U.S. GUN TRIAL ECHOES IN DRUG-TORN MEXICO

PHOENIX -- This week, an Arizona gun shop goes on trial in state
court in what law-enforcement officials are calling a landmark case
against gun dealers who sell weapons that end up in the hands of
Mexican drug cartels, fueling horrific violence south of the border
that killed more than 6,000 people last year.

X-Caliber Guns LLC, is accused of knowingly selling hundreds of
weapons, mostly AK-47s, to buyers who were posing as fronts for
Mexican drug gangs. The gun store's owner, 47-year-old George
Iknadosian, has maintained his innocence in court filings.

While the U.S. has long pressed Mexico to stop the flow of illegal
drugs such as cocaine from crossing the border heading north, Mexico
has complained that the U.S. doesn't stop the flow of guns heading
south. Mexican and U.S. officials estimate that more than 90% of the
weapons used by Mexican drug cartels come from the U.S.

Consider what happened last year in the Mexican border city of
Nogales. The chief of the Sonora state anti-drug unit, Juan Manuel
Pavon, was murdered by cartel hit men, just hours after attending a
U.S. seminar on how to resist the tide of American firearms surging
into Mexico. Several weapons linked to the crime traced back to X-Caliber Guns.

"The three highest priorities for me in terms of U.S. cooperation in
the drugs war are these: guns, guns, guns," Mexican Attorney General
Eduardo Medina Mora said in a recent interview with The Wall Street
Journal. "These drug groups intimidate society and government because
of their firepower. And their firepower comes from the U.S."

No one knows how many weapons cross the border into Mexico each year.
Unlike contraband drugs, which are consumed, contraband guns "remain
in circulation until they are captured," says Terry Goddard, the
Arizona Attorney General bringing the case against X-Caliber Guns.

The number of U.S. guns in Mexico is growing. The Justice
Department's Bureau of Alcohol, Tobacco, Firearms and Explosives, or
ATF, says more than 7,700 guns sold in America were traced to Mexico
in the fiscal year ending last September. That's twice the 3,300
recorded the previous year and more than triple the 2,100 traced the
year before that.

U.S. officials acknowledge that U.S. gun laws are partly to blame.
The 1994 ban on the sale of assault weapons like AK-47s in the U.S.
led to a decrease of such weapons south of the border. But the ban
expired in 2004, and the numbers in Mexico spiked. Last week, U.S.
Attorney General Eric Holder said the Obama administration would seek
to reinstate the ban. Contributing to the problem is the fact that
Mexico's customs control is famously weak, and authorities rarely
check inbound traffic from the U.S.

Meanwhile, Mexican drug gangs are stocking up on deadlier weapons.
ATF officials say they have registered more purchases of high-powered
FN Herstal rifles and pistols -- the Belgian-made weapon called
"matapolicias" in Mexico, or "cop killers," for their ability to fire
through body armor. Such items are sold in hundreds of Arizona gun
shops, or by private owners advertising online.

Although U.S. gun laws generally forbid the sale of weapons to
noncitizens, the X-Caliber case shows how Mexican purchasers used
intermediaries -- or "straw buyers" -- to flout the rules.

The scheme, according to the prosecution, was simple: The buyers,
usually 19- to 22-year-old U.S. citizens with no police record,
declared that the firearm was for personal use, but instead passed it
along to an associate of a Mexican cartel. The buyer filled out a
standard form used by the ATF to track firearms. Lying on the form is
punishable by up to 10 years in prison. But ATF agents here say
buyers in the X-Caliber case were paid a fee to run that risk -- up
to $100 on each transaction.

Gun shops generally rely on ATF recordkeeping to check them before
selling to the wrong buyer. Ken Logan, a manager at the Shooters
World gun store in Phoenix says the ATF form, once approved after
being checked against a national data base, relieves the store of
responsibility. "The ATF says 'yea' or 'nay,' on who I can sell a gun
to," he says.

Gun stores run the risk of lawsuits if they're deemed to be
"profiling" -- refusing to sell guns to young Latinos, for instance.
Mr. Logan concedes he has seen men enter gun stores, point out to a
girlfriend what weapon they should buy, and leave. The girlfriend
fills out the form, attesting the firearm is for her personal use.

Getting bullets is even easier. Gun dealers here must report anyone
purchasing more than one handgun during a single five-day period, but
there is no restriction on ammunition. Last Christmas Eve, salesmen
at Cabela's Sporting Goods store in Phoenix were surprised when two
Hispanic men bought 24,000 rounds of 5.7 caliber bullets -- the same
caliber used in FN "cop killers." They paid in cash -- more than
$10,000. When the buyers were seen loading their purchase into a car
with Mexican license plates, store managers summoned police.
Authorities found 12 FN rifles and three "cop killer" handguns.

Police arrested the buyers, but only because they were foreign
nationals, thus forbidden from possessing arms in the U.S.

The murder of Mr. Pavon last year illustrates how Arizona's
gun-friendly culture contributes to mayhem in Mexico. Last October,
the men under Mr. Pavon's command fought gangs of narco-pistoleros in
gun battles across the state. On October 24, a caravan of heavily
armed assassins descended on Nogales, only to be repelled, leaving 10
gunmen dead. A week later, they attacked a police substation about a
mile from the U.S. border crossing.

Days later, Mr. Pavon was in Arizona for consultations with U.S. officials.

At a farewell picnic at a federal shooting range in Tucson, the
Mexican policeman was invited to test fire a powerful American weapon
that has been surfacing lately in the narco-gangs' arsenals: the 50
caliber Barrett rifle, powerful enough to pierce a tank's armor.

"We had a shootout," recalls Mr. Newell, the ATF agent. "He won."

The following night, Commander Pavon was ambushed as he entered a
Nogales hotel.

- -Jose de Cordoba contributed to this article.