New Canaan Man, 58, Gets Prison Term In Vodka Company Fraud Scam: Feds

NEW HAVEN, CT — Brian Hughes, who was arrested in January 2021, pleaded guilty a year later, in February 2022, to one count of wire fraud, one count of making an illegal monetary transaction, and one count of tax evasion.

The now-58-year-old, originally from Madison, agreed to pay nearly $3 million in restitution to the IRS and investors he defrauded, the U.S. Attorney for the District of Connecticut said.

This week, Hughes, now living in New Canaan, was sentenced in a New Haven federal courtroom to serve 30 months in federal prison followed by three years of supervised release, per prosecutors, for defrauding investors of two companies, and for tax evasion.

He had faced up to 35 years in prison.

According to prosecutors, federal investigators, and statements made in court, Hughes ran a scheme to defraud investors of an alcoholic beverage company, Handcrated Brands of Branford. His company promoted its brand, Salute American Vodka, which its website and Facebook page said was "committed to supporting our nation’s heroes." On its Facebook page, it's noted that "For every bottle sold, one dollar is donated to support veterans and other American heroes."
The vodka brand website had read that its "mission to support veterans and other heroes as they work to further their careers, start small businesses, and achieve the American dream..."

The indictment alleged that in March 2015, Hughes founded Handcrafted Brands for to raise money to buy Salute American Vodka, prosecutors said. Hughes solicited, and got, money from investors and promised they'd get "equity shares" of the company and brand and that he wouldn't be paying himself a salary, the U.S. Attorney said. An indictment alleged that he "misused investor funds on expenses unrelated to the purchase and development of Salute American Vodka and diverted hundreds of thousands of dollars of investor funds for his personal use." Federal prosecutors allege Hughes did not compensate investors with equity shares.

The indictment also alleged that Hughes solicited investments "purportedly on behalf of another company, which is identified in court documents as 'Company-1.'”

"In fact, Hughes had no official relationship with Company-1 and could not raise capital on its behalf," prosecutors said in 2021. They said Hughes also solicited investment money by "falsely representing to investors that he owned a percentage share of Company-1, that he planned to acquire Company-1, and that Company-1 or its parent company planned to acquire his business. In fact, Hughes spent the investment money associated with Company-1 on personal expenses and on other expenses unrelated to Company-1."

Prosecutors also "alleged that, in order to conceal his fraud, Hughes made 'lulling' payments to investors."

"Lulling payments purportedly represent profits from an initial investment designed to inspire confidence that an investment is yielding results, and are made to encourage further investment. In fact, the source of the funds underlying the lulling payments made by Hughes included funds from other investors," a news release from the Justice Department read.

Prosecutors charged that Hughes "evaded the assessment of his tax obligations for the 2015 through 2018 tax years by substantially under-reporting his income to the IRS," resulting in a tax loss of $470,880.

Hughes was ordered to pay full restitution to investors in both HCB and Company-1, and to the IRS, in the total amount of $2,991,880.

Hughes, who is released on a $250,000 bond, is required to report to prison on Sept. 6.

The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service - Criminal Investigation Division. The case was prosecuted by Assistant U.S. Attorney John T. Pierpont, Jr.