Joseph S. Pete
Dec 20, 2017
Though bootlegging is most commonly associated with Prohibition, bathtub gin and gangsters like Al Capone, federal prosecutors say it’s alive and well in Northwest Indiana.
The federal government has seized $1 million from a Hammond liquor store alleged to have sold booze to Illinois liquor stores so they could dodge the higher state alcohol taxes in the Land of Lincoln.
In June, law enforcement officials seized $1 million from Columbia Liquors at 6433 Columbia Ave. in south Hammond and its bank accounts at First Merchants Bank in Munster, including more than $52,000 in cash the owners had at their home, according to court records. The U.S. attorney’s office is now pursuing a forfeiture case in the United States District Court Northern District of Indiana in Hammond.
The federal case charges that Columbia Liquor owners Shreyas Patel and Dipteben Patel “devised a scheme to defraud or obtain money by false or fraudulent pretenses.” Prosecutors allege Columbia Liquors bought liquor from three Indiana distributors and in turn sold it for cash to liquor stores across the south suburbs in Illinois, where excise taxes are substantially higher.
“Specifically, the Patels, through their Indiana liquor store, purchased large quantities of liquor and sold them to seventeen Illinois liquor stores, at least five of which they own, for subsequent retail sale thereby depriving the State of Illinois of excise and sales taxes to which it was entitled,” Assistant U.S. Attorney Orest Szewciw charged in the federal complaint. “By selling liquor purchased without payment of excise taxes in Illinois, the Illinois liquor-store owners, including the Patels, increased their profits. In furtherance of the scheme to defraud or obtain money by false pretenses, the Patels caused the use of interstate wire communications.”
The feds alleged Columbia Liquors operated a “front door register” for legitimate retail sales that brought in an average of $1,570.12 a day earlier this year, and a separate “back door register” for sales to Illinois liquor stores that brought in $42,347.76 per day, according to court documents.
The Patels did not immediately return messages.
In court, their attorney argued they run a legal business, that some of money seized was from lottery sales, and that the federal government violated their Fourth Amendment right to be free from illegal searches and seizures.
“Plaintiff is (stopped) from obtaining a forfeiture judgment because it obtained the seizure warrant through incorrect, misleading, or incomplete allegations,” defense attorney Glenn Seiden wrote in response to the federal complaint. “Plaintiff cannot obtain a forfeiture judgment because it has not acted in good faith.”
Liquor excise tax rates are significantly lower in Indiana than in Chicago: $0.115 for beer in Indiana compared to $0.611 in Chicago, $0.47 for wine in Indiana compared to $2.52 in Chicago, $2.68 for liquor in Indiana compared to $13.73 in Chicago when state, city and Cook county taxes are added up.
“The $2.68 per gallon Indiana tax rate on hard liquor is $8.37 per gallon less than the tax in Cook County, and $11.05 per gallon less than in Chicago,” the U.S. attorney’s office wrote in its forfeiture complaint. “If a liquor-store owner in Cook County and Chicago avoids paying the excise taxes imposed by the state, county and city, the cost of his products would be less than that of his competitors in the same area. With reduced purchase costs, a liquor-store owner would keep more profit. If the liquor-store owner did not pay the cost of excise tax, the liquor-store owner could offer a much lower retail price of products to increase sales volume, and effectively undercut the price charged by other liquor stores in the area.”
The Wine and Spirits Distributors of Illinois trade association said cross-state bootlegging costs Illinois nearly $30 million in lost tax revenue every year.
“The continued brazen disregard for Illinois law by these modern-day bootleggers is putting the health and safety of Illinois consumers at risk and costing our state millions in much-needed tax revenue,” WSMI Executive Director Karin Lijana said. “Any out-of-state retailer may set up shop in Illinois as long as they follow existing state laws and compete fairly. The issue is that retailers who avoid paying their fair share of taxes expose Illinois residents to alcohol shipments that can’t be tracked or recalled in the wake of a safety incident.