NH Lawmaker Says State Liquor Commission Aiding Cross-Border ‘Money Laundering’

In New England, New Hampshire is well known for tax-free liquor sales, which makes the Granite State a popular destination for out-of-staters looking to stock up on alcohol.

State-run liquor outlets dot highways near the state’s borders.

But now, a politician is accusing the New Hampshire State Liquor Commission, which regulates alcohol sales, of skirting federal law.

With few exceptions, the IRS requires businesses to document when someone spends more than $10,000 in cash on a single purchase. State liquor rules also require employees to fill out this IRS documentation anytime someone is “purchasing a volume of product totaling $10,000 or more in cash, either through one or multiple related transactions.”

New Hampshire Executive Councilor Andru Volinsky alleges the agency is turning a blind eye to illegal cash transactions involving out-of-state purchasers. Volinsky claims the commission may be allowing bulk liquor buyers to evade IRS reporting requirements, or steering staffers away from documenting smaller purchases that are, in fact, part of larger buying sprees.

He says the issues were brought to his attention by liquor store employees, and he also observed some of them firsthand.

With the help of an employee who was acting as a whistleblower, Volinsky said he recently witnessed two people spend $24,000 in a series of bulk purchases— all in increments under the $10,000+ limit — paid for using “a very large wad of cash” and a credit card.

“What I personally observed on February 3, 2018 confirmed what I had been told; that is, that cash bulk sales transactions appear to be done openly, are widespread and the practice is long running,” Volinsky wrote in a letter to the New Hampshire Governor and Attorney General.

Large, illicit purchases by out-of-state residents at New Hampshire liquor stores are well-documented in recent years.

In December, a New York City man was arrested with 757 liters of liquor in his vehicle. The driver of the vehicle drove to New Hampshire, where he made purchases at five different liquor outlets in the state, according to law enforcement officials there. He was arrested in New York, and pleaded not guilty to two counts of felony tax evasion, which carry up to a four year prison sentence.

“It is clear that our state is profiting from cash bulk transactions where at least some of the cash is coming from illegal trafficking, whether in drugs, guns or humans,” Volinsky wrote in his letter. “The stories are widespread of customers arriving at stores in out-of-state trucks and SUVs with wads of cash stuffed into their pockets, money belts and socks.”

And Volinsky alleges the Liquor Commission is disregarding the practice. He points to a memo from liquor commission leadership discouraging store employees from reporting cash liquor purchases to the IRS unless they have a definitive reason to believe a customer is making a series of purchases that add up to $10,000 or more.

Volinsky claims he’s been told that state liquor store employees have been instructed not to look closely at the cars of people buying bulk liquor in cash, “to avoid learning that the customer has purchased cases of liquor at other [New Hampshire Liquor and Wine Outlet] stores.” He also claims that the liquor commission has installed cash counting machines in some of its stores, which he interprets as a further indication that the state is at some level aware of the problem.

Separately, State Employees’ Association President Rich Gulla said that liquor store employees have voiced concerns about the same issues, but fear speaking up publicly would put them at risk for retaliation from the Commission.

“They are starting to feel like a drug dealer,” Gulla said. “Because it is not common for folks to come in and drop $9,000 all on Hennessy products, and then leave and go to another store and do the same thing.”

Volinsky is now calling for an outside investigation.

The State Liquor Commission, which reported record-breaking $698.2 million in sales last year, acknowledges no such wrongdoing. In turn, the agency accuses Volinsky of conducting a “sting operation” in an attempt to turn the commission into a “political football.”

The liquor commission says “there’s nothing illegal or unscrupulous about making large sales to out of state customers as long as our employees follow the policies in place set forth by the State and federal government.”

They say the memo discouraging employees from some reporting was framed as a response to what liquor commissioners described as excessive filing patterns and potentially discriminatory practices at some of their stores. Commissioners wrote that some staff were allegedly “profiling customers” and reporting cash transactions that fell under the IRS threshold “without providing any proof of illegal activity.”

And they claim Volinsky is the one who may have broken state rules.

“Among those infractions included violating policies set to protect the security of our store, privacy of our customers and integrity of our inventory,” the liquor commission wrote in a statement. “More awkward and alarming was the three hours of video footage of the Councilor lurking around the interior, exterior and backroom of the store, and curious attempts to conceal his [sic] identity during his ‘sting operation.’ ”

The Commission also suggests that Volinsky and Gulla “allowed or pressured a long-tenured manager to continue with the sale, when they knew of the potential personnel actions that could be taken against an employee in violation of these policies.”

In Vermont, local law enforcement were notified by New York State officials to be on the lookout for vehicles carrying large quantities of liquor purchased at New Hampshire liquor stores during promotional periods.

In the last six months, Vermont Commissioner of Liquor Control Patrick Delaney says his enforcement officers made two arrests — one with an estimated $40,000 worth of New Hampshire purchased liquor in the back of an SUV, the other with an estimated $28,000 worth.

In each of those cases, Delaney believes the defendants made all-cash and reward-card based bulk purchases at multiple liquor store locations.

“By using cash, there is obviously no paper trail, if an authority were to investigate it,” says Delaney. “The activity itself is basically tax evasion.”

The two drivers allegedly violated Vermont state law, which prohibits anyone from carrying more than nine liters of distilled spirits across its state line.

Delaney adds that his agency’s focus is not on transactions taking place between New Hampshire liquor stores and their customers, but does note that the IRS did contact him about all-cash transactions in the Granite State.

The IRS would not confirm any active investigation into all-cash bulk transactions.

“While we will not discuss a particular taxpayer’s situation,” writes a spokesperson for the IRS, “we are aware of this and similar schemes being used in a variety of different forms in order to evade certain reporting requirements.”

Neither of these cases confirm Volinsky’s allegations that the New Hampshire Liquor Commission is facilitating money laundering activities, or turning a blind eye to potentially illegal bulk cash transactions. And the councilor acknowledges as much.

But ruling that out, he says, requires some kind of independent investigation.

“I don’t know that anyone has committed a crime; I don’t know that anyone is doing anything illegal,” Volinsky said on Thursday. “But there is enough here that this needs to be looked at, and you can’t count on the agency that’s being looked at to provide you the answers.”

This report comes from the New England News Collaborative, eight public media companies, including Rhode Island Public Radio, joining together to tell stories of a changing region with support from the Corporation for Public Broadcasting.