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AG completes interim report of large state liquor buys with cash

New Hampshire Union Leader

April 16. 2018 4:33PM
Executive Councilor Andru Volinsky (with hat) and Richard Gulla, president of the N.H. State Employees Association, are seen on Feb. 3, 2018, in surveillance footage strolling the stockroom of a Keene liquor store. 

CONCORD — Attorney General Gordon J. MacDonald said large volume cash sale of liquor Feb. 3 at a Keene liquor store “plainly violated” existing policy regarding reporting requirements put into place after the federal government had raised concerns about practices at the State Liquor Commission.

The sale was one of the principal allegations from Executive Councilor Andru Volinsky, D-Concord, who called on MacDonald to investigate whether the SLC was willfully instructing employees not to report large, cash purchases of liquor and that this would allow out-of-state buyers to illegally bring the alcohol back home and even resell it.

Last Friday, MacDonald issued an interim report on Volinsky’s complaint which confirmed his office has been working with the commission for more than a decade in response to concerns raised by federal authorities.

After Volinsky’s complaint, the State Liquor Commission fired an employee who was involved in that sale.

State officials and the State Employees Association have declined comment on the move saying it’s a confidential personnel matter.

The Union Leader was first to report New York and Vermont authorities had questioned whether New Hampshire liquor authorities were doing enough to ensure illegal bootlegging was not taking place.

Sources in the state liquor broker industry said it was well known out-of-state buyers were making huge cash buys in such a way so as to skirt federal reporting of them to the Internal Revenue Service.

SLC officials have insisted they have complied with federal reporting requirements about cash transactions of $10,000 or more.

They also stressed they would not investigate what out-of-buyers do with the alcohol once they have legally bought it here.

In the report addressed to Gov. Chris Sununu and Volinsky, MacDonald said the commission has since 2006 complied with the federal reporting mandate.

Then, in May 2009, the Internal Revenue Service sent the commission a proposed penalty assessment for a late and/or incomplete report, MacDonald said.

The commission challenged that “relatively modest” fine and the IRS never responded to that letter or further pursued the penalty, MacDonald said.

State prosecutors later became aware in 2012 that the IRS was again investigating large volume sales in New Hampshire and that several witnesses were interviewed.

In late 2014, the U.S. Attorney’s Office in Concord told state prosecutors the federal government “had concerns” with the commission’s compliance.

“It is also important to note that federal authorities stated that the concern was with reporting large cash sales, not that the cash used for the sales was from illegal sources,” MacDonald wrote.

In response, state prosecutors worked with the commission to adopt on March 23, 2015 the current policy on reporting large volume sales.

Volinsky’s complaint maintains he saw two people use cash to buy $24,000 of Hennessey cognac but they split up the purchases so each would not have to be reported.

“That sale plainly violated the existing policy,” MacDonald said.

Volinsky alleged store employees were encouraged not to report sales to the IRS or look into the vehicles of large cash buyers to see if they had bought liquor from other state stores.

“As with any such inquiry, it is important to establish all relevant facts underlying the issues raised in the letter including conduct involving the Feb. 3, 2018 sale,” MacDonald said.

Prosecutors are gathering information from the commission and an investigator is interviewing witnesses.

“We hope to complete this work as soon as possible within existing resource constraints,” MacDonald wrote. “We expect to issue a written response.”

Gov. Sununu’s office and Volinsky did not respond to requests for comment on the interim report.

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