to ATF in order to continue in his livelihood.  The hearing decision went into a state of limbo.

And then the Newtown tragedy occurred in December 2012.

The guns used in Newtown were legally — and with no recordkeeping hiccups whatsoever — sold from LaGuercia’s store to the shooter’s mother.  Post-tragedy, LaGuercia was “appalled” by what had happened, as any dedicated gun store owner, with children or without, would be.

Shortly thereafter, the Obama “we need a pound of flesh” hammer came down on LaGuercia.  An ATF raid on his store with media tipped off beforehand, an “emergency revocation” of his FFL (not a often seen event) notwithstanding what the revocation hearing results may or may not have been, and regulatory problems suddenly transformed into criminal problems.*

Exit FFLGuard counsel, and enter criminal defense lawyers.

The ATF says that FFL recordkeeping is critical to successful law enforcement actions.  And now, the Federal Government’s success in criminally prosecuting an FFL for “simple recordkeeping errors” without any trial, and without the FFL being judged by his peers, has had unbelievable impact.  Start with LaGuercia’s employee pleading guilty to “aiding and abetting the failure to make a proper entry on the form” 4473.   Can’t say we’ve seen that too often in the past.  Nor have we seen, with any frequency, an FFL criminally charged for not reporting thefts/losses in a timely fashion, not filing multiple sales forms properly, or not completing NICS checks appropriately, as LaGuercia was.  Regulatory consequences for those?  Of course.  But criminal?  Never.  This is a watershed event.

The door is now open for this to happen to an FFL anywhere and everywhere.  Through his plea bargan, LaGuercia may face prison time.  They say it’s unlikely, but he still may.  He may have to pay fines in the six figures.  And part of his plea deal was that, despite only facing misdemeanor charges, he can’t hold an FFL for at least 5 years.  Usually, the “no FFL” penalty is reserved for felons under the Gun Control Act. But that’s the corner into which LaGuercia was obviously painted.

We’ve said it for years, and there’s now teeth in the warning: there’s no such thing as a “simple recordkeeping error.”  Used to be you could lose your FFL.  Now, you can end up in jail.  It is absolutely imperative to keep your ATF compliance health beyond reproach, and have a dedicated team of counsel and subject matter experts at your call before things get HOT.  By then, it could be way too late.

Ask LaGuercia.  He didn’t deserve what he got.

* At the time of the original posting, it was apparently unclear to some that CRIMINAL charges being brought against LaGuercia were NEVER even a thought before the Newtown incident it December 2012… and certainly a tactic never seen before as a “side event” related to any regulatory matter handled by FFLGuard.

The Number One (#1) Mistake Made By Federal Firearms Licensees

This BLOG post is in no way meant to be condescending towards FFL’s, who are the lifeblood of my business and why I go to work in the morning, but instead a cautionary tale for them to heed. Be guided accordingly.

As the National Coordinating Counsel for FFLGuard, I am often asked the same question over and over: “What is the most common mistake made by FFL’s to trigger an ATF administrative action (warning letter, warning conference, or revocation proceeding)?” The answer will surprise you.

Each year ATF publishes a list of top 10 errors made by FFLs, but offers little to no guidance on how to avoid the traps causing those errors. And each year, industry trade groups trot out a monotone spokesperson to regurgitate that top 10 list as if they were sharing the location of the Holy Grail. Yet each year the list remains virtually unchanged. Why?

Because the real #1 mistake made by FFLs is not one written (or miswritten) in any Acquisition and Disposition Record or on any Form 4473.

The real #1 mistake made by FFLs is…


I cannot tell you how many times we, at FFLGuard, meet FFLs brimming with pride presented as false confidence. Internally, we nickname these folks a KIA (“know-it-all”) who usually ends up KIA (“killed-in-action”) on the compliance battlefield. We see the old maxim in effect, every single day—the pride comes before the fall.

The unwillingness or inability of any FFL to identify, understand, and/or accept that “you don’t know what you don’t know” and that you simply can’t “have it all figured out” when it comes to ATF compliance is a fatal flaw. How an FFL could be so confident that it has “it all under control” when it comes to ATF compliance is mind-boggling sometimes. You maybe attended an ATF compliance seminar or webinar here and there?  Had a one-time visit from a has-been “expert” to review compliance practices in your business? Or received periodic e-mail updates from various sources that don’t cite actual, everyday ATF practices but stuff that everyone can read in the paper and on the Internet? Really?

FFLGuard has about 500+ years of combined experience in firearms counsel and ATF compliance, and I swear each one of us learns something from each other every day. I’ve practiced firearms law for 15 years, day in and day out, and my peers still teach me things all the time. How did these KIA’s get so wired in, and where do I get the drugs that they’re on? ‘Cause I want them!

I can tell you, without fail, we routinely see (and hear) pride in various forms and multiple ways. I can share just a few with you here:

    • “We know our local agent” is usually the most comical one, because that sends a signal right there that the FFL doesn’t realize there’s a huge difference between: (1) an ATF Agent, who deals with law enforcement, not compliance, and arrests criminals while carrying a firearm; and (2) an ATF Industry Operations Investigator (an “IOI”), who conducts FFL compliance inspections, and who doesn’t arrest people or carry a gun but has a real sharp pencil and a keen albeit blinking eye (… sometimes he sees it… sometimes he don’t…). Two very different roles at ATF.  It also discounts the highly transient nature of government positions, where your current job is your current job today… but maybe not tomorrow. Sure, knowing The Right Guy is important, but perhaps one that “works for the government and is here to help” isn’t The Right Guy after all.

Yet pride takes over… because of course a successful entrepreneur knows all the right people, everywhere, or he wouldn’t be successful. “I sell a ton of guns to a heap of people… obviously I know something and somebody!” And then… WHACK! There’s the ATF revocation hammer slamming you in the head.

    • “We have a compliance department/director that handles that” is another one. The thought that a sole employee/static department can thrive without outside counsel and advisory in a fluid and dynamic world like ATF compliance is just myopic. It is certainly NOT a poor reflection on any organization that a compliance department/officer would need outside assistance to gain the big picture perspective required to fine-tune internal systems and processes. Finance departments engage in this advisory-to-business interplay all the time to keep sharp.

But then pride takes over… because of course a successful business has all the right internal processes in place, or it wouldn’t be successful. “Do you know how many guns we move in and out of here, year in and year out? Our processes are superlative!”  And then… OUCH! There’s the ATF revocation stick poking you square in the eye.

    • “That’s my job, we don’t need someone else to help us do it” is usually the war cry of internal compliance teams/officers, deathly afraid that not “knowing it all” somehow suggests weakness or incompetence. Compliance personnel get very defensive when they think their bosses may frown on them because outsiders could identify vulnerabilities or shortcomings that the compliance personnel “should have known” about.

So then pride takes over… because of course a successful compliance team has the bandwidth to know everything… not only what goes on in their own organization, but in every other ATF regulated business around the country. “We’ve been to a meeting at ATF!  We’ve attended some ‘Hilton hotel compliance seminar’ — slash — ‘something with university in its name to sound smart thing’ — slash — ‘No Doze sponsored snorefest by ATF cast-offs’!  We’ve swapped war stories with other like-minded businesses at the Rotary club!” And then… CRASH! There’s the direct hit from the ATF revocation cannon to the hull of your compliance ship.

    • “We’ve had X previous inspections in the last Y years, and never had a problem” invites the real sucker punch. The only thing consistent about ATF inspections is that they are inconsistent. I can point you to FFLs “too big to fail” that have felt the wrath of ATF, and show you FFLs with absolutely perfect inspection records that suddenly get revoked. Relying on past performance makes the hurt so much deeper, because pointing out to ATF that they have never cited you for a certain violation in the past, as a defense for your non-compliance, is useless. It’s like a gun with no firing pin.

And then pride takes over… because of course a successful FFL has been there, done that. “That could happen to them, but certainly not to us, because we are [insert successful FFL name here] and it certainly ain’t our first rodeo….” (Now wait for it….) KA-BOOM. You can pilot 100,000 ATF flight miles unscathed, but catastrophically crash merely one compliance jumbo jet and suddenly you’re the a**hole in the room.

Federal Firearms Licensees, hear me!  Take a hard look at yourself, not your business. Your commercial success to date is rooted in your personal ability to adapt to your business environment, chart a course for achievement, and overcome adversity.  You are the best at what you do, and sell as much as you sell, because you see things that others don’t, which results in a serious competitive advantage when you grab market share while your competitors fall by the wayside.  Today’s adversity in the firearms business is the regulatory environment. Exploit this knowledge to your advantage in the marketplace, and tighten up your internal compliance while others fail to do so!  Their loss will be your gain.

At FFLGuard, we constantly preach that ATF compliance is a process and not an event.  It is an ongoing, living, breathing state-of-being that goes beyond reading a list of “Top 10 Mistakes By FFLs” and requires constant attention.  So drill down my existential point-of-view to something more identifiable: strength training and exercise, for example.  Target ATF compliance as the “core strength” of your business that will make all of the other revenue-generating muscles around it stronger.  Seek a qualified outsider, like FFLGuard, as a “strength trainer” to help build that core, day-in and day-out, and the rest will follow.

Don’t let pride be what gets you in the ATF administrative action hot seat.  That’s the #1 mistake by FFLs everywhere.  Don’t let it be yours.


If you attended any of the seminars that I gave earlier this year, I advised that federal legislation would be VERY hard to pass with regard to gun control, no matter how much groundswell the MSM suggested there would be in favor of it.  Instead, I offered, FFL’s can expect increased scrutiny from its regulators — ATF and, in some instances, OSHA — to be the back-door gun-control that the Obama Administration has always craved.

In February, the “assault weapons” part of the gun control bill pooped out.

Just this month, universal background checks took a dump, too.

While this was occurring, a little known event was transpiring at ATF: our inside sources tell us that the “Adminstrative Action Order” (AAO) that governs how FFL’s are inspected and handled administratively by ATF (i.e., do you keep your FFL post-inspection? Or does it get revoked?  Because the only “in-between” is being set up for revocation with Warning Letters or Warning Conferences, which is having one foot in the grave…) got a sneaky make-over in February 2013. Interesting timing, huh?  And if you think they loosened things up during that reworking, think again.

There is a “perfect storm” brewing for FFL’s. The convergence of events that are creating problems for gun sellers include (1) the unfortunate events of Newtown being co-opted to push a nationwide gun-control agenda, (2) the reticence of the U.S. Senate to pass any federal gun-control legislation despite that push, and (3) an assessment in an April 2013 report by the Office of Inspector General (OIG) (Review of ATF’s FFL Inspection Program, Report# I-2013-005) that ATF failed to inspect 58% of FFL’s in the past 5 years. Now weigh this against the fact that the OIG also recognized, in that same report, what we have been saying for years: that there are “inconsistencies” in the ATF revocation process which OIG intends to “examine… in more detail in a future review.” When taken all together, FFL’s can expect greater scrutiny from inconsistent regulators in the remaining years of the Obama administration.

And why wouldn’t that happen? It’s much easier for this administration to tighten standards already in place when inspecting FFL’s, as compared to passing federal legislation. That dog was never going to hunt! Under the new, reworked AAO at ATF, the threshold for FFL error is reportedly even lower. And with overall “administrative actions” taken by ATF against FFL’s increased from 1,127 in total (2004) to 4,056 (2011), it doesn’t take much to figure where those numbers will be in 2012-2015.

Now, more than ever, FFL’s need to make SURE that their compliance backyard is squared away.  “I know my local ATF guy” and “I know what I’m doing” is not going to keep you out of harm’s way.  If you already have a warning letter or have attended a warning conference at ATF, YOU HAVE BEEN WARNED.  Do not, under any circumstances, think that there is a way around a revocation hearing once the Notice of Revocation has been issued.  There is a 1% chance of getting out of that meat-grinder without a LOT of sleepless nights and money out the door. Only pro-activity, and aligning yourselves with a risk-manager who knows his way around ATF compliance issues, can help keep it from getting better before it gets worse.

Clients who come in HOT aren’t doing themselves any favors!

We recently had two clients come in HOT after being served with revocation notices.  We only accept these cases if we feel there is some aspect of their case that could benefit the good of the FFLGuard collective, and these two cases fit the bill.

That doesn’t detract, however, from the inevitable: revocation is a VERY difficult minefield to navigate successfully.  If you haven’t read my Open Letter to ATF re the Revocation Process, you should acquaint yourself with it.  The process is so one-sided in favor of the government and against the licensee, success is difficult to achieve.

Once the revocation notice has been issued to an FFL, it is the equivalent to already being in the ER with your chest cracked open, and asking us to perform a quadruple bypass.  We’re your best chance at survival, for sure, but loss of life (or, in this case, of license) is a very REAL and LIKELY result.

This is why — NOW, MORE THAN EVER — FFL’s should talk to us long before they are on the operating room table….  Our mantra for years has been: “Let us give you the cholesterol medication you need so you never, ever need invasive heart surgery.”  My preventative medicine theme was so powerful that other players in the firearms industry adopted it, almost verbatim!

There is no more powerful risk management tool for you than FFLGuard.  While some commercial insurance policies will certainly provide money for your defense, they don’t guarantee your success… only that your lawyer will be paid.  Many times, that lawyer is us. But we prefer to keep our “patients” alive through proactive measures.  Don’t wait until it’s too late.

There’s one statistic that we are quite proud of: no client who ever joined FFLGuard COLD has ever even gone to a revocation hearing, let alone actually being revoked.  EVER.

Now, more than ever… FFLGuard.

FFLGuard takes flight!

This has been a torrid start to 2013….

In the past 45 days, we have signed up about 45 clients… or one per day.  That has increased the financial strength of the Program considerably, and gives us more of a presence (325 clients in 46 states) than many of the box chains!

There is, indeed, strength in numbers.

Is FFLGuard part of your Risk Management portfolio?

It’s been a great month for FFLGuard so far, with over 37 new clients on board to date.  During sign-ups, people often suggest that FFLGuard gives them “peace of mind” like insurance would. The one nuance that I clarify for clients is that FFLGuard is not insurance… but it is part of your risk management portfolio, of which insurance should be a large component.  FFLGuard is merely one more tool in that portfolio.  In fact, your risk management portfolio should include anything and everything, whether it is a service or product, that helps mitigate risk of loss at your business.  FFLGuard certainly delivers that mitigation of risk component, and adds to your risk management awareness!

There are a number of insurance options available to FFL’s, including those offered by AIG, Lloyd’s of London, Philadelphia Insurance, IronShore, and other carriers that you can obtain through firearms specific broker/agents like Bob, Joe and Steven over at Joe Chiarello & Sons, Jeff at the Hylant Group, Trent Yager over at ASI, the folks at the NRA, as only a few examples.  Being “self-insured” in this business is not recommended, and you should reach out to one of these contacts immediately.  Insurance is a needed compliment to FFLGuard services in your risk management portfolio!

Live from the AcuSport Business Conference!

Outstanding turnout for FFLGuard at the AcuSport Business Conference for both our clients-only meeting (about 150 attendees) and our educational seminar for non-clients (about 100 attendees).  Signed up no less than 25 new clients here to add to those from the Ellett Brothers show earlier in this year.  Much concern about the future of our country and gun control.

Sadly, gun control issues always negatively affect the FFL retailer more than the general public.  It was great to get out and talk to clients and non-clients alike about their thoughts, feelings and issues.

Proud to represent this industry!


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