Who's Minding The Gun Counter?

When one thinks of guns, one doesn't often think of Kmart Corp. But on Oct. 8, the nation's largest retailer was indisputably linked to the sale of firearms. A Florida jury ordered the company to pay Deborah Kitchen $12.5 million. Kitchen had sued Kmart for recklessly selling a .22- caliber rifle to her former boyfriend, who in 1987 shot her in the neck at point-blank range. She survived--but was rendered a quadriplegic for life.

The jury found that Kmart was negligent when it sold the rifle to Kitchen's heavily intoxicated ex, Thomas Knapp. Knapp was so drunk he could not legibly fill out the federal firearms form required by law of all gun purchasers. A Kmart clerk completed the task for him, trial evidence showed. Knapp is now serving a 40-year prison term.

The retailer, based in Troy, Mich., is appealing the verdict, the largest of its kind. Kmart argues that Knapp used a different rifle from the one he bought at Kmart to shoot Kitchen. In addition, the retailer contends that even if Knapp did use the Kmart gun, it could not have foreseen the tragic episode and therefore shouldn't be held liable for the incident.

POOR TRAINING? But Kitchen's case is more than an isolated incident. Court documents, records from the Bureau of Alcohol, Tobacco & Firearms, and interviews with many clerks and managers at stores nationwide reveal troubles at Kmart, which, along with Wal-Mart Stores Inc., is one of the nation's two largest sellers of guns and ammunition. The documents and interviews suggest that certain Kmart stores fail to adhere to federal and state firearms laws and inadequately train clerks about basic gun statutes and internal safety procedures.

Wal-Mart also has had its problems with gun sales. Interviews with employees by BUSINESS WEEK show discrepancies in their knowledge of internal procedures and government guidelines in the sale of firearms. The chain, based in Bentonville, Ark., declined to comment for this story or to respond to written questions submitted to its executives.

The sheer size of Kmart and Wal-Mart enables them to control a large portion of the consumer market. The National Sporting Goods Assn. estimates that in 1992, discount stores selling firearms, primarily Kmart and Wal-Mart, accounted for $81 million of the $488 million of annual sales of rifles and $77 million of the $433 million annual sales of shotguns. Discounters' market share in shotguns jumped from 17.4% in 1983 to 27.8% in 1992, while their market share of rifles increased from 13.5% in 1983 to 22.5% in 1992, the trade group reports. Both retailers declined to release information on sales or volume of firearms and ammunition sold.

As for handguns, Wal-Mart probably leads all other competitors in the $650 million market for such weapons. The chain carries an array of pistols and revolvers at an estimated 600 of its 1,954 stores. Kmart also sells handguns, though not at any of its 2,400 stores. It sells them through its wholly owned subsidiary, Sports Authority, a Ft. Lauderdale-based specialty store that offers the weapons at most of its 66 outlets.

Certainly Kmart and Wal-Mart make thousands of sales without incident. For its part, Kmart says its written firearms policies are strict and sound. "Kmart always has taken very seriously the responsibility that goes along with the selling of firearms," says Shawn McGee Kahle, director of corporate communications. "We require training in firearms-law procedures at the local, state, and federal level." In a written response to questions posed by BUSINESS WEEK, Kmart contends that in many instances, it is the victim of "civil actions brought by individuals seeking financial gain."

WIDESPREAD PATTERN. According to documents obtained from the Bureau of Alcohol, Tobacco & Firearms, however, Kmart stores have been repeatedly cited for violating firearms laws, including failure to maintain current state licenses and to fill out basic paperwork required by federal law. ATF records show that of six stores inspected within the past five years, all of which were previously involved in litigation, three have been cited for numerous firearms violations. Another store, the one at which Knapp bought his shotgun, hasn't been inspected since 1980, according to ATF records.

Kahle says that she is unable to address ATF reports citing violations at individual stores. But in general, she says that Kmart is working closely with the ATF to "make sure we're following the proper procedures." Kahle adds that in April, Kmart revised its internal firearms policies and procedures, and the ATF found them to be "improved."

Lengthy gaps between inspections are not surprising, given the state of the undermanned and overwhelmed ATF. The government permits nearly 300,000 individuals and stores to operate as gun dealers, granting licenses for as little as $10 a year. But federal firearms inspectors, who must make sure gun dealers obey the law, number fewer than 220. "There is no way we can possibly get around to all firearms dealers," says ATF spokeswoman Susan McCarron. "A lot of...stores are in rural areas, and we may not get to them for years."

Still, when the ATF does pay a visit, inspectors in some cases have turned up problems, says ATF spokesman Jack Killorin. The Kmart store in Oxon Hill, Md., for instance, was cited for "numerous record-keeping discrepancies," according to an April ATF report. The ATF found that the store didn't even possess a current, valid state firearms license. In addition, inspectors cited the store for failing to require customers to show sufficient identification before purchasing a firearm and to fill out federal firearms forms properly. The report also notes an ongoing ATF "legal enforcement" probe of the store.

Tony Tanedo, sporting-goods manager at the Oxon Hill store, concedes that mishaps occur when employees fail to implement the retailer's internal policies. "The problem is not with the written policies, but with the people who are not following them," says Tanedo.

At a Kmart store in Southfield, Mich., a November, 1992, ATF inspection showed that in 25 instances over two years, clerks failed to require purchasers to complete firearms forms. It was at the Southfield store that a drunken 18-year-old bought deer slugs in 1984. The youth used them to settle a score with an acquaintance, permanently disabling him. The victim, Anthony Buczkowski, filed suit against Kmart and won a $1.5 million judgment. But in September, 1992, the Michigan Supreme Court reversed the verdict, ruling "intoxicated buyers" are not legally deemed unfit to buy ammunition.

The problems at Kmart and Wal-Mart may stem from the way firearms are sold. Many firearms clerks at Kmart and Wal-Mart are young--generally of high school or college age. According to interviews with 22 Kmart and Wal-Mart employees, their experience in handling or selling firearms varies widely from store to store. At some stores, training in how to detect drunk, drugged, or unstable customers is lacking. "One of the problems in a large chain store, as opposed to a specialty gun store, is turnover," says the ATF's Killorin.

A newly hired sporting-goods clerk at a Wal-Mart in Harrisonburg, Va., says she was put on the floor without any formal firearms training or instruction. The 18-year-old clerk told BUSINESS WEEK she would not feel comfortable selling a gun by herself and would seek out assistance from other staff. By contrast, the sporting-goods section at a Wal-Mart store in Slidell, La., is staffed by retired military officers with 20 years experience in handling firearms, according to interviews.

It was a perceived lack of training that convinced jurors in the Kitchen case of Kmart's liability. "It's pretty concerning to see how easy it was to get this firearm," says jury foreman Sean Callahan. "The clerk's lack of training was really Kmart's downfall."

Kmart's Kahle explains that the store's training procedures are thorough and strict. She says employees are required to become familiar with training manuals and must attend in-store classes on the sale of firearms. They view videos showing simulated sales to explain what is required when customers purchase weapons. Kahle also notes that, as of this year, Kmart has increased the frequency of its training sessions and internal auditing of gun records. "Corporately, we're making sure procedures are followed, and we're going to intensify those efforts," she says.

LOOPHOLES. Certainly, mishaps and oversights at stores are only partly to blame in the escalation of gun-related violence. Loopholes in the law are also a problem. While federal law prohibits the sale of guns or ammunition to "unlawful users of any controlled substance," no law specifically bars the sale of weapons or ammunition to intoxicated customers. While federally licensed firearms dealers are prohibited from selling ammunition to convicted felons, retailers are not obliged to inquire about customers' criminal records. No law requires a store to train its staff on the particulars of selling firearms. And nothing on the books compels retailers to ask how purchasers intend to use their guns.

In 10 suits reviewed by BUSINESS WEEK against Kmart and Wal-Mart, the companies contended that they were careful to comply with current law. Moreover, they note that they cannot predict whether customers who purchase guns are dangerous. A number of judges have agreed with them, ruling in the companies' favor in six of the suits. Three were decided for the plaintiffs while another was settled out of court.

The case of Susan Drake illustrates the tangled nature of the laws governing the sale of firearms--and the difficulty of determining liability. In 1988, Drake, 19, went to a Wal-Mart store in Bartlesville, Okla., to buy a handgun. When a sales clerk asked her for identification, she showed a driver's license stamped with "UNDER 21" in large red letters, court records show. State and federal laws--as well as Wal-Mart's own policy--prohibit the sale of handguns to minors. But court records show the store clerk still sold Drake the weapon, which she used the following day to kill herself.

In a 1992 deposition in a case brought by Drake's family, a Wal-Mart regional compliance supervisor admitted that store employees in Oklahoma had not been instructed to watch for the

UNDER 21 stamp, nor were they taught how to look for signals put out by people in distress. Wal-Mart attorneys argued that the store could not have foreseen the suicide. An Oklahoma state court judge agreed, but the case is on appeal. Meanwhile, the store has discontinued its sales of handguns.

Many store employees believe purchasing firearms from the chains is far better for consumers interested in acquiring and using guns legitimately than is buying from smaller dealers. "Kmart offers a better atmosphere for a 16-year-old who comes into the store with his father to buy his first hunting rifle," says Kmart Tampa store manager Mike Rogers. Richard Gardiner, legislative counsel for the National Rifle Assn., believes specialized knowledge is unnecessary in the sale of most weapons. "Selling a firearm is like selling anything else," he says. "As long as a person can read, it's relatively straightforward."

Still, most other mass merchandisers have gotten out of the gun business. Since 1980, Sears Roebuck, J.C. Penney, Montgomery Ward, Target, and Ames Department Stores all have taken firearms off their shelves. They cite lack of profitability, concern over misuse of weapons, and the difficulties involved in keeping track of an ever-growing maze of local, state, and federal firearms laws for the decision.

In the late 1970s, Target stores discontinued the sale of hunting rifles. "We see ourselves as a family store, and we didn't see firearms as a fit," says spokeswoman Carolyn Brookter.

Kmart and Wal-Mart also position themselves as wholesome, all-American stores. But their marketing philosophy on guns is radically different: They use the weapons to draw male customers into their stores, industry experts say. Once there, these shoppers often buy other, highly profitable items, such as hunting clothing and accessories. In certain stores, firearms can lead to a 50% increase in hunting-gear sales, says Kmart's Rogers. "Their biggest value is that they're an attraction to a one-stop hunting shop," he says. "We have to do what we have to do to get business in the store."

DECOY. Some advocacy groups have decided to test the effectiveness of retailers' internal policies. Detroit's Save Our Sons & Daughters (SOSAD), a crime-watch group, wanted to see whether Kmart would sell ammunition to underage customers. On New Year's Eve last year, the group sent two boys, aged 15 and 16, to a store in a Detroit suburb. "The clerk asked me for my I.D. When I said I didn't have any, the clerk said 'I'm not supposed to be doing this,' and then he rang it up anyway," recalls Delrico Henley, who turned 17 last spring. The message on Henley's receipt: "Have a safe and happy New Year."

Kmart denies the incident, saying an adult made the purchase for Henley and his friend. But SOSAD member Allen Martin, who accompanied the boys into the store says, "No way. I was standing 15 to 20 yards away from the counter during the entire transaction."

Given the growing popularity of firearms, and an endless stream of gun-related violence, better control of their sale seems essential. But any restrictions will face opposition from those who contend that most gun-buyers are law-abiding citizens. "If you're talking about sales of hundreds of thousands of guns, 12 suits [against Kmart and Wal-Mart] doesn't indicate there's a problem," says the NRA's Gardiner. Yet with so many dangerous weapons in the hands of so many people, there may be no such thing as being too careful.

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