DENVER - Alan Timothy Hershey, age 50, of Gilcrest, Colorado, pled guilty last week before U.S. District Court Judge Christine M. Arguello to conspiracy to defraud the United States and tax evasion, United States Attorney John Walsh, IRS Criminal Investigation Acting Special Agent in Charge Gilbert R. Garza announced. Judge Arguello is scheduled to sentence Hershey on Aug. 25, 2015. Hershey was indicted by a federal grand jury in Denver on July 3, 2014 along with co-conspirator Renee Molinar. Molinar plead guilty to conspiracy to defraud the United States on May 7, 2014 and is scheduled to be sentenced on Aug. 27, 2015.
According to information contained in the indictment and the plea agreements, Johnstown Liquor is a retail liquor store located in Johnstown, Colorado. In March of 2001, Hershey transferred the store to co-conspirator Molinar. They concealed from the IRS that Hershey retained true ownership and control of the store.
They 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, 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 record-keeping system (QuickBooks 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.
Hershey willfully filed no federal income tax returns for the entire period of the conspiracy, (for tax 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) and 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, Colorado. 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. Any employees paid entirely in cash were issued no Forms W-2. Those who were paid partly in cash and partly by check received Forms W-2 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 Colorado Department of Revenue.
The total restitution owed by Hershey in this case is $1,777,183, consisting of $1,337,183 owed to the IRS for all federal taxes owed by Hershey for tax years 2001- 2011 and $440,000 owed to the Colorado Department of Revenue 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.
Hershey and Molinar each pled guilty to one count of conspiracy to defraud the United States, which carries a penalty of not more than 5 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 also pled guilty to two counts of income tax evasion, each of which carries a penalty of not more than 5 years in federal prison, and a fine of up to $100,000
This case was investigated by the Internal Revenue Service - Criminal Investigation with assistance from the Special Enforcement Program of the Internal Revenue Service. This case was prosecuted by Assistant United States Attorney Assistant U.S. Attorney Linda Kaufman.
Source: U.S. Department of Justice, Office of the United States Attorneys
