Who approved sting? Questions over police 'churning' authority at center of cigarette case

But when asked last week whether a police department, sheriff's office or other agency can simply grant themselves the authority — without the involvement of anyone else in local government — Gibson did not get back with an answer as of press time for this story.

A need for accountability

In Hampton's case, members of the City Council said they didn't know about the more than $718,000 in Blue Water Tobacco's account until it was reported in late September as part of an investigation by the Daily Press.

Others high in city government — such as Bunting and City Attorney Cynthia Hudson — also said they didn't know about the millions of dollars flowing through the churning account until the investigation was halted in January.

Money raised through churning is distinct from criminal forfeiture funds, experts say. Those are funds seized during investigations, used as evidence in court, ruled forfeited by judges, and doled back to localities for appropriations to law enforcement.

Whatever the Attorney General's Office says on churning, the requested opinion could have a wide-ranging impact, not only in Hampton but for other law enforcement churning accounts statewide.

A critical question, for example, is how such churning operations square with existing state laws that give budgetary appropriation powers solely to elected governing bodies — such as city councils and county boards — and not the police.

A government accounting expert, Virginia Auditor of Public Accounts Walter Kucharski, said the reason for such laws is fundamental — so that the people's elected representatives get to decide how public money is spent.

He also cited policy, liability and accountability reasons for elected councils and boards to aign off on all appropriations. If an employee makes a purchase without such a budgetary authorization, Kucharski said, the council can demand the money be repaid from the employee's own pocket.

Bunting, however, has stated that according to the city's legal interpretation, churning funds, as the "ongoing fruits" of a criminal investigation, "did not require prior appropriation by Council as they were not 'public funds' in the sense contemplated by the appropriations statute."

Hudson has also cited a 2006 Attorney General's opinion, unrelated to a law enforcement operation, which defines "public funds" in a way that leads the city to conclude that churning funds are not necessarily included in that definition.

City Councilman Donnie Tuck has weighed in on the other side. "It's not just a private operation of the police department," he said two weeks ago. "It's still public money."

Origins of the operation

An ATF special agent first approached Hampton in the spring of 2010 with the idea for an undercover cigarette sting operation.

The idea was to crack down on cigarette bootleggers — people trying to profit by buying cigarettes in low-tax states and selling them in high-tax states — and related crimes. Under the agreement, the ATF supplied the caseloads of cigarettes and money for a warehouse lease.

Hinson, then the resident agent-in-charge of the ATF's Hampton Roads region, said that she and the Hampton Police Division decided to go with what she termed "state churning" because of the time-consuming process for getting federal churning approved.

"It was easier to get up and running if you used state churning authority rather than federal," she said. "The federal rules required too long a process, and you can lose (investigative) targets in the process."

Though ATF officials in Washington strongly preferred that its agents in the field use federal churning authority, a source said, there was no requirement that they do so.

Hinson said that while ATF officials in Washington were aware of and approved the joint Hampton operation, she doesn't recall a process for getting state churning authority approved. "I was not aware of any approval that HPD was required to obtain regarding the joint investigation," she said.

But at meetings, Hinson said, Jordan always made clear that he wanted the proper protocols to be followed. "The chief was very concerned that everything was done absolutely right, by the book," she said.