LCB, State Reach $16K Settlement Over Violations

SNOW HILL – One day after striking a deal with the Comptroller of Maryland for breaking the law, the Liquor Control Board for Worcester County (LCB) fielded some hard questions from the County Commissioners.

Last April, the Field Enforcement Division began looking into allegations of Article 2B and trade violations leveled at the LCB. At a press conference earlier this month, Comptroller Peter Franchot announced the probe had found evidence that the LCB had engaged in price discrimination and illegal sales and purchases and violated state trade practices.

Instead of answering the charges at a formal hearing, where the potential sentence could have been an eight-day license suspension, the LCB opted for an informal hearing, where they did not contest the facts of the case, and agreed to pay a $16,000 settlement in lieu of suspension or other punishment.

While the settlement may have ended the possibility of suspension, Commission President Bud Church did not seem happy that the $16,000 would come out of the county’s share of the profit.

“It has to,” said LCB Chairman Donald Hastings.

Hastings was quick to point out how much overall profit the county was likely to see from the LCB for the fiscal year 2011. He also mentioned the LCB is responsible for 40 jobs and if disbanded, the county would suffer.

However, when the actual estimated profit of $900,000 for the year was announced, many commissioners were skeptical.

“I don’t see how you go from $60,000 to $900,000,” said Church, referencing the money the county received last year compared to what Hastings was estimating for this year.

Hastings claimed that some of the blame for last year’s low profits rested on the elected officials.

“This board and [Delegate Jim] Mathias put pressure on us to lower prices for licensees [last year],” Hastings said.

Hastings went on to say that because of a general reduction in prices, which he believed had been the intention of the commissioners, profits decreased.

“We did what we thought we were told to do,” he offered in way of explanation.

Church took issue with Hastings passing the buck onto the commissioners.  He made it clear that most of the responsibility for the spot the LCB was in belonged to it and it alone. Church then brought up the growing ill will in the county directed toward the board. Hastings responded that much of the negative image suffered by the LCB was the fault of unfair media portrayal, a point he returned to several times.

Despite Hastings’ proposal that a change in prices could result in a more than 1,000-percent profit increase this year, Church still harbored doubts. County attorney Sonny Bloxom informed the commissioners that it was technically possible.

“You have to remember that they (the LCB) have a monopoly, so they can do it,” Bloxom said.

When the specific charges from the comptroller’s probe were discussed, Hastings didn’t hesitate to admit that the LCB had broken the law, but did offer an explanation for each offense.

In reference to the charge that the LCB sold Stoli Orange Vodka at different prices on the same day, Hastings claimed that all the board did was extend a prior sale to some retailers that did not hear of it in time to take advantage.

“Even though going back to correct a wrong was the Christian thing to do, in this case it violated the law,” Hastings said.

Commissioner Louise Gulyas, however, objected to the defense.
“What you did was illegal and it was not the Christian way to do things,” Gulyas said.

Gulyas pointed out that if the LCB purchased a product like Stoli at a sale price, it should continue the sale until out of stock, not put it on a time limit and then break that limit later.

In general, Gulyas chastised Hastings on the way the LCB had acted, stating that she was “very disappointed.”

In answer to the trade violation charge, Hastings chalked it up to a simple, one-time mistake. In 2007, 200 cases of Captain Morgan’s Rum were purchased from a Washington D.C. retailer. The LCB may only purchase from state licensed wholesalers, a credential that the board believed the D.C. location had at the time of the purchase.

However, Bill Herbst, owner of La Hacienda restaurant in Ocean City, pointed out to The Dispatch after the meeting that the LCB had purchased from an out-of-state retailer, not a wholesaler, as listed on Hastings’ report. Herbst claimed that if he’d done something like that he would have lost his liquor license.

Hastings finished his report by explaining the remaining category of charges, mainly the LCB’s selling some alcohol below cost, which is illegal, and giving away certain equipment to retailers free of charge, which is a trade practice violation.

Church again spoke up, this time about several counts the LCB had incurred of selling a product below cost.

“How can a private vendor compete against the county when you’re selling below cost?,” Church asked.

Hastings defended the action, informing the assembly that the sales had been part of a promotion by William Grant and Sons, Inc, who had provided the board with a credit of over $52,000 in recompense.

Contradictory to that, a representative of William Grant stated that only a $3,000 credit had been provided in the Comptroller’s Summary of Findings report issued after the LCB’s investigation. Hastings was aware of this report and stated that this was a just a point where there was disagreement over how the reimbursement was to be defined.

As for the items that the LCB provided retailers gratis, including a commercial chilling machine and 14 commercial juicers, Hastings attributed any violations to a miscalculation of value, stating that the board had believed the juicers to fall into the “under $150 promotional supplies category.”

Joseph Jackson, who sits on the Board of Directors for the LCB, informed the commissioners that it had, “made the decision to hire legal council,” stating that, if the group had a lawyer on hand at the time of the incidents, these infractions likely would not have happened.

While Church said that he thought that was a good call, Gulyas wondered if the fee for that attorney would, much like the $16,000 settlement, be coming out of the money intended for the county. Jackson admitted that it would.

Hastings made it clear that, while the LCB did break the law on numerous occasions, he believed that every infringement had positive effects on local retailers.

“It should be noted that the violations benefited licensees,” Hastings said.
Gulyas did not agree.

“I think it was wrong and I think the LCB should be abolished,” she said.

Church was not as harsh in his comments, but he did warn Hastings that, even though the case was settled, it wasn’t exactly over.

“This is not something that is going away real quickly,” said Church.

Church then advised the LCB to contact the liquor licensees after the holidays to discuss the situation and to perform “fence mending.”

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