Man, 56, Charged In 'Salute American Vodka' Fraud Scheme: Feds

MADISON, CT — A 56-year-old Madison man is facing a 17-count federal indictment in connection with a fraud scheme, federal prosecutors said Friday.

Brian Hughes is facing seven counts of wire fraud, five counts of illegal monetary transactions, one count of money laundering, and four counts of tax evasion. Should he be convicted on all counts, he faces a maximum prison sentence of 230 years.

According to the Connecticut US Attorney and the FBI, Hughes was arrested Thursday, entered a plea of not guilty and is being held in jail until a Jan. 21 hearing.

Prosecutors claim 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 says is "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 reads 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 alleges that in March 2015, Hughes founded Handcrafted Brands for to raise money to buy Salute American Vodka, According to US Attorney John H. Durham. Prosecutors said Hughes solicited, and got, money from investors and promised they'd be get "equity shares" of the company and brand and that he wouldn't be paying himself a salary. But the indictment alleges that he "misused investor funds on expenses unrelated to the purchase and development of Salute 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 alleges 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. 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."

The US Attorney said it's 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, the press release from Durham reads.

And, prosecutors charge 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."