Dispensary Admits Mistakes In Liquor Promotion

OCEAN CITY — The Liquor Control Board for Worcester County
(LCB) admitted it “made some mistakes” during the Stoli Orange promotion in
March that has brought accusations of price discrimination and an alleged
comptroller investigation to the forefront.

At Wednesday’s LCB meeting in Snow Hill, Executive
Director Brian Sturgeon conceded that mistakes had been made and that those
mistakes had been rectified, but he also contested that he was only trying to
help the licensees and in no way was trying to do anything illegal.

“This promotion was there to help the licensees, as it was
a great deal to basically get Stoli at $5 a bottle or $60 off the case, after
the promotional credits we accredited,” said Sturgeon. “We weren’t making any
money on that promotion, and neither was the supplier [William Grant and Sons].
It was all done to help the licensees.”

Some licensees, however, were outraged last week, when it
came to light that three different prices were paid for the same bottle of
Stoli Orange by three different businesses.

On April 16, Chris Wall at Harborside Bar and Grill paid
$5 per bottle, as stated in the promotion, while Charlene Elliott-Carr, chief
financial officer at the Purple Moose Saloon, paid $11.99 per bottle and Gary
Figgs, chief financial officer of Seacrets, paid $22.99 per bottle.

Licensees argued that the difference in prices was
illegal, as Maryland law states that the same price must be offered to all
licensees by a monopoly such as the LCB. In addition, many licensees contested
that they never were offered the promotion at all, which is also a violation.

“We weren’t offered the deal, because if we would have
been, we most certainly would have bought Stoli at $5 a bottle”, said Buxy’s
Salty Dog owner Doug Buxbaum

However, Sturgeon and LCB Board Chairman Don Hastings
spoke to each of these accusations on Wednesday, saying that all licensees had
been notified, including Buxbaum, and pointed to an email sent by Sturgeon to the
licensees on March 17.

“Mr. Buxbaum’s claim that he wasn’t offered the promotion
was egregious,” said Sturgeon. “That wouldn’t be a fair practice and he was
offered the promotion [via email on March 17, 2010]. If he didn’t open the
email or chose not to respond to it, that’s not my fault. We wouldn’t and
didn’t prevent him from receiving or being offered this promotion.”

The email’s subject heading states “Stoli Orange Crush
Promotion” and tells licensees when to put in orders by and what the minimum and
maximum amount that can be purchased is, but oddly, it does not list the
aforementioned price of the promotion. Simply put, the email tells of the
promotion, but it never states that bottles would be available for purchase for
$5 each.

In addition, Sturgeon said that Figgs was offered the
promotion at Seacrets and he chose to turn it down.

This week, Figgs argued that he would have never rejected
the deal, but did opt against the other portion of the promotion.

“They wanted everyone to wear T-shirts and apparel and
things like that, and I remember saying that I wasn’t interested in that part,
but I was never offered Stoli for $5 a bottle, because, obviously, I would have
taken that,” said Figgs. “It makes no sense that I would rather pay $22.99 a
bottle versus $5.”

Concerning the Purple Moose claim, Sturgeon said this week
that Elliott-Carr and the Purple Moose was actually ineligible for the deal
because they had been temporarily cut-off by the LCB for outstanding invoices.
Sturgeon said that he gave Elliott-Carr a deal after the promotion had ended as
a favor, which he now regrets.

“The only thing I think I really did wrong in this case is
try to give Charlene [Elliott-Carr] a deal on the promotion after it had
ended,” said Sturgeon. “I was only trying to help her out, just like we were
trying to help all the licensees with this promotion.”

William Grant and Sons, the supplier of Stoli to the LCB,
gave an official statement this week that seemed to distance itself from the
LCB’s promotion or the controversy.

“We sell our products to our Maryland distributor Reliable
Churchill, the Montgomery County LCB and the Worcester County LCB for the same
price. At the end of the day, the wholesale price of our brands is determined
by our distributor partners and local county liquor control boards,” said
William Grant and Sons spokesman James Curich. “William Grant & Sons was
neither involved with nor aware of the $5 pricing promotion being executed as
such by Worcester County LCB.”

Local retailers and wholesalers have begun to come out of
the woodwork this week to speak out on the matter, and the debate has brought
out one of the key members of the last campaign to abolish the LCB in 1998:
Trader Lee’s owner Bob Jester.

“I’ve had a liquor license in this county for 34 years,
but I’ve always been battling against this monster monopoly in the LCB,” said
Jester. “They are a useless middleman, and if they were to go away, I would
without a doubt be able to charge my customers less. I also think that it’s
ironic that we have to buy everything from them, and follow the chain of
command so to speak, but they are making a large part of their business by
cutting out the other middle man and buying direct to make more money.”

LCB officials estimate that between 50-60 percent of their
purchases are through direct buys, meaning that they are purchasing liquor
directly from the suppliers, thus skipping wholesalers or distributors.

Jester believes that simple economics says that if they
cut out a middleman in the process of purchasing the liquor, that the LCB
stands to make more money when the product is sold in retail stores.

However, the LCB not only disagrees with this theory, but
said that the amount of direct purchasing it does could in fact be hurting
their bottom line.

“Stoli was a $100 more a case when we bought it through
the distributors,” said Sturgeon. “When we bought it direct, it saved the
licensees a $100 a case, but it ended up hurting our gross sales because we
sold it for less money.”

Terry Loughlin of Carey Distributors believes that the LCB
is an added tier of the process that adversely affects the free market system
in Worcester County. He said that abolishment of the LCB would mean more jobs
in the local economy.

“Without a doubt, if the dispensary system went away, we
would have to hire additional manpower to make up for it,” said Loughlin. “So
the jobs issue should be moot, and for the LCB to argue that there would be a
liquor store on every corner is moot as well, because the Board of License
Commissioners oversees that, and they would only add licenses on a ‘need
basis’. The revenue would probably get made up by raising license fees, but all
we want is a level playing field and for them to publish prices.”

Loughlin also contests that since the LCB buys so much of
their inventory direct, some of his products are left in the proverbial stock
room or the bottom shelves.

“If you go into one of their stores, the products that
they buy direct are front and center on the display racks because they make
more money by selling those products,” said Loughlin. “I think it would be
cheaper for consumers if the LCB went away, and I also think that the most
important thing is that Maryland State Law is followed all the time, and I
don’t think the dispensary always does that.”

Other distributors were a bit more reluctant to comment
this week, citing the fact that the LCB was still one of their clients and
deferred comment to the company’s legal counsel.

Bob Douglas of DLA Piper LLP USA, legal counsel for the
Licensed Beverage Distributors of Maryland, including two of the areas biggest
distributors (Reliable Churchill and Republic National), said in a statement
this week, “We do believe that it is imperative that all parties in the
alcoholic beverage industry follow the laws of Maryland and we applaud the
diligence of the comptroller’s office to assure that these laws are in fact
being followed.”

Reports had surfaced last week that recent accusations
and/or practices by the LCB had allegedly sparked an investigation of the LCB
by the state comptroller’s office. Several licensees have confirmed that
Comptroller Field Officer Anthony Hatcher has been reviewing invoices and
looking at records for the better part of a month in reference to the recent
allegations against the LCB.

LCB officials said this week that they had yet to be
contacted by anyone in the comptroller’s office, but said they would be more
than willing to cooperate.

“We are the most vulnerable and accountable entity in the
entire county,” said Hastings, who has reportedly been reappointed for another
four years by Gov. Martin O’Malley this week. “We are accountable to the
customers, to the taxpayers, the County Commissioners, the governor and the
comptroller. But, we are not the old board at the LCB, so we hope that the personal
assassination claims against us stop, and we can present our 2010 financials so
we can show that the money lost was a result of the economy and not because of
what we did wrong.”