Justice IG slams ATF undercover tobacco investigations

Kevin Johnson | USA TODAY

WASHINGTON — Federal undercover investigations that allowed authorities to use more than $100 million generated from illegal tobacco trafficking could not account for millions of dollars linked to some of the 35 such investigations since 2006.

Justice Inspector General Michael Horowitz, following a 7-year review of the income-generating undercover operations, faulted the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) for "a serious lack'' of management, finding that the investigations were never reviewed as required by the agency's Undercover Review Committee prior to their submission for approval.

"Indeed, we were told that ATF's Undercover Review Committee did not meet between February 2005 and January 2012,'' the inspector general found.

In one unauthorized investigation, the review found that a confidential informant was allowed to keep $4.9 million of $5.2 million in profit generated "without submitting adequate documentation supporting his expenses.''

The so-called "churning'' investigations are able to use funding generated from illicit transactions to offset expenses incurred by the investigations. The ATF has used this authority to investigate tobacco diversion cases that involve efforts to evade state, local or federal tobacco taxes

In a written response to the inspector general's findings, ATF Director B. Todd Jones said the agency identified the problems in early 2011 and issued a directive calling for more "stringent controls and restrictions'' on how the funds are used.

"Under current policy, income generating undercover operations are subject to detailed and rigorous application, review, approval and oversight mechanisms,'' Jones said.

Those controls include required approval by the agency's Undercover Review Committee along with federal prosecutors in the national offices where the investigations originate.