The inspector general’s office examined 20 undercover operations by the Bureau of Alcohol, Tobacco, Firearms and Explosives in which the agency generated $162 million in income as it attempted to build cases against cigarette smugglers. The investigations were conducted from 2006 to 2011.
In 2004, ATF was granted the same authority as that held by the FBI and the Drug Enforcement Administration to use proceeds generated from some investigations to offset operational expenses.
Horowitz said that in one case, which operated without proper ATF approval, approximately $15 million worth of cigarettes were sold undercover in an 18-month period and a confidential informant was allowed to keep more than $4.9 million of the $5.2 million in profit generated without submitting adequate documentation supporting his expenses.
The report said ATF could also not account for an additional 2.1 million of 9.9 million cartons of cigarettes, with a retail value of more than $127 million, that were purchased for the investigations.
ATF spokeswoman Ginger Colbrun said that the inspector general’s numbers are inaccurate. She said ATF has determined that 447,218 cartons were unaccounted for, not 2.1 million, after it conducted a more thorough audit of the documentation.
“The OIG report inaccurately implies ATF cannot account for 2.1 million cartons of cigarettes or that the cigarettes are missing,” Colbrun said. “ATF forensic auditors conducted a comprehensive . . . inventory reconciliation of the 2.1 million cigarette cartons in question. The results of our reconstructive inventory are a more thorough and accurate reading . . . than the figure reached by the OIG audit.”
ATF officials also said the agency has since tightened its guidelines for the kinds of cases that were audited, which the agency calls “churning investigations.”
In his report, Horowitz also said that ATF spent funds in ways that appeared “improper, unnecessary and unreasonable.”
The report of lost cigarettes was not good news for ATF, which has been harshly criticized in recent years by Republican lawmakers for losing thousands of guns.
In its Phoenix-based “Fast and Furious” gun operation, ATF lost track of more than 2,000 guns that investigators were monitoring as they were sold to traffickers suspected of arming Mexican drug cartels. The operation to link guns to a cartel fell apart after some of those guns were found at the scene of a shootout that killed a U.S. Border Patrol agent. That led to an 18-month congressional investigation and a vote to hold Attorney General Eric H. Holder Jr. in contempt.