"Red's had 10 or more crime gun traces connected to them so they got inspected," said John Hansen, an inspector for the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives who investigated the shop in 2000. He said he did not know why the ATF inspects dealers who have sold 10 or more guns used in crimes. But after an additional audit in 2005, Hansen said, "they did not follow up on their promise to keep better track of their firearms."

Outside the courtroom, Red's manager Ryan Horsley expressed shock at learning that the agency audits dealers who hit the 10-guns mark. He previously said he assumed that an ex-employee with a grudge had called in the ATF.

The revelation of the 10-gun rule came during the first day of a scheduled two-day U.S. District Court hearing over the future of Red's license. It offered a glimpse of how the ATF decides when and where to crack down on gun shops. That mystery has evaded Republican Idaho Sens. Larry Craig and Mike Crapo, who each put a hold on the president's nomination of the agency's head pending an ATF explanation of an apparent escalation in license revocations nationwide in recent years.

U.S. District Judge Edward Lodge has temporarily allowed Red's to continue operating while he rules whether the ATF was justified in revoking the dealer's license. That ruling rests on whether Red's "willingly" violated the laws, as the ATF alleges.

Assistant U.S. Attorney Deborah Ferguson, representing the ATF, Tuesday drew testimony from two agents who said that Red's had been warned and had been "educated," but that its lapses had proved costly to law enforcement in two failed gun traces.

In fiscal year 2003, two guns used in crimes were traced to the manufacturer, and then the wholesaler and to the shop, where the trail ended, an ATF inspector testified.

"The trace was successful all the way to this licensee, Red's Trading Post," said ATF Inspector Caleb Rushing, who after conducting a 2005 audit recommended the license revocation. Rushing said law enforcement requires licensed gun dealers to respond to its trace requests within 24 hours.

"Emergency traces need to be developed all the time," he said. The 2005 audit found Red's had failed to place "internal controls" or training to self-regulate as its president, Terry Horsley, and her son, Ryan, promised at a warning conference held in 2000 at this same federal building.

Hansen said he had left that conference feeling confident that Red's would resolve its problems.

But in 2005 store employees were found to have repeated their errors, he said. On multiple occasions they left blank the responses to questions on legally required transaction forms. The store also failed to notify police, as is required, that a customer had purchased multiple handguns within a five-day period. At least one gun said to have been purchased by Red's could not be accounted for in the shop's records, and in one instance no background check was performed for a sale.

On cross examination, Richard Gardiner, a Fairfax, Va.-based attorney representing Red's, pointed out that most of the problems were quickly fixed. He scolded the agents for not offering training to Red's employees.

"Have you ever made a mistake taking a note," he asked Rushing in an accusatory tone.

The ATF has never trained Red's employees, he said, although agents have trained employees of other shops in how to comply with the law.

"You never offered training," Gardiner said. "In fact, no one ever did."

The federal agency provides handbooks, quarterly newsletters and posts educational materials to dealers on its Web site.

Ferguson tossed the blame back at Red's for not supplying its own training.

"Most FFLs (federal firearms licensees) have training and standardized practices," Rushing said.

Linda Young, ATF area supervisor, testified she educates dealers at trade shows and conferences.

"I give the dealers my cell phone number … to ask questions," Young said. Gardiner grilled Young -Ferguson's last witness of the day -as he had grilled the others.

"Do you maintain that every dealer should not make a single mistake?" he asked. "Dealers make mistakes; Do they not? Have you ever made a mistake?

Ferguson told Gardiner she plans to call one last witness today. Gardiner said he would call four witnesses.

Lodge can take the case under advisement or rule today.

Cassidy Friedman can be reached at 735-3241 or cfriedman@magicvalley.com