Manfreda: Moving ATF Criminal Agents to TTB Makes Good Sense, Won’t Change Agency’s Culture

One of the first things President Trump did after taking office was to order all federal agencies to review their operations and submit suggestions for how to streamline or make the federal government more efficient and effective.

One year later, that directive has borne fruit in a proposal in Trump’s 2019 budget that would put all criminal investigative responsibility for alcohol and tobacco in Alcohol & Tobacco Tax & Trade Bureau, enabling the Justice Department’s Bureau of Alcohol, Tobacco, Firearms & Explosives to focus all its attention on firearms and explosives cases.

The proposal has drawn criticism from a former chief counsel of TTB, who was also assistant chief counsel for alcohol and tobacco at TTB’s predecessor agency, the Bureau of Alcohol, Tobacco & Firearms (ATF).  The plan would, he wrote, dramatically transform TTB and destroy its culture, turning TTB into an agency driven by criminal agents, looking to notch convictions on their pistols, rather than an agency which works to bring and preserve a level playing field for industry members and focused upon voluntary compliance with tax statutes.

We sat down with John Manfreda, TTB’s administrator, to see just how much the proposal would transform the agency.

“I’m 1,000% for it,” he told us.  “We’ve been advocating for this since before TTB was split from ATF” following the government reorganization triggered by the Sept. 11, 2001, attacks on the World Trade Center and Pentagon.

And, he said, his counterpart at ATF is totally supportive, too.

That’s understandable.  ATF’s alcohol and tobacco responsibilities today are distraction from its major responsibility investigating school shootings, bombings, and attempted bombings.

It seems so logical.  Why, we wondered, wasn’t TTB given all the federal responsibility for alcohol and tobacco, leaving ATF to just focus on firearms, arson and explosives (and, perhaps, to have been renamed the “Bureau of Firearms and Explosives”).

“It was a matter of resources,” Manfreda recalled.  He was TTB’s first deputy administrator and was deeply involved in planning for the split.

“The synergies are huge” from putting all alcohol and tobacco taxing, investigative and criminal authority in one agency, he told us.  Manfreda’s been a federal employee for more than 40 years.  Like his predecessor at TTB, Arthur Libertucci, he’s a passionate believer in highly efficient agencies, tightly focused on achieving a core mission.

That focus has paid off.  TTB this year was rated the fourth best agency to work for among some 339 federal sub-component agencies.  It’s also why human resources, payroll and similar functions have been contracted out to other agencies.

To be sure, TTB does have a human resources director. But most HR functions are handled in other agencies, somewhat similar to how a wholesaler might have his payroll processed by Paychex, his retirement plans by a large financial services provider, and his various employee benefit programs administered by yet another firm.

The Trump Administration proposal to transfer ATF’s remaining alcohol and tobacco functions to TTB would primarily affect enforcement of the Contraband Cigarette Trafficking Act (CCTA).

It would increase TTB’s payroll by 28 positions, including auditors, investigators and other program staff.  Agents would be hired under an expansion of TTB’s existing interagency agreement with the IRS.  Initially, an additional 12 agents would be added.

But the former chief counsel argued those additional agents would wreck the existing culture at TTB.  He pointed to what happened to ATF in the 1980s, when it shifted to more criminal enforcement rather than simply tax collecting and rulemaking.

Manfreda vehemently rejected that argument.  First, he said, the two situations aren’t at all similar.  Following the 1993 terrorist bombing of the World Trade Center, the 1995 bombing of the Alfred P. Murrah Federal Building in downtown Oklahoma City, and a series of mass shootings beginning in 1984, Congress and the White House insisted ATF focus on investigating and tracing the source of explosives and firearms used in such attacks.

ATF resources formerly dedicated to regulating and taxing the alcohol and tobacco industries were shifted to investigating mass murder.

Alcohol and tobacco can’t be used to commit mass murder.  The major threat from alcohol and tobacco is loss of tax revenue from diversion into unlicensed channels, or from criminal elements gaining access to those industries.

TTB’s work – from licensing participants in the industries it regulates to preventing diversion of product into illegal channels – helps insure the legal consumption of alcohol and tobacco doesn’t help fund terrorist groups.

“ATF and TTB are in absolute agreement on this transfer,” Manfreda told us.  Right now, TTB “is a tax collection agency without the ability to enforce the tax statutes with agents of its own.”  That means to investigate criminal matters, it had to beg to borrow agents from other agencies, on a catch-as-catch can basis.

“We’ve always had the criminal jurisdiction,” he added, “but not the agents.  We use our criminal jurisdiction to collect taxes,” he said.

One of the other arguments made by the former chief counsel was about funding.  Without additional funding, he argued, the agency was certain to see a change in its culture as criminal investigations begin to crowd out regulatory activities.  That’s what happened, he said, in the 1980s and 1990s as ATF’s mission was shifted to criminal investigations of terrorism and mass murder.

But that’s not the case with this proposal.  In a detailed justification to Congress, the President’s budget proposal provides $5 million in transfer start-up costs for this fiscal year.   And it makes clear there will be funding in future. That’s pretty unusual, we’re told.

It makes sense for the federal government’s FET experts to have CCTA jurisdiction, Manfreda added.  Indeed, since TTB began its current enforcement program in FY2011, its investigations have resulted in more than $600 million in tax liabilities as well as numerous tax convictions.  TTB overall generates about $400 in revenue for every dollar it spends to collect taxes.

“Consolidating federal alcohol and tobacco tax jurisdiction within Treasury, once enacted and fully funded, will result in a more effective and efficient enforcement approach for detecting and addressing tax evasion schemes that deny federal and state revenues and undercut legitimate businesses,” a detailed explanation to Congress supporting the proposal explains.

No cultural changes will happen, Manfreda said.  “We’ve been running on the idea that our goal is to put people into compliance, not into jail.”

“We’ll never have agents dominating us,” Manfreda added.  Indeed, the proposal would bring the total number of agents working for TTB to only 18 out of a total workforce of 478.

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