Johnstown liquor retailer pleads guilty after failing to report $3.2M in income to IRS

JOHNSTOWN — The owner of a liquor store in Johnstown has pleaded guilty to evading federal income tax by failing to report $3.2 million in income.

Alan Timothy Hershey, 50, of Gilcrest pleaded guilty last week in Denver before U.S. District Court Judge Christine M. Arguello. Arguello is scheduled to sentence Hershey on Aug. 25.

Hershey was indicted by a federal grand jury in Denver on July 3, 2014 along with co-conspirator Renee Molinar. She pleaded guilty to conspiracy to defraud the United States on May 7, 2014, and is scheduled to be sentenced on Aug. 27.

SPONSORED CONTENT

People Powered: Preparing Longmont Businesses for Economic Success

Longmont Chamber and FNBO present People Powered on April 24, 2024, aiming to inform business owners about workforce development, housing, and transportation issues.

According to information contained in the indictment and the plea agreements, Hershey transferred Johnstown Liquor to Molinar in March 2001. They concealed from the IRS that Hershey retained true ownership and control of the store.

Hershey and Molinar used a “Keystroke” point-of-sale record-keeping system at the store which was connected to the store’s cash registers and accurately recorded the business’s cash, check, and credit card receipts. At Hershey’s direction, according to the indictment, Molinar would remove a certain amount of the cash receipts before preparing the deposit slips and give that cash to Hershey.  To conceal the existence of the cash receipts that had been removed, they used a second set of books. Hershey directed an unindicted co-conspirator to make entries into a separate QuickBooks record-keeping system for this purpose. They also used the check-cashing business operated by Johnstown Liquor, which required the store to have a large amount of cash on hand, to conceal the true amount of the business’s cash receipts.

According to the indictment, Hershey willfully filed no federal income tax returns for the years 2001 through 2011 and made no payments of income taxes to the IRS. To conceal the gross receipts they were skimming from the store, Hershey used nominees to act as purchasers, and bought two other liquor stores, Liquor Plus in Greeley and Gilcrest Liquor in Gilcrest, as well as a number of houses with the cash skimmed from Johnstown Liquor’s gross receipts. Hershey controlled the operations of the stores, and he and Molinar collected the rents from the houses.  Hershey also ran Corona’s and More, a liquor store in Bennett. He failed to pay federal taxes on any of the four stores’ $3,223.027 taxable income.

As part of the fraud, many employees were paid “off the books” in cash wages, according to the indictment. Any employees paid entirely in cash were issued no W-2 forms. Those who were paid partly in cash and partly by check received W-2s reflecting only the payments made by check. To ensure that the IRS would not discover this deceit, Hershey instructed the employees who were paid in cash not to file tax returns.

Johnstown Liquor was required to collect state sales taxes on its sales of beverages, file monthly sales tax returns, and to pay those taxes monthly to the Colorado Department of Revenue. Hershey directed the unindicted co-conspirator to create the business’s monthly state sales tax returns using the understated sales figures from the QuickBooks records. Johnstown Liquor collected sales tax on each sale, but failed to pay $440,000 of what was collected to the state revenue department.

The total restitution owed by Hershey in this case is $1,777,183, including $1,337,183 owed to the IRS 2011 and $440,000 owed to Colorado for state sales taxes collected by Johnstown Liquor from 2001 through 2010. Molinar’s restitution is based on the unpaid federal taxes related to Johnstown Liquor and the sales tax collected by Johnstown Liquor and not remitted to the state, or $1,464,952.

Each of the counts of conspiracy to defraud the United States carry a penalty of not more than five years in federal prison, and a fine of up to $250,000 or the greater of twice the gross loss or twice the gross gain from the offense. Hershey’s two counts of income tax evasion each carry a penalty of not more than five years in federal prison and a fine of up to $100,000.