The second shop owner lost his license after authorities linked guns he sold to 19 Philadelphia homicides, including the killing of a police officer.
"This involves hundreds of guns," said retired police detective Ray Britt, one of four current and former officers who told The Inquirer that police routinely resold seized firearms.
"Lots of people knew it was happening, and some officers tried to stop it," Britt said. "But it went on for years."
Upper Darby suspended the practice in 2005, shortly after federal agents raided one gun shop and quickly traced a sawed-off shotgun to the Police Department.
"We don't need to be putting guns used in crimes back out on the street," said Township Manager Thomas Judge Jr., who said he had learned of the practice after the raid. "Guns used in crimes are now melted down."
On Friday, the Delaware County District Attorney's Office, citing new information provided by The Inquirer, referred the matter to the Pennsylvania attorney general for investigation.
Agents from the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) are conducting an even broader investigation.
Under Pennsylvania law, police departments may resell seized or donated guns. In this case, ATF agents are trying to determine whether the proceeds from the guns went back to the township - or into the pockets of the officers, sources said.
An ATF spokesman declined to comment.
Upper Darby Police Chief Michael Chitwood said an ATF agent had visited him two weeks ago. He said he was cooperating.
"I have not seen anything - anything - that says that the Upper Darby Police Department illegally took guns out of here and sold them to anybody else," said Chitwood, who became chief of the 127-member force in August 2005, after all the transfers apparently had stopped.
But he added: "What happened prior to me coming here, I'm not responsible for, I wasn't involved in, I don't know."
