Shawano — From almost the time it opened in 1998, Shawano Gun and Loan has been in trouble with federal authorities.

After repeatedly warning the store about missing records and other violations, the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives took the unusual step of revoking its license in 2007.

Nearly three years later, the case is tied up in federal court in Green Bay where an appeal could grind on for years.

And the store continues to sell guns - thousands of them each year - with the ATF's blessing.

What's more, the owner told the ATF that he might transfer the operation to his nephew. That could keep the store operating and erase the violations and revocation - similar to the scenario that unfolded in 2006 at the West Milwaukee store that has sold every gun used to wound six Milwaukee police officers in the past 2 ½ years.

The case shows how laws enacted by Congress hobble the agency charged with policing gun stores and protect dealers who repeatedly break the law. The ATF doesn't crack down on dealers because there are so many loopholes in the law protecting them, agency veterans say.

"It is just very difficult to go after a gun dealer," said Gerald Nunziato, who retired in 1999 after 29 years in the ATF. "It is sad. Everyone thinks the government is handling it. They are handling it by ignoring it."

The case involving the Shawano store is notable because of what experts call blatant evidence of "straw buying" - where people with clean records purchase guns for felons and others who are forbidden from buying and owning them.

Straw buying is a crime - for the buyer and the clerk who knowingly makes the sale. It is a federal felony but remains a misdemeanor in Wisconsin after the Legislature failed to pass a law making it a felony this year.

Shawano Gun and Loan sold guns to relatives of people who had just failed background checks at the store, ATF records show. In at least five cases, family members - who live with the prohibited person - bought the gun shortly after the rejection, sometimes the same day. In three other cases, the buyer admitted on forms they were buying the gun for someone else. They were sold the gun anyway.

No one has been charged with straw buying or selling in the case.

The owner of Shawano Gun and Loan declined to be interviewed. His attorney said the ATF unfairly is targeting the store for minor problems and the straw buying cases are simple misunderstandings. The attorney said there should be intermediate punishment short of revocation, which current law does not allow.

"They go from nothing to the guillotine," said attorney Raymond Dall'Osto. "The issue is equal treatment, fair treatment. What is the goal? Compliance or revocation no matter what? My client is under the gun here."

Assistant U.S. attorney Lisa Warwick, who is representing the ATF, said the case is moving at the speed of most civil cases. She said the case has no special urgency.

"Why do they continue to be in business? I don't know," Warwick said. "That is a call that ATF makes for each store owner in litigation. That is not my call."

The ATF declined to provide any information about the case.

"We are not going to make any comment on that until it is completed," said ATF spokesman Robert Schmidt.

Timothy Backes opened Shawano Gun and Loan in 1998. The 38-year-old had no experience in the gun business. He grew up working in his father's grocery store, according to court records.

Backes' plan was to pay people cash for pawned tools, stereos, guns and other items. Anything left for more than a month went on the floor for sale. He also would sell new guns.

Federal law requires background checks on all new gun sales. Checks also are required if a store returns a pawned gun to the person who brought it in.

Before issuing the license to Backes, ATF inspectors explained record-keeping rules to him, including inventory paperwork. Those records are ATF's tool for detecting illegal gun trafficking.

About a year after opening, ATF inspectors arrived at the store for an unannounced inspection. There were many problems with inventory. Records were missing on the sale of at least 145 guns, according to ATF records.

Backes said later that he had neglected to complete the paperwork but could account for all the guns he sold.

Despite the violations, ATF investigators didn't return to the store for five years. According to the agency, tight budgets and huge investigator workloads make such lapses between inspections common.

In 2004, ATF investigators found more violations, again involving missing paperwork on guns. The store also was selling guns at a bar raffle. And ATF warned Backes about selling to straw buyers.

Congress has limited ATF's options when it comes to punishing law-breaking stores. Besides revocation, the agency can only give warnings. ATF cannot suspend or fine a dealer, except under rare circumstances.

Following the 2004 inspection, the ATF cracked down on Backes as hard as Congress allows: It sent a letter and held a meeting with him. He promised to do better.

"I would like apologize (sic) for my misconduct," Backes wrote in a letter to the ATF. "I do understand the severity of the violations."

In 2007, ATF investigators returned and again found missing paperwork for guns sold. They also uncovered evidence Backes and his staff were selling guns to straw buyers, records show.

The store sold or returned on pawn nearly 3,000 guns over the 14 months before the inspection. That would rank it among the larger gun dealers nationwide, according to gun experts and the ATF.

The store reported that people buying guns or trying to get back pawned guns failed background checks 48 times, records show.

In nine of those cases, there was evidence of straw buying, according to ATF investigators, who said they spot-checked just a sampling of Backes' records.

In several of the cases, the suspected straw buyer bought the gun on the same day a relative was rejected, records show. That is a strong indicator of straw buying, ATF officials testified in a hearing as part of the revocation process.

"These are not clerical errors. They are breakdowns in what a dealer is supposed to do," ATF investigator Mary Jo Holpit testified in the 2008 hearing.

There may be other reasons why the ATF went after Backes' license, according to documents from the revocation case.

Holpit testified guns sold by the Shawano store ended up in the hands of felons or others who legally can't buy a gun. But an ATF attorney would not allow Holpit to elaborate because the information came from "a confidential source," according to the hearing transcript.

Holpit also revealed in the hearing that one of Backes' employees was selling guns at the store at the same time he was facing drug charges, which is against the law.

'Incredibly egregious'

Straw buyers usually are not obvious as the ATF described them in the Shawano examples, according to gun case experts.

"Usually (the buyers) do their level best to keep the dealer in complete ignorance. I have never heard of a dealer that says, 'OK, I will sell it you,' " said Richard Gardiner, a prominent attorney practicing in Virginia who represents gun shops. "The dealers are not that stupid. They usually kick them out of the store at that point."

"That is pretty incredible," added Daniel Vice, chief counsel with the Brady Center to Prevent Gun Violence. "That I have not seen before. That sounds incredibly egregious."

ATF documents in the revocation case say Backes violated federal law "by willfully making false entries and aiding and abetting the making of false entries" in five of the nine suspected straw buy cases.

Yet no charges were filed against anyone working at the store, either by local or federal prosecutors. The ATF declined to comment on whether the cases were examined by the agency's criminal investigators.

Gun rights advocates say the lack of charges undercuts the government's argument that the store should be shut down.

"If this guy is such a badass, where are the criminal charges?" said Dave Workman, senior editor with Gun Week, a magazine run by the Second Amendment Foundation in Bellevue, Wash. "You are accusing them of engaging in blatant selling to straw buyers. I am sorry but that is a federal crime."

All of the suspected straw buyers have signed affidavits swearing they bought the gun for themselves.

Warwick, the prosecutor in the license revocation case, said that is not surprising.

"Would anyone, upon query, admit to this?" Warwick said. "Would you admit to perpetuating a crime?

Badger saga

Backes, 50, repeatedly told ATF investigators during the 2007 inspection that he planned to transfer the store to his nephew, Scott Backes, 38, who manages the operation, according to records.

If Timothy Backes relinquishes his license and Scott Backes pulls a fresh one, that could halt the revocation process and erase the earlier violations.

That would be similar to the case in 2006, when ATF investigators recommended revoking the license of Badger Outdoors in West Milwaukee.

There was no revocation and the store remains open, operating as Badger Guns. Federal records show the license recommended for revocation was relinquished voluntarily, the players inside the operation took on new roles, and a new license was issued to the son of a previous owner, creating what one federal official called a "clean slate," a Journal Sentinel investigation found earlier this year.

A former owner of Badger Outdoors said he knew nothing about the recommended revocation, and he already had decided to turn in the license and retire. The current owner declined to comment on the change.

Last year, Milwaukee police launched an undercover investigation that revealed felons regularly frequent Badger Guns and use the range. Officers have continued to stop felons leaving the store as recently as last week. Police also found that felons were practicing on the store's range with rented guns.

Congress has said that gun stores don't have to do background checks on people who rent guns for target practice.

Badger Guns and Badger Outdoors have been the top sellers of crime guns recovered by Milwaukee police for at least the past decade, according to records obtained by the Journal Sentinel. Similar records are not available for guns purchased at Shawano Gun and Loan, because Congress passed a law limiting ATF's release of such information.

Congress also has prohibited lawmakers from considering violations found under the previous gun license - even if the same people are involved in the operation.

"The law is written in a way to protect firearms dealers," said Stephen Higgins, former director of the ATF. "There is far more protection for problem firearms than problem dealers in the liquor industry, that's for sure."

Firearm protection act

Gun stores are handled differently than other federal license, largely because of the 1986 Firearm Owners' Protection Act, experts said.

Strongly supported by the National Rifle Association and other gun rights groups, the legislation laid out special appeal rights and rules for gun dealers.

ATF investigators can inspect a dealer only once a year without a federal court order. But the agency doesn't come close to inspecting all 115,000 dealers annually.

The agency moved to revoke 64 licenses in fiscal year 2009 stemming from more than 11,000 inspections - the most recent figures available.

Revoking a license can take years because of a law that allows a so-called "de novo review" by a federal judge - a fresh look at the case.

ATF typically allows stores to continue selling guns during the appeal process. Indeed, the law and court rulings have found that a dealer can, on a one-time basis, move his entire inventory into his "private collection" and sell the firearms at gun shows without background checks.

Congress designed the process to be deliberate, said Gardiner, the attorney who helped draft the 1986 law when he was chief legal counsel for the NRA.

"It is a slow process to make sure the dealer is treated justly and given a meaningful opportunity to defend themselves," he said.

Higgins, director of the ATF when the 1986 law passed, said he opposed it but was limited by his bosses about what he could say. He thought the law should get tougher on gun stores, not weaker.

The law has added enough hurdles so ATF will only go after the worst gun dealers - and sometimes they can't even do that, he said.

"It is a long, slow process that dissuades the agency from doing things they ought to do," Higgins said.

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Some secret records opened due to appeal

A law, quietly passed by Congress in 2003, hides information from the public about how many crime guns are sold by dealers and what violations are uncovered by the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives.

But when a gun store appeals a license revocation, certain inspection documents become public as part of the court record, as in the case of Shawano Gun and Loan.

President Barack Obama promised to get rid of the secrecy provision. Instead, he embraced most of the law and added even more rules that could make it harder for law enforcement to crack down on dealers and stores selling guns to criminals.

New rule could slow revocations

Revocations of gun dealer licenses by the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives could move even more slowly following the agency's adoption of a rule last week.

The rule gives the ATF's director final say on revoking a gun dealer's license. Before, the authority rested with the agency's regional directors.

But the ATF has no director and hasn't for four years. Former President George W. Bush's nominee for the job was blocked by fellow Republicans. President Barack Obama has not nominated anyone for the post.

In the meantime, it appears Deputy Director Kenneth Melson will have the new authority over dealers' licenses.

- John Diedrich