THURSDAY, FEBRUARY 23, 1984.

BUREAU OF ALCOHOL, TOBACCO AND FIREARMS

SALARIES AND EXPENSES

WITNESSES

JOHN M. WALKER, JR., ASSISTANT SECRETARY, (ENFORCEMENT AND OPERATIONS)

STEPHEN E. HIGGINS, DIRECTOR

WILLIAM T. DRAKE, ASSOCIATE DIRECTOR, COMPLIANCE OPERATIONS PHILLIP C. MCGUIRE, ASSOCIATE DIRECTOR, LAW ENFORCEMENT

BARBARA P. POMEROY, COMPTROLLER

PAUL R. GENTILLE, FINANCIAL MANAGER

ARTHUR D. KALLEN, DIRECTOR, OFFICE OF BUDGET AND FINANCE, DEPARTMENT OF THE TREASURY

INTRODUCTION

Mr. HOYER. The hearing will be in order.
Mr. Walker, you may proceed.

OPENING REMARKS BY MR. WALKER

Mr. WALKER. I have a brief prepared statement, Mr. Chairman. Mr. Chairman, and Members of the Committee, I am pleased to appear before you today in support of the annual appropriation request of the Bureau of Alcohol, Tobacco and Firearms for fiscal year 1985. With me today are the Director, Stephen E. Higgins, key AT&F staff members, and Arthur D. Kallen, the Director of the Department of the Treasury's Office of Budget and Finance.

The fiscal year 1985 request is $161,771,000 and 2,777 average positions. Included in this amount are two program increases. They are $2 million for a digital voice privacy radio communication system and $1 million for additional permanent change of station moves. This budget also reduces staffing by 143 positions. This reduction is primarily in the alcohol regulatory enforcement area. The bureau plans to be more selective in its inspections, de-emphasizing inspections for local, low risk activities.

The Bureau continues to seek ways to improve its productivity and maintain its effectiveness in this period of very scarce resources. As you know, during the past year there have been many changes to streamline the operations of the Bureau.

The number of regulatory and administrative regions was reduced from seven to five, Headquarters Criminal and Regulatory Enforcement activities were reorganized along program rather than functional lines, the laboratory system was realigned with the closings of the Philadelphia and Cincinnati laboratories, and financial management activities were centralized at Headquarters. Re

cently, the four Regional Offices for Investigations were abolished in an effort to improve field communication and control.

Since the end of fiscal year 1982, nearly 50 posts of duty and area offices have been closed and 12 have been opened. Relocations of staff resources such as these are needed to gain full productivity and meet the Nation's changing violent crime trends and shifts in population centers. Permanent change of station moves will be necessary at a greater than normal rate during fiscal year 1985.

LAW ENFORCEMENT MISSION

The law enforcement mission of AT&F is a critical one. The Bureau remains in the forefront of the President's fight against crime. ATF participates in the President's Organized Crime and Drug Enforcement Task Forces, as well as the South Florida Task Force under the leadership of the Vice President. ATF's agents in these forces conduct firearms and explosives investigations against violent crime and drug trafficking organizations. ATF's Special Agents have earned the respect and admiration of the law enforcement community for their work against outlaw motorcycle organizations, street and prison gangs, and other organized groups who illegally use or traffic in firearms and explosives to support and protect their illegal enterprises. In addition to securing the arrest and prosecution of gang members and narcotics traffickers for violations of Federal firearms and explosives statutes, this investigative work is invaluable in accumulating critical intelligence data on these violators.

In order to support the major fight against narcotic traffickers, ATF is redirecting 33 agents from its Arson Program to its Firearms Program. While this is a reduction in the Arson Program, we believe that the training being provided State and local enforcement agencies will allow this reduction with minimal impact. ATF is highly regarded for its arson investigation course that allows State and local agencies to enhance their capabilities in this area. In fulfilling its enforcement role against crimes involving firearms, explosives and arson, ATF must confront the nation's most hardened criminal elements. An analysis over a two year period reveals that 86 percent of ATF's defendants had criminal records and 60 percent were felons. Because of the nature of the serious crimes which this Bureau investigates, ATF's agents are continually exposed to life-threatening situations. During the past fiscal year, two of our special agents were killed in the line of duty, and another was very seriously injured.

The danger that our agents face in their day-to-day criminal investigative activities cannot be emphasized enough. Their work takes place under volatile and unpredictable conditions, against an armed and sophisticated enemy. Because of this engagement in volatile, tactical investigative operations, I wholeheartedly support ATF's request for a radio voice privacy system.

COMPLIANCE OPERATIONS MISSION

In addition to its criminal jurisdiction, ATF is responsible for regulation of the alcohol, tobacco, firearms and explosives industries and must ensure that all alcohol and tobacco excise taxes are

collected. These taxes are estimated to be $10.2 billion in fiscal year 1985. ATF's regulatory role also requires ensuring fair trade practices and maintaining high levels of compliance with Federal laws.

ATF is deeply committed to deregulation wherever possible. Historically, the industries with which we are concerned have been heavily regulated. Therefore, we continue to view deregulation as an important priority. While regulation of sensitive industries for which the Bureau has responsibility cannot be eliminated entirely, we believe that regulations and paperwork can be reduced while maintaining an efficient and effective administration of Federal statutes.

Overall, this budget is in furtherance of the Secretary's and the President's goals for efficient operations and fiscal restraints.

Mr. Chairman, this concludes my opening statement. I would now like to introduce Steve Higgins, Director of ATF, who will introduce his staff and provide you with more details on their budget request. We would both then be happy to answer any questions you or other members of the committee may have. Mr. HOYER. Thank you, Mr. Secretary.

OPENING REMARKS BY MR. HIGGINS

Mr. HIGGINS. We do have a general statement to introduce into the record. I would like to make just a brief opening statement.

It is a pleasure to appear before you in support of the fiscal year 1985 budget request. With me this morning are my colleagues Mr. William Drake and Mr. Phillip McGuire.

The fiscal year 1985 budget request is $161,771,000 and 2,777 staff years, which represents a net increase of $2,218,000 and a reduction of 143 staff years compared to the fiscal year 1984 authorized level.

This request includes reductions and nonrecurring cost savings of $11,092,000 and 176 staff years, and an increase of $10,310,000 to maintain current levels of operation, including a redirection of $2,100,000 and 33 staff years.

Two program increases are also proposed, $1 million for 53 additional permanent change of station moves and $2 million for a digital voice privacy radio communications system. These requirements are discussed in more detail in our fiscal year 1985 budget justification.

During fiscal year 1983 and again in fiscal year 1984, one of our highest priorities has been the hiring of qualified personnel to replace those lost through attrition during the prolonged uncertainty over ATF's future. As of December 31, 1983, our onboard staffing level had reached 2,903, which includes 1,210 special agents and 612 inspectors.

While these recent personnel increases are important to our continued efficiency, we have not lost sight of the need to look for ways to improve productivity, thereby minimizing the need for future personnel increases. With this in mind, we made a number of changes in fiscal year 1983 which resulted in more effective utilization of our personnel.

Among the most significant of these are the reduction in the number of Compliance Operations regions from seven to five, the elimination of Law Enforcement regional offices, the redeployment of significant numbers of special agents from small, noncost-effective posts to large, high crime metropolitan areas, and a much more broad-based application of ADP equipment to Compliance, Law Enforcement and support operations.

Because of the terrible cost in lives and property exacted by these vicious crimes, our highest law enforcement priority is the investigation of bombings, attempted bombings and arson cases. We also vigorously pursue those who endanger the public safety through the commission of crimes involving illegal trafficking in firearms, and those who use firearms in the course of their criminal activity with a specific emphasis on narcotics violations.

Cigarette smuggling enforcement is concentrated on interstate conspiracies involving substantial revenue frauds where State and local resources are insufficient to combat this problem. In cooperation with the Compliance Operations staff, investigations are also conducted of organized crime violations of the Federal Alcohol Administration Act.

Law Enforcement personnel routinely provide technical investigative assistance, intelligence data, and training to other Federal, State, and local law enforcement agencies. We participate in national strike forces focusing on organized crime. We are also very proud of the role ATF has played in the success of the Vice President's South Florida Task Force, and are extremely pleased with the results to date from our participation in the Drug Enforcement Task Forces.

We are pleased that again in 1984, the U.S. Secret Service is utilizing ATF assistance in meeting the additional protective requirements of a Presidential campaign year. As of mid-January, we had already committed 226 agents to protective assignments in support of this vitally important mission. We are honored to be called upon, and believe that the frequent requests for ATF assistance reflect a high regard for the professionalism and expertise of ATF special agents.

SUMMER OLYMPIC GAMES

In response to the critical need for efficient security at the 1984 Olympic Games, ATF has redirected 83 special agents, inspectors and support personnel to assist State and local authorities. Our contribution will be focused in three primary areas: identification and investigation of firearms-related violations and sources of terrorists' weapons; prevention of, response to, and investigations of major arsons and explosives-related incidents; and assistance to foreign competitors and/or security personnel relative to their importation of firearms.

Our security assistance effort for the 1984 Olympics will be completed during the fourth quarter of fiscal year 1984. For fiscal year 1985, the 83 agents, inspectors and support personnel will be redirected into the existing firearms and explosives programs.

PREVENTION PHILOSOPHY

Our law enforcement philosophy embraces crime prevention as the primary goal of the special agent. It is much more desirable to stop a vicious, mindless crime from happening than it is to apprehend a criminal after he has caused the loss of innocent lives and property.

This same basic philosophy is applicable to our compliance oriented programs. It is far more worthwhile to use our scarce resources to prevent excise tax evasion than to discover the evasion after the revenue is lost, possibly forever, to the Treasury. It is also of great importance that organized crime figures be denied entry into regulated industries-and ATF inspectors strive to do just that.

With this in mind, the Office of Compliance Operations is exercising careful selectivity in its use of resources to ensure the greatest possible net benefit to the Government. We gear our tax collection activities directly to the degree of potential revenue jeopardy, employing statistical, narrative and historical data to determine vulnerable areas.

Historically, ATF has encouraged the alcohol and tobacco industries to pay the proper taxes through a strong revenue examination program. We believe that the current rate of tax compliance is directly related to this effort, and that we can only expect future compliance to be as good as the examination, verification and enforcement process.

Unfortunately, there have been several recent instances of tax evasion and diversion of taxable products from distilled spirits plants. The problems range from large-scale organized fraud, to apparent carelessness or lack of internal controls, to increasingly frequent theft incidents. I have included several examples of such problems in my general statement.

Our concern over a possible trend toward evasion is not limited to the distilled spirits industry. The same root causes are present in other industries, along with other potentially aggravating factors such as the recent doubling of the tax on cigarettes.

To deal with these factors, we plan on developing new approaches to improve resource utilization, as well as immediate implementation of the improved targeting techniques I mentioned earlier.

Our philosophy of preventive enforcement and educational efforts to achieve compliance is also evident in the firearms and explosives compliance programs, where the value of, and enthusiasm for, dealer seminars is well established. We make every effort to ensure that Federal firearms and explosives licensees, the vast majority of whom are legitimate businessmen, not only understand the regulations, but also understand the importance of compliance with those regulations to our enforcement efforts.

Thanks to your support, and the support of the Administration, I believe that the men and women of ATF have had a very productive year in fulfilling their responsibilities in the public safety, tax administration and consumer protection areas. We ask your continued support in fiscal year 1985, and in return we promise another good year's work from ATF.