Editorial: N.H. Liquor Commission Ignored 2012 Report of Suspicious Sales

  • The New Hampshire Liquor Commission is announcing plans to build a new, 19,000-square-foot, state-of-the-art New Hampshire Liquor & Wine Outlet in West Lebanon. Pending local approvals, construction for the new store, which will be more than double the size of the existing location and provide added shopping amenities for customers, will begin in spring 2018. The existing store located in Powerhouse Plaza will remain open during construction to allow uninterrupted shopping. Above is a photo of the new Bedford New Hampshire Liquor & Wine Outlet, which the new West Lebanon location will closely resemble. (Photo courtesy New Hampshire Liquor Commission)

Wednesday, March 07, 2018

The New Hampshire Liquor Commission professes to be shocked and saddened — even hurt! — by Executive Councilor Andru Volinsky’s recent accusations that its business practices may facilitate money laundering and bootlegging. But as it turns out, a special legislative committee raised similar concerns five years ago that the commission appears to have ignored.

At issue are high-volume cash purchases by out-of-state buyers that appear structured to evade the $10,000 legal threshold that triggers a mandatory report to the Internal Revenue Service. So, for example, out-of-state purchasers could be using the proceeds of illegal activities to buy cheap liquor in New Hampshire for profitable resale in urban areas, while avoiding federal scrutiny and excise taxes in their own states. That would constitute both money laundering and bootlegging, although each could also be undertaken separately.

In 2012, a special House committee appointed by then-Speaker Bill O’Brien and chaired by Republican state Rep. Lynne Ober produced a report with assistance from an outside law firm that covered some of the same ground as Volinsky.

The law firm’s report includes a statement from Peter Engel, the then-recently retired director of liquor store operations, that he “firmly believed that stores were being used for bootlegging and money laundering,” and that in his view, revisions to an internal policy that were ordered by his superiors at the Liquor Commission in 2011 actually invited structured transactions and put employees at risk.

Given that background, it’s not surprising that the Liquor Commission’s response has been to try to change the subject from the substance of Volinsky’s allegations to his methods of inquiry, particularly his personal observation of a large cash transaction at the Keene store last month in which two customers split a large order of Hennessy cognac, as well as a large wad of cash, so that each purchase fell just under the $10,000 reporting requirement.

The commission contends that Volinsky, a Democrat from Concord, violated a variety of Liquor Commission policies in an attempt to turn the issue into a “political football,” although it does not say why an executive councilor would be bound to follow its policies. The commission also claims that it’s “disconcerting” that Volinsky took photos of the customers involved and their New York license plates. But insofar as liquor stores and parking lots are public spaces, customers have no reasonable expectation of privacy while frequenting them, so it’s hard to fathom why photographs would be prohibited within their confines.

More alarming yet, the commission says, are “three hours of video” of Volinsky “lurking around the interior, exterior and backroom of the store” while conducting a “sting” operation. But as Volinsky has pointed out, part of his job as an executive councilor is voting on confirmation of the liquor commissioner and his deputy, a duty that could well be informed by a candid, first-hand look at liquor store operations.

And we couldn’t help but wonder why, if video capability is in place at state liquor stores, it is not being used to track high-volume cash purchases, particularly if purchasers are traveling store to store in serial shopping sprees in which they spend just under the $10,000 threshold, as some evidence suggests.

The Liquor Commission sold nearly $700 million worth of liquor last year, while contributing $153 million to the state’s general fund — almost 6 percent of the total. So the Liquor Commission and the state’s elected officials have every reason to want to shield the golden goose, especially now that huge new liquor stores are being built all over New Hampshire, including in West Lebanon.

But if this empire is erected partly on a foundation of turning a blind eye to illegal activities, federal regulators or those of other states could crack down. It would be far wiser for Attorney General Gordon MacDonald to investigate, as Volinsky has requested, and for New Hampshire to clean up this act itself.