By Richard A. Serrano and Kim Murphy, Los Angeles Times

June 21, 2011

The acting director of the federal Bureau of Alcohol, Tobacco, Firearms and Explosives is expected to step down because of a controversial gun-running investigation that allowed weapons to be sold to suspected agents of Mexican drug cartels, according to two sources inside the agency.

Kenneth E. Melson's resignation, which could happen as early as this week, is the most significant repercussion yet from a growing public outcry over the code-named Fast and Furious operation, under which ATF agents watched while straw purchasers acquired more than 1,700 AK-47s and other high-powered rifles from Arizona gun dealers and delivered them to others.

Hundreds of the weapons turned up at crime scenes in Mexico and the U.S., including in southern Arizona last December where a Border Patrol agent was shot to death.

At a House hearing last week, internal government documents showed that Melson was closely involved in overseeing the operation and received weekly briefings. Documents released by Congress showed that he asked for and received log-in information and a link to an Internet feed so that he could watch some of the illegal straw purchases taking place in an Arizona gun store.

Melson became acting director in April 2009 and has remained in place because gun rights groups have held up confirmation of the proposed permanent director, Andrew Traver, head of the ATF's Chicago field office.

"Traver has been deeply aligned with gun control advocates and anti-gun activities," the National Rifle Assn. said in January. "This makes him the wrong choice to lead an enforcement agency that has almost exclusive oversight and control over the firearms industry, its retailers and consumers."

Sources in the agency, who asked not to be identified because the process remained fluid, said Traver could not serve as acting director while his nomination remained under consideration. So it was not clear whether Traver would step in immediately or whether someone else would be named acting director.

"Melson is out," one source said. "Traver is flying into Washington to meet with the Justice Department," the ATF's parent agency. "The administration still favors him because he will do what the Department of Justice instructs him to do."

But the source said that Traver, although close to Obama through their Chicago connections, did not have "the rank and file" support from agents around the country.

"We need someone permanent in that slot," the source said. "It's been five years since we've had a permanent director. That's the rub."

A second source, also speaking on the condition of anonymity, said "the feeling on the inside is that Melson is going to resign and that they will have Traver in place in Washington to do a press conference and show there is no gap in the leadership."

Officially, the ATF declined to address the reports.

"Melson continues to be focused on leading ATF in its efforts to reduce violent crime and to stem the flow of firearms to criminals and criminal organizations," Scot Thomasson, the agency's chief spokesman, said Monday. "We are not going to comment on any speculations" about his status as head of the agency.

Melson's resignation would mark the most significant response yet to the outcry over Fast and Furious. But it would probably fall far short of resolving questions in Congress and among Mexican lawmakers over who authorized the operation.

In interviews with The Times, several disgruntled agents have said they were told the operation had been approved at the highest levels in Washington.

The operation marked a rare instance in which ATF agents allowed guns to "walk" into the hands of criminals, ostensibly with the goal of catching higher-ups in gun-trafficking organizations.

"We want to know what felony stupid bad judgment led to allowing this investigation at the highest levels," Rep. Darrell Issa (R-Vista), chairman of the House Committee on Oversight and Government Reform, said at last week's hearing.

Sen. Charles E. Grassley (R-Iowa), ranking member of the Senate Judiciary Committee, said in a statement Monday that Melson's departure would not clear up his committee's questions.

"It would be a shame if the Justice Department makes Mr. Melson the only fall guy for this disastrous strategy — there's plenty of blame to go around at both the ATF and the Justice Department," Grassley said in a statement. "A resignation by the acting director would be, by no means, the end of our inquiry. Congressman Issa and I are eager to talk to Mr. Melson and hear his side of the story as soon as possible."

A clue to where the congressional inquiries are going might lie in a sealed document that was inadvertently released partially because of the investigation. The document makes it clear that at least one wiretap application under Fast and Furious, in March 2010, was signed by Assistant Atty. Gen. Lanny A. Breuer, head of the Justice Department's criminal division.

Department officials reacted angrily when the document's heavily redacted cover letter was recently made public, saying it justified their refusal to turn over other sensitive documents.

One ATF source, speaking anonymously because he was not authorized to speak publicly, called Melson a career Justice Department attorney who "got terrible advice from his inner circle. Ken Melson is an attorney. He was not raised as an agent. …If you spend just 10 minutes in our academy for new agents, you know our mission is to deny guns to criminals. And yet they told Melson this was OK."

Three agents from ATF's Phoenix office testified before Issa's committee last week that they had repeatedly objected but were told to back off surveillance once the guns were transferred to third parties.

"Several special agents in the group, including myself, became increasingly concerned and alarmed at [Phoenix management's] refusal to address or stop the suspected straw purchaser from purchasing additional firearms," Agent Olindo James Casa told the committee.

"On several occasions I personally requested to interdict or seize firearms in such a manner that would only further the investigation," he said, "but I was always [ordered] to stand down and not to seize the firearms."

Mexican lawmakers believe that at least 150 Mexicans have been killed or wounded with weapons smuggled in the operation. And the ATF has estimated that at least 372 of the guns have been recovered in Arizona and Texas, mainly at crime scenes.

richard.serrano@latimes.com

kim.murphy@latimes.com