The New Hampshire Attorney General’s office says it has found no evidence of illegal activity related to the New Hampshire Liquor Commission’s handling of large, all-cash transactions at state-run liquor outlets.
In a letter released Thursday, Deputy Attorney General Jane Young writes that the Liquor Commission’s practices and procedures “are consistent with applicable state and federal laws” and that it found “no credible evidence” that the agency was encouraging employees to disregard agency policy when they completed cash sales.
The three-page letter, which contains no supporting documentation, was released days before the Executive Council will hold a public hearing on the nomination of Dan St. Hilaire, the Liquor Commission’s current Chief Operating Officer, to serve as a Superior Court judge.
Andru Volinsky, a member of the Executive Council who will vote on St. Hilaire’s nomination, prompted the investigation when he released a memo earlier this year accusing the Liquor Commission of turning a blind eye to potentially illegal activity, including easing the way for bootleggers to purchase vast amounts of liquor in New Hampshire for resale out of state.
“The timing and brevity of the letter issued by the DOJ after an investigation that begin [sic] at my request in February 2018 should give us all pause,” said Volinsky in a statement to NHPR.
In his original memo that opened the investigation into high volume liquor sales, Volinsky alleged that the agency that oversees 79 state-run liquor stores had policies that could “unquestionably facilitate money laundering related to criminal activities.” At issue is an IRS policy that requires businesses to report when a purchase is made using $10,000 or more in cash. Volinsky believes the Liquor Commission allows customers to circumvent this rule by going to multiple stores in the same day, spending just under the $10,000 threshold during the individual transactions.
According to the Attorney General’s letter, the Liquor Commission, as a “governmental unit,” is not subject to the IRS rule. However, the Attorney General has asked the IRS to issue a final ruling on the matter, writing that “there is a long overdue need for finality and certainty” with respect to the issue. There was no timetable provided for when the IRS may release its findings. IRS officials have repeatedly declined to provide details about their investigation into the New Hampshire Liquor Commission.
In an interim report released in April, the New Hampshire Department of Justice outlined more than a decade of interactions with the IRS over this issue. Earlier this year, agents from the IRS visited liquor stores, as well as the Liquor Commission’s headquarters in Concord, seeking information about two alleged bootleggers who made purchases in New Hampshire. In 2012, the IRS engaged in what the state described as an extended investigation into large cash sales.
In 2015, the Liquor Commission, under the guidance of the Attorney General, revised its large volume sales policy to comply with federal laws.
Officials at the Liquor Commission have repeatedly denied any wrongdoing since Volinsky’s call for an investigation and described Thursday’s report as an “exoneration.”
“The Department of Justice’s investigation reaffirms what we have stated from day one -- the New Hampshire Liquor Commission has strong policies in place that adhere to all state and federal guidelines,” said Liquor Commission Chairman Joseph Mollica.
Sales to out-of-state customers have long made up an important source of revenue for the Liquor Commission, which transfers the bulk of its profits into the state’s general fund. Volinksy, as well as rank and file employees who work at the state’s liquor stores, argue that among those out-of-state customers are a growing number of bootleggers, who purchase huge quantities of alcohol, including Hennessy cognac, and then resell it in their home state.
While there have been multiple arrests for those customers for violating Vermont, Massachusetts and New York laws for illegal importation of untaxed liquor, the new report notes that the New Hampshire Liquor Commission “has neither the authority nor a legal obligation to enforce the laws imposed by other states.”
Court documents show that investigators from New York and Vermont have staked out New Hampshire liquor store parking lots in recent months, apparently without the knowledge or coordination of state or local officials.
The Attorney General’s report also says that investigators found “no credible evidence that the cash received...is derived from any sort of illegal trafficking.” At least one well-documented case suggests otherwise, according to Volinsky. In February of 2011, a bootlegger named Luis Colon-Bacenet was arrested in Massachusetts after police found more than $40,000 worth of Hennessy purchased with cash at New Hampshire liquor stores inside of a van.
Colon-Bacenet told law enforcement that he was working on behalf Hamlet Peralta, a New York liquor store owner who was subsequently arrested for operating a $12 million ponzi scheme and sentenced to five years in federal prison.
“This evidence establishes a clear link between bootlegging in New Hampshire and bribery, extortion and financial frauds committed in New York,” said Volinsky.
The surge of purchases by bootleggers who pay in cash has triggered a number of internal policy changes by the Liquor Commission, including the installation of cash counting machines at numerous locations, as well as the hiring of armored cars to transport huge sums of currency to banks. Employee trainings now also include the use of Monopoly money to ensure accurate transactions.
Volinsky says he personally witnessed a large transaction of Hennessy cognac at the Keene retail store in February of this year, where customers divided the purchase at the register to avoid the $10,000 threshold. Republicans, including Gov. Chris Sununu, chided Volinsky for his “sting operation” and called for an investigation. The Attorney General’s report, however, makes no mention of any ongoing look at Volinsky’s actions.