Newswatch: Gun store admits violating law
(Published Feb. 12, 2000)
Sacramento
An Auburn Boulevard gun store pleaded guilty Friday in Sacramento federal court to possession of illegal semiautomatic assault weapons.
The plea was entered on behalf of Great Guns by one of its attorneys, Richard Pachter. Sentencing was set for April 28.
The company faces a maximum fine of $500,000; the company's federal firearms licence will become invalid 60 days after sentencing.
Charges against the store's owner, Sterling G. Fligge, previously were dismissed.
Pachter admitted that the store displayed two .22-caliber Ruger semiautomatic rifles that had been converted to assault weapons with detachable magazines, pistol grips and folding stocks.
Rifles in that configuration are more easily concealed and fired from the hip.
Huge fine for owner of capital gun store: $500,000 for selling illegal assault arms
By Denny Walsh
Bee Staff Writer
(Published May 13, 2000)
A federal judge Friday fined the corporate owner of Sacramento's largest gun store $500,000 for marketing illegal assault weapons. It is the biggest criminal fine ever levied against a U.S. gun retailer.
Attorneys for Great Guns, which had pleaded guilty to the charges, say the company can't pay the fine because it is insolvent.
U.S. District Judge Garland E. Burrell Jr. was obviously unhappy with Great Guns' attempt to sidestep a fine by what he described as "gutting its assets" shortly before its Feb. 11 guilty plea.
"Great Guns' effort to avoid any fine in this case is akin to the parent murderer who seeks the mercy of the court because he is an orphan," said Assistant U.S. Attorney Benjamin Wagner in a sentencing brief.
Burrell said he was imposing the maximum penalty not just to deprive Great Guns of profit from the crime but "to penalize it for its evident action of transforming its corporate existence through the fiction of placing a significant amount of its assets in possession of its sole stockholder."
Richard Pachter, an attorney for the Auburn Boulevard store, told Burrell he was troubled by the judge's finding that the company deliberately engaged in conduct designed to frustrate the government's mission and asked Burrell to reconsider.
"I think you're wrong," Burrell shot back heatedly. "My ruling on that point is right and will not be changed."
Because of its felony conviction, Great Guns will automatically lose its federal license to sell firearms 30 days after the sentencing.
This was the first prosecution under Congress' 1994 assault weapons ban in the 34- county Eastern District of California, stretching from Bakersfield to the Oregon border.
Two semiautomatic .22-caliber Ruger rifles with detachable magazines, pistol grips and folding stocks were on display when agents of the federal Bureau of Alcohol, Tobacco and Firearms visited Great Guns on March 8, 1999. Under the 1994 law, semiautomatic rifles in that configuration are illegal because they can more easily be concealed and can be fired from the hip.
Great Guns' sole owner, Sterling Fligge II of Granite Bay, was originally charged along with the company in the weapons counts. He was also charged with lying to an ATF agent when he denied the store had sold any semiautomatic rifles equipped like those displayed.
Fligge, 51, hired former U.S. Attorney George O'Connell, whose firm has as its other name partner immediate past U.S. Attorney Charles Stevens. As tough as he is smart, O'Connell brought his hard-nosed tactics to the matter.
Pachter, a former assistant U.S. attorney and now an associate at Stevens & O'Connell, first argued that the offense was a meaningless, technical and accidental violation that did not merit criminal sanctions. The U.S. Attorney's Office rebuffed Pachter's pitch.
Pachter later returned with O'Connell, and then the two of them persuaded the U.S. Attorney's Office to drop the charges against Fligge.
Prosecutors subsequently said in an application to Burrell:
"The government is moving for the dismissal of defendant Fligge after due consideration, as a matter of prosecutorial discretion, and at the request of counsel for the defendants."
But by Friday's sentencing, relations had cooled between the U.S. Attorney's Office and O'Connell's firm.
Burrell, who was an assistant U.S. attorney under O'Connell, had denied his old boss's motion to suppress the evidence on Oct. 22. The judge found Fligge's testimony at a hearing on the motion "was not veracious; some of his testimony even conflicted with his own declaration" in support of the motion.
Three days after that ruling, Guns and Gear, a newly formed company wholly owned by Fligge, applied for a federal firearms license to operate a gun store at the premises occupied by Great Guns. The new corporation has purchased the right to the Great Guns name.
"Apparently, (Fligge) does not even intend to change the sign," Wagner said in his sentencing brief.
Under the circumstances of this case, the government had no legal ability to freeze the corporation's assets before the February guilty plea. And it had no inkling of what was afoot until after the plea when a probation officer, who was preparing a presentence report for Burrell, began reviewing Great Guns' income statements and balance sheets.
At the end of last year, nearly $1 million was drained out of Great Guns and channeled to Fligge -- then free from prosecution -- in the form of a loan repayment, the first salary he had ever drawn from the company, and a dividend distribution. During the same period, the company drastically reduced its inventory, and its checking account balance plummeted from $133,000 to a minus $10,250.
Total current assets shrank from more than $873,000 as of Sept. 30 to less than $76,000 on Dec. 31.
Although acknowledging in his sentencing memorandum that this could reflect a depletion from sales, Wagner said, "A more logical explanation for the quantity of missing inventory is that some of it has been transferred to another person or entity in contemplation of passing it on to Guns and Gear."
In a later pleading, Wagner said he had "just become aware" that Fligge had, indeed, transferred more than 100 firearms from Great Guns to himself.
While all this was going on, "Fligge almost certainly knew that the company would be pleading guilty to a felony and subject to a substantial fine," Wagner said in his memorandum.
Great Guns insisted it was a normal winding down of operations.
Wagner, however, termed it a "sham ... in order to present this court with a fait accompli -- an indigent defendant."
In a memorandum filed this week, Wagner said, "The defendant simply argues that Fligge had a right to loot the company, and that there is nothing this court can do about it." Fligge "clearly has not gotten the message."
In the event that Great Guns fails to pay the fine, Burrell noted that civil collection remedies are available to the government.
Wagner suggested the possibility that the government would impose the fine against Guns and Gear, provided it could be shown to be an alter ego of Great Guns.
The new corporation's application for a federal firearms license was rejected by ATF locally, and that action was appealed, Pachter said outside the courtroom.
He said there was an administrative hearing in Sacramento last week before an ATF inspector from Southern California, who has not yet made a decision.
