MD: National liquor distributor fights Maryland charges
Republic National cites 21st Amendment to fight federal liquor sales charges
The Baltimore Sun
By Sarah Gantz
June 1, 2016
Republic National Distributing Co., one of the nation’s largest wholesale liquor distributors, is citing the 21st Amendment, which repealed Prohibition, to fight federal charges filed in Maryland against the company and three of its employees.
The New Orleans-based distributor and three of its Maryland workers were indicted on charges of wire fraud conspiracy and money laundering in relation to a $9 million scheme to smuggle liquor from Maryland to New York.
The federal grand jury indictment alleges that Republican National facilitated the transport of liquor intended for retail sale from Maryland to New York, avoiding New York’s higher excise tax. Three employees, Eugene Gerzsenyi, 52, of Glen Burnie; Jason Lockerman, 38, of Bel Air; and Lisa Robbins, 55, of Woodbine were also indicted as part of the alleged scheme.
Republican National, which has local offices in Jessup, denied any wrongdoing.
The accusations are “based on erroneous assumptions, unsubstantiated theories, and represent an unprecedented attempt at federal government overreach,” CEO Tom Cole said in a statement. “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.”
Cole said the allegations go against the 21st Amendment, which ended Prohibition but gave states authority to continue enforcing the ban on alcohol within state boundaries. The language is vague and has been interpreted as giving states regulatory authority over liquor that trumps the Constitution’s Commerce Clause, which gives the federal government authority to regulate interstate trade.
The company declined to comment further on Wednesday.
“It’s an unusual constitutional claim,” said Jesse Merriam, an assistant professor of political science at Loyola University Maryland who is also a lawyer specializing in constitutional law.
“The fact that it’s so unusual makes it hard to anticipate how a court would rule, but I would put a significant amount of money on it being dismissed,” he said of Republic National’s argument.
Precedents set by U.S. Supreme Court decisions make clear that the regulatory authority granted states under the 21st Amendment apply only to activity within their borders — not across state lines, Merriam said.
In one such case, in 1945, the Supreme Court ruled that Colorado liquor distributors could be charged with price-fixing under federal antitrust laws because the state’s regulatory authority didn’t extend to companies doing business out of state.
The 23-count indictment against Republic National, announced last week by the U.S. attorney for the District of Maryland, Rod J. Rosenstein, alleges that from June 2009 through June 2012, Republic National and the three named employees sold and delivered liquor and wine to New York retailers by working through Cecil County retailers.
New York retailers would send orders through Cecil County retailers to Republic National sales people; the orders would be delivered to the Cecil County retailers, where they were held for the New York retailers, the indictment alleges. The scheme allowed the liquor and wine to be sold to customers in New York without that state’s $7.44 per gallon excise tax. The excise tax for liquor is $1.50 per gallon in Maryland.
Wholesalers in Maryland and New York are required to register with the state and provide monthly reports about the amount of liquor transferred for sale. Republic National did not register in New York, provide monthly reports of the liquor sent to New York and didn’t pay the New York tax, according to the indictment.
The process was facilitated by Gerzsenyi, an assistant director of operations; Lockerman, a salesman; and Robbins, an accounting manager, according to the indictment.
If convicted of the money-laundering counts, Republic National could be forced to repay its gains from the scheme, estimated to be at least $9 million.
Each of the indicted employees faces a $250,000 fine and a maximum sentence of 20 years in prison if convicted of the wire fraud charges. Republic National also potentially faces a $250,000 fine for wire fraud.