Allegations Against LCB Include Lies, Price Gouging

OCEAN CITY — The Liquor
Control Board for Worcester County (LCB) was caught in another lie this week,
as more allegations about their pricing and product availability come forward
from licensees.

Last week, when
questioned about becoming the first dispensary in the history of Maryland to be
put on the state’s “30-day biweekly credit control list”, albeit for a span of
several hours, LCB member and official spokesman Larry Wilkinson said that he
had “no knowledge that the LCB had been put on the list”, and hinted that it
more than likely had to do with a simple matter of a check not being received
by the 11 a.m. deadline.

However, the state
Comptroller’s Office of the Treasury, Alcohol, and Tobacco Tax Office said this
week that the LCB had in fact called and petitioned office supervisor Trish
Anthony to remove it from the list.

“They did call and they
made their case as to why they shouldn’t be on the list, and they were taken
off,” said Comptroller’s Office Spokesperson Christine Feldman. “I can confirm
that they were put on the list because they had been late five times on
invoices to wholesalers in the past several months. They were taken off the
list, but they have been warned that if they are late with a payment again,
they are going back on the list and staying there.”

The “list”, which is
sent out on a bi-weekly basis from the Comptroller’s office, advises each
wholesaler which of their clients must pay cash on delivery for their purchased
goods. Feldman says that after a transaction is made, the purchaser has usually
30 days to make their payments to the wholesalers. By law, wholesalers are
required to notify the comptroller’s office on day 31 if they have not received

Feldman also refuted
Wilkinson’s claim concerning the check not being received in the proper amount
of time as being the basis for the LCB’s short-lived presence on the list.

“The check that they
sent would not have come to this office,” said Feldman. “It would have gone to
the wholesalers that they purchased the liquor from, so the check coming in
played no part in them being taken off the list. It was based on the
conversation they had with [office supervisor] Trish [Anthony].”

Industry insiders say
that the LCB was more than likely taken off the list because being required to
pay cash on all the transactions over an extended period of time would have
adversely affected all the licensees in Worcester County in the busiest time of
the year. It could have potentially meant they wouldn’t have had the cash to
meet the huge volumes of liquor being ordered in the summer months.

Ironically, more
licensees in Worcester County came forward this week and said that their prices
had gone up once again for no reason, and in some cases, the liquor that they
had ordered was suddenly unavailable.

Several licensees
pointed out this week that they’ve been unable to get a popular brand of
blackberry brandy, and were instead forced to order a higher priced product of
a different brand. Licensees contest that this incremental jump in their liquor
orders from week to week, spread out amongst hundreds of licensees could add up
very quickly for the LCB’s bottom line.

“It’s just another case
where it goes to show that they can change their prices or be suddenly out of
products whenever they want to be,” said Harborside co-owner Chris Wall.

Other instances included
a large liquor licensee being charged almost $4 more than what it had paid in a
previous invoice or a 56-percent markup for a mid-level dark rum and a dollar
markup for a bottle of low-end rum with no reason given.

Wall said that he called
LCB Executive Director Brian Sturgeon personally and asked why he had suddenly
been charged a 70-percent markup on bottles of Hiram Walker Triple Sec when the
LCB announced that it was changing the price structure in June.

Wall says that he was
paying a 22-percent markup per bottle until June 1, when the price shot up to a
70-percent markup. He said only after he called to complain did the markup go
down to 42 percent per bottle.

“I spoke with [Sturgeon]
on July 2, and asked him why the markups were so big, and he told me that the
County Commissioners had been putting pressure on him to bring more money back
to the county, and that brought on the price hikes,” he said.

Ironically, that
conversation came after a June 21, 2010 letter penned to Sturgeon from
Worcester County Chief Administrative Officer Gerald Mason that clearly stated
that the Worcester County Commissioners had made no such request to the LCB for
it to raise its prices to licensees.

Still, more licensees
say that if they look closely at their invoices, they are seeing jumps in their
costs, and the LCB has made it clear that its flaw has been trying to help the
licensees with lower prices, such as the 18-percent, across-the-board markup
that it instituted from March to December of 2009 and that it will be raising
prices to make up for their profit losses.

“We are going to make up
the lost money, and we’ve already taken the steps to do that with the new
pricing structure,” said Wilkinson in an interview last week. “We’ve been
trying to help the licensees for too long, and in the process, we’ve hurt the
people of Worcester County.”

One particularly mind
boggling claim came to light this week, as Michael Lawson, owner of the
Pirate’s Den, said that he had run out of Alpenwolfe liquor (which is
comparable to Jagermeister), and went to the county store on 18th
Street in Ocean City to purchase a bottle.

“I was told that the
bottle would cost me almost $22 after my licensee discount, but if I were to
buy it as a retailer, it came out to a little more than $12,” said Lawson. “So
I don’t understand how just because I hold a liquor license in this town I have
to pay basically $10 more for the same bottle for a sticker that I have to put
on the bottle to make it legal for me to pour. Something is seriously wrong
down there, and I don’t know if it’s mismanagement or gouging, but something is
definitely wrong.”

Lawson says that he’s
had trouble getting the products that he’s ordered as well as several retailers
who have cited growing instances where liquor that is being ordered is no
longer being carried or is simply out of stock.

“It’s the middle of
July, and this shouldn’t be going on right now,” said Lawson. “We only have a
few months to make it around here, and this isn’t right. July isn’t going to
come in October.”

Some licensees are even
hinting that the random rate increases and sudden unavailability of certain
products could have a direct connection to licensees’ outspoken criticism of
the county’s 75-year-old monopoly.

“If you go from a
22-percent markup to a 70-percent markup, I’m pretty sure that means that
you’ve ticked someone off down there, because that is just highway robbery,”
said Wall.

The LCB’s new pricing
structure is no longer based upon the Maryland Beverage Journal prices, but
rather, 85 percent of the retail price, which is consistent with Maryland Law.

This new price scheme,
which was instituted on June 1, 2010, has forced the fluctuation of markup
percentages to be proverbially all over the map, but averaging around 26

County Commissioner and
former LCB head Bobby Cowger said although he still believes in the LCB as a
whole, he’s losing faith in the current operators and doesn’t begrudge the
licensees for their disdain.

“It seems like the LCB
is going after the licensees for a bailout of sorts with these crazy price
hikes for the years in which their revenues have been decreasing, so I don’t
blame the licensees for being mad, because they are basically being slapped in
the face with it,” Cowger said.