Major US distributor charged with smuggling

Republic National Distributing Company – the second largest drinks distribution firm in the US – has hit out at its recent indictment on federal smuggling charges.

Republic National Distributing Company and three of its employees face charges of smuggling

This week, a federal grand jury charged the group and three of its employees – Eugene Gerzsenyi, Jason Lockerman and Lisa Robbins – on charges arising from an alleged US$9 million scheme to defraud the state and city of New York, along with registered New York liquor wholesalers.

According to a statement from the US Department of Justice, the indictment alleges that the defendants transferred alcohol from Maryland, where the state excise was approximately US$1.50 per gallon, to New York, where state excise tax is much higher at approximately US$7.44 per gallon, for retail sale.

Any wholesaler transferring or distributing liquor for retail sale in Maryland or New York is required to register with the state. While RNDC is registered in Maryland, it is not registered as a distributor in New York.

A total of 23 counts have been registered in the indictment, claiming that from at least June 2009 to June 2012 a number of New York alcohol retailers attempted to order cases of wine and spirits through several retail liquor stores in Cecil County, Maryland.

These requests were passed on to RNDC salesmen, who the indictment alleges knew the cases were intended for retail sale in New York.

Charges state that these stocks were ordered by RNDC and delivered to Cecil County retailers, where they were then collected and sold by New York retailers without the correct taxes for that state being paid. Specifically, RNDC is alleged to have submitted invoices to Cecil County for stocks sold in New York.

‘Multi-million dollar scheme’

The indictment is seeking recompense for all proceeds associated with the scheme, estimated to amount to at least US$9m, while RNDC and the individual defendants could face a US$250,000 fine. Gerzsenyi, Lockerman and Robbins also face a maximum sentence of 20 years in prison.

RNDC has vehemently denied the charges, claiming they are “not supported by facts”.

“RNDC is extremely disappointed to learn that the US Attorney for the District of Maryland has chosen to take this action,” said Tom Cole, president and CEO of RNDC. “We have worked diligently with the US Attorney’s office since first learning about the investigation in 2012, and have seen no evidence to support their version of the facts.

“RNDC emphatically denies these allegations and looks forward to our day in court where we will demonstrate that the prosecutors’ accusations are based on erroneous assumptions, unsubstantiated theories, and represent an unprecedented attempt at federal government overreach.”

He continues: “In addition to not being supported by facts, today’s action is a rogue effort by a federal agency to seize control of the state regulation of liquor sales in violation of longstanding law.

“The wholesale distribution of beverage alcohol in the US is the most effective and efficient system of adult beverage distribution in the world today, ensuring product integrity and safety, sales to only licensed retailers, and an effective method of tax collection for local, state and federal authorities.

“With over 100 years of exemplary business on our side, we expect complete exoneration.”