Editorial: A.G. Should Investigate Suspicious N.H. Liquor Sales

  • New Hampshire Executive Councilor Andru Volinsky has raised serious questions about the business practices of the New Hampshire Liquor Commission. (TNS)

Saturday, February 24, 2018

Executive Councilor Andru Volinsky has raised serious questions about the business practices of the New Hampshire Liquor Commission and has provided some substantive, if circumstantial, evidence to back up his assertions. So far, the Liquor Commission and Gov. Chris Sununu appear more inclined to blame the messenger than to heed the message. We urge Attorney General Gordon MacDonald to investigate Volinsky’s accusations thoroughly.

In a Feb. 13 letter to Sununu and MacDonald, Volinsky, a Concord Democrat, alleges that the Liquor Commission turns a blind eye to or facilitates high-volume cash purchases by out-of-state customers that are structured to avoid federal reporting requirements. These IRS rules require the reporting of cash purchases over $10,000, and Volinsky notes that this is one way the federal government discourages money laundering, the process by which the source of money derived from illegal activity is disguised.

Volinsky, a respected lawyer whose Executive Council District 2 includes Charlestown and Unity, asserts that while the Liquor Commission has a policy on the books requiring that the relevant IRS form be filled out for purchases over $10,000, it in fact discourages employees from doing so. He cites a recent letter from the commission to employees that, among other things, instructs them not to complete the IRS form for sales of $10,000 or less unless they know or have reason to know “that each sale is one of a series of connected transactions and the aggregate sales exceed $10,000.”

At the same time, it prohibits employees from communicating any concerns to other stores through videos, photos or physical descriptions.

And Volinsky says elsewhere that he was told that liquor store employees have been instructed not to look inside vehicles driven by bulk purchasers using large sums of cash. If that’s the case even when they are helping to load the vehicles, it is hard to understand how it would be possible to verify that bulk purchasers were traveling to a series of liquor outlets and spending, say, $9,000 in cash at each one.

The current beverage of choice for bulk purchasers, Volinsky asserts, is Hennessy cognac, and he documents that the Liquor Commission maintains high inventories of Hennessy products at stores located near major highways and adjacent to the state’s borders, while other outlets carry relatively little of those products.

Volinsky also describes in detail one such bulk transaction that he witnessed on Feb. 3. According to his account, a woman called the store in question and asked the staff to pull together an order almost exclusively of Hennessy products that totaled more than $24,000. She later arrived at the store accompanied by a male, who produced a wad of cash at the register and gave her about half. They then proceeded to each make purchases just under the $10,000 threshold and put the remainder on a credit card.

“Whether the (Liquor Commission) is actively facilitating these types of transactions or simply turning a blind eye, our state should not be in the business of profiting from cash bulk transactions where the money likely comes from illicit activity,” Volinsky writes. “This presents both ethical and financial issues for our state.”

In its response, the Liquor Commission chose not to seriously engage with those issues, but rather to accuse Volinsky of attempting “to profile our customers, place their personal data at risk and politicize the (Liquor Commission)” and of jeopardizing “the security of our store, privacy of our customers and integrity of our inventory” by conducting “a sting operation.” Sununu similarly said he wanted to examine the methods Volinsky used to gather his information as well as the charges themselves. “Obviously there are a lot of questions to be answered on both sides,” the governor said.

To be sure, Volinsky concedes that he has no direct evidence that illegal activity is the source of the cash used in bulk purchases. But he is not the first to raise questions about bulk sales. Earlier this year, the New Hampshire Union Leader reported that regulators in New York and Vermont suspect the existence of a pipeline through which cheap liquor bought in New Hampshire is smuggled into New York to evade that state’s excise taxes.

Perhaps there is a more innocent explanation for this situation than money laundering or bootlegging. But it’s also true that the state’s liquor monopoly is a $700 million enterprise built on the sale of cheap booze to both residents and out-of-staters. Like it or not (and we don’t), the proceeds help fund key state services, which in turn means there is great incentive to maximize those sales.

If that inherent conflict prevents state officials from investigating Volinsky’s assertions thoroughly, then the federal government should step in.