County’s ‘Sweetheart Deal’ With Alcohol Illegal?

SNOW HILL — The Worcester County Department of Liquor Control (DLC) may have made its first major error since seizing control of the county’s booze dispensary in July, and it could prove to be a costly one, despite what was called “good” intentions.

Reports earlier this week indicated the DLC was in negotiations with the Alabama Alcoholic Beverage Control Board (ABCB) to purchase large quantities of liquor at a much lower price than it could get from wholesalers in Maryland.

Worcester County Public Information Officer Kim Moses confirmed this report in an email saying, “in representing the best interests of the licensees and the citizens, we negotiated a sweetheart deal with Alabama and took it.”

Yet, in taking that deal, they may have inadvertently broken the law.

When the quasi-governmental Worcester County Liquor Control Board (LCB) was disbanded last year after a public scandal and the corresponding eight-month investigation by the state Comptroller’s office found them guilty of multiple violations of state law including price discrimination, illegal sales, purchases, and violating state trade practices, the county government took over, creating the DLC via State Senator Jim Mathias’ Senate Bill 906.

In doing so, language was added to Article 2-B (15-205), that states the county can buy liquor from anywhere, as long as the entity they purchase liquor from has a license to sell in Maryland.

However, Lou Berman, Auditor and Investigator for the Comptroller’s Field Enforcement Division, confirmed yesterday that the Alabama ABCB had not secured a license to sell liquor in the state of Maryland.

“They haven’t even applied for the license yet”, said Berman.

What makes Alabama’s lack of license even more compelling is the fact that the deal brokered between the County DLC and the Alabama ABCB has already produced a substantial transaction, one that by definition of the law, could be deemed unlawful, and subject to potential seizure of the illegal products.

“We took delivery of our first shipment on Monday, Oct. 31, at a cost of $175,000, and the shipment is sitting in the warehouse awaiting issuance of the permit,” said Moses in her email.

Moses went on to explain that the Comptroller’s office notified the county that there was a “licensing issue” with the state of Alabama and now the county is backpeddling to fix their error, with some reports implicating that the county may be trying to send back the shipment of booze to Alabama.

“Alabama is one of the 19 controlled states that we can purchase from, and we failed to consider the licensing aspect. We jumped the gun prematurely in our efforts to obtain the best pricing for our citizens and businesses,” said Moses.

County Attorney John “Sonny” Bloxom said he “wasn’t at liberty to talk about whether or not the purchase had been made” but did say that the county, under the advisement of the Attorney General’s office is in the process of “helping Alabama get the proper licensing in place. It costs about $200.”

Critics of the government’s involvement in the liquor business were quick to make comparisons to this purchase and shipment of liquor in Alabama to one of the surprise findings in the Comptroller’s investigation, which was that the LCB had brought 200 cases of Captain Morgan’s Spiced Rum from an unlicensed retailer in Washington DC and then essentially smuggled it across state lines in 2007.

The obvious difference in this case, is that the LCB purchase was from a retailer, and the Alabama purchase is from a wholesaler, but the similarities between the two are at least partially prudent because it seems that in both cases, liquor was brought across state lines illegally, as per Article 2-B.

However, it was a bit surprising that the county licensees, who were so adamantly in favor of the disbanding of the quasi-governmental LCB, have proverbially been watching this situation unfold from the sidelines and have provided little commentary on it.

“Bobby Cowger [the new director of the DLC] has been trying to get us on board with what the county is doing and keeping the markups reasonable, and we met with him this week and he mentioned a deal they were trying to make that would get us better prices,” said Doug Buxbaum, owner of Buxy’s Salty Dog Saloon and president of the Worcester License Beverage Association. “Obviously, as business owners, we want to get the best prices we can to help us survive, but we certainly don’t want to get them illegally.”

Cowger who ran the LCB in the early 2000’s, led the county dispensary to its highest profits in history, before making way for Brian Sturgeon, whose business prowess quickly turned local licensees against him, and his strategies for running the LCB took revenues to all-time lows and eventually got the 75-year-old monopoly disbanded.

Although it seems Cowger is trying to mend the relationship with the licensees, he is still tasked with trying to make the county good profits, despite the competition with the wholesalers on the second tier of the state’s three-tier liquor dispensary system. Couple that with the fact that the county’s retail stores are reportedly down almost 10 percent in sales, most likely linked to the state’s 50% hike in alcohol tax which sent many local consumers to Delaware to buy booze, and it perhaps explains the rather long distances Cowger is apparently willing to go to get good pricing on liquor for Worcester County.

“Bobby Cowger is not Brian Sturgeon, and he would never knowingly break the law,” said Worcester County Commission President Bud Church. “He’s done a great job for the county and the licensees since he took over.”

Moses said in her email that the state wholesaler’s unwillingness to go down on their pricing prompted the sweetheart deal.

“Last year, $11.2 million in products were purchased from wholesalers at steep markups that run contrary to our goals as a department to offer licensees the best price possible”, she said; “We have tried without success since assuming operations on July 1, 2011 to negotiate better pricing from the wholesalers.”

The state Comptroller’s office is reportedly looking into this situation, and has reportedly known of the DLC’s intentions to utilize out of state suppliers for at least several weeks, as per a letter dated Oct. 3, to Bloxom from the Comptroller’s Tax Consultant II Joanne Tetlow.

The letter was in response to a Sept. 7 letter penned by Bloxom asking if the County could purchase alcoholic products from the Montgomery County Department of Liquor Control and the State of Virginia’s Department of Alcoholic Beverage Control.

Tetlow’s response was lengthy, but clearly stated “If the DLC intends to make purchases and to have the VDABC ship or cause to be shipped to the DLC the product so purchased, the VDABC would have to qualify and hold the requisite license or permit under Article 2B.”

One comment on “County’s ‘Sweetheart Deal’ With Alcohol Illegal?

  1. Good. The County is getting some of its own medicine on being licensed, permitted and regulated to death. I hope this experience will deter them from hatching the next regulatory scheme.

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