Are NYC Gun Lawsuits Hurting Va. Dealers?

By CBS News producer Phil Hirschkorn.

Additionally, New York is targeting twenty more dealers in four other states: Georgia, Ohio, Pennsylvania, and South Carolina.

Are the lawsuits hurting their bottom line? It's hard to say in Virginia.

Two of the five Virginia dealers still fighting New York City — Old Dominion Guns & Tackle, in Danville, and Webb's Sporting Goods, in Madison Heights – are having their defense bills paid by their insurance companies.

"I'll expect this thing will go on a couple years before it's over," owner Harold "Webb" Babcock tells CBS News. "We're going to be there until the end."

One sued vendor, Patriot Services Inc., simply surrendered its federal firearms license and re-launched with a new license as Virginia Firearms & Transfers, Inc. at the same Richmond address. Owner Jim Jarrett tells CBS News he runs the business out of his garage. "I wouldn't want to operate a company under a lawsuit," he says.

Bob Moates, owner of a Midlothian, VA gun shop fighting the New York suit, says his legal bills so for amount to only $11,000. "I'm concerned. This could go on for years," said Moates. "It's money that could be spent for a better purpose."

Moates and Dennis Alverson, the owner of Old Dominion, promoted the gun giveaway by awarding raffle tickets to anyone who spent more than $100 in their stores during the past three months. "February, March, and April were three of my highest sales month since I've been in business," said Alverson.

Only one of the seven sued Virginia dealers, Franklin Rod & Gun Shop, in Rocky Mount, appears to have gone out of business. Owner Dan Heckman liquidated his stock and surrendered his license. But another gun seller has moved into his store and is selling guns as Franklin Outdoor Space.

Two Virginia dealers have settled with New York City: Cole's Gun Shop, in Danville, and Town and Country pawn shop, in Roanoke. That requires them to submit to inventory inspections and sales monitoring by a court-appointed "special master" to ensure they comply with gun control laws or be fined if they don't.

Data from the Bureau of Alcohol, Tobacco and Firearms traced 137 guns used in New York City crimes between the mid-1990s and 2002 to the seven Virginia dealers. The city then dispatched local investigators with hidden cameras to see if the stores were engaged in any illegal sales. The sued stores, according to the city, all permitted a "straw purchase," when one person who might not pass an instant criminal background check does all the shopping but turns to a companion to make the buy.

Virginia wants to stop what its attorney general, Bob McDonnell, calls "unauthorized, undercover, vigilante private investigators." McDonnell persuaded the state legislature to pass a law barring outside investigators from conducting simulated straw purchases without contacting and working with Virginia State Police. The law going into effect in July 1 would make violating this protocol a felony.

The federal government is siding with Virginia. In a recent letter sent to John Feinblatt, the New York City criminal justice coordinator who ran the gun store stings, Michael Battle, the Justice Department's outgoing overseer of all 93 U.S. attorneys, has asked the city to cease and desist. "The circumstances surrounding the purchases do not rise to the level that would support a criminal prosecution," Battle wrote. "Civilian efforts can unintentionally interrupt or jeopardize ongoing investigations."