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AG Says It's Investigating N.H. State Liquor Commission's Handling of Large Cash Sales

N.Y. Department of Taxation

The New Hampshire Attorney General's Office says it is investigating how the state Liquor Commission handles large volume, all-cash sales at its retail outlets across the state. 

The investigation stems from questions raised earlier this year by Executive Councilor Andru Volinsky, about what he calls potentially illegal business practices by the New Hampshire Liquor Commission stemming from all-cash, bulk liquor sales, often involving out-of-state customers.

In a report released Friday and addressed to Volinsky and Governor Chris Sununu, Attorney General Gordon MacDonald acknowledged that his office is currently investigating the type of transaction at the heart of Volinsky's claims. MacDonald notes that federal authorities have raised concerns about these sales going back at least a decade.

In 2009, the Internal Revenue Service proposed a penalty against the commission for failing to properly report large volume all-cash sales, as required by federal law. Those reporting requirements are intended to track and prevent money-laundering and other criminal activity.

On behalf of the commission, the AG's office that year challenged that penalty and requested a waiver, which was denied. The state maintained that it is not liable to pay the penalty, which was assessed at just $200, because "the state is a 'governmental unit' that is not subject to the filing requirements" of IRS code 60501, those related to cash received in trade or business.

The IRS appears to have failed to respond six months later when the state continued to push its challenge, according to documents. (NHPR has filed a right-to-know request for additional documents in this case.)

[READ the Attorney General's letter to the Governor, and related documents released.]

MacDonald's report also says that, in 2012, federal officials began an extended investigation into how New Hampshire liquor stores handle large volume sales.

In late 2014, MacDonald says, the United States Attorney voiced concerns about the state Liquor Commission's practices, but took no action against it. MacDonald writes, "It is also important to note that federal authorities stated that the concern was with reporting large cash sales, not that the cash for the sales was from illegal sources."

In the wake of that earlier investigation, the AG notes that it worked with the Liquor Commission to update its policy on large volume sales. The revised policy took effect March 23, 2015, and remains in effect today.
The AG cites Volinsky's complaint and example of a large sale that occurred Feb. 3, 2018: "That sale plainly violated the existing policy." 

Volinsky's complaint highlighted the sale of large amounts of Hennessy cognac. He questioned whether certain Hennessy sales were split up into smaller transactions in order to keep purchase totals under $10,000, so to avoid IRS reporting requirements. Volinsky raised concern that the Liquor Commission's policies "appear designed to avoid federal financial reporting requirements related to large cash transactions."

Those policies are now being reviewed as part of the AG's investigation.

The state Liquor Commission denies that it is turning a blind eye to these transactions. It says that it is "committed to following state and federal laws and we have an 85-year track record of doing just that."

MacDonald says his office continues to investigate how the Liquor Commission handles all-cash sales. An investigator from the AG's office continues to interview witnesses.

The AG's office previously told New Hampshire Public Radio that it reviewed the Liquor Commission's policies on cash-related transactions in 2014 and 2015, but it declined to say why that review was undertaken, citing attorney-client privilege.
While the AG's office plays the role of legal counsel to the commission, it says it is not a conflict of interest to also investigate the commission. 

"The Department of Justice is obligated under the law to ensure that state agencies are complying with the law," says Deputy Attorney General Ann Rice. "Attorney Volinsky has raised concerns about how the policies are actually being implemented, which we will look into."


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