Interviews, Email Spark Questions About LCB Motives

OCEAN CITY — The battle
between the state’s wholesalers and the Liquor Control Board for Worcester
County (LCB) for a stronger foothold on the second tier of the state’s three-tier
alcohol system seems to be one of the driving forces behind continuous
allegations and ongoing investigations against the quasi-governmental monopoly.

Simply put, some
wholesalers believe that the LCB’s quest for a stronger market share of the
second or wholesaler tier of the state’s system has led to mismanagement,
unethical business practices, and perhaps, even unlawful activity, while the
LCB claims that wholesalers are simply enraged that it’s taking business away
from wholesalers by buying liquor direct from the suppliers, and thus, pushing
for its abolishment.

Two weeks ago, when LCB
Chairman Don Hastings made statements claiming that the state’s wholesale
companies were just as much to blame for the allegations mounting against the
LCB as the licensees were, and that they are merely angry because of the
increased direct business that the LCB is now getting in this market, it seemed
only a matter of time before wholesalers would lash back.

This week, two employees
of FP Winner, Ltd stepped forward with accounts from a May 2008 meeting with
LCB Executive Director Brian Sturgeon, where they say, Sturgeon asked them to
break the law by selling him liquor under the Maryland State Beverage Journal

Rob Kenney, division
manager for FP Winner and a 27-year veteran of the industry, said that the
reason for the meeting was not only to introduce Sturgeon to his new
representative, Randy Williams, who would be handling Worcester and Wicomico
counties, but also to try to replenish the account that was lost when the LCB
started purchasing Svedka vodka direct from the supplier, rather than from FP

“In January or February
of 2008, I went around the area with Richard Fine from Svedka to kind of
introduce the product into the market and we got a lot of accounts from the two
weeks we spent doing that,” said Kenney. “In March, I was told that Svedka had
reached a deal with Brian [Sturgeon] at the LCB to go direct, and of course
that was a big hit for me, but what was more troubling is that I was told by
our Vice President of Operations at the time, Joe Stanley, that he had a
conversation with Brian that the fact that Svedka had gone direct wouldn’t
tarnish the business relationship because he liked me as a person and as a
sales rep.  The problem was that I’d never
met Brian Sturgeon at that time.”

Kenney said that a month
later, at a trade show in Ocean City, Sturgeon was standing with Stanley having
a friendly conversation with their wives and Kenney took the opportunity to
introduce himself to Sturgeon, thus proving to Stanley that Sturgeon’s comments
about Kenney were false.

“I introduced myself as
someone else and then gave a look to Joe Stanley that my claim about having
never met Brian Sturgeon were correct,” said Kenney.

Two months later, in May
of 2008, Kenney and Williams secured a meeting with Sturgeon to talk about
selling products to the LCB.

Kenney and Williams say
that what transpired was something that they’d never encountered before in the
liquor business.

“I simply said that we
wanted to get back the business we lost with Svedka and wondered if we were
doing something wrong for him to pull his business with us and go direct, and
he sat back in his chair, and he spun a copy of the Maryland Beverage Journal
back across the table towards Randy and I, pointed to a number and said, ‘I
want a 20-25% lower price than what’s in the Beverage Journal,’” Kenney said.

Kenney said that he
responded with the question, “how do you think I should do that without
breaking the law, because I’ve never been asked to do that before”, to which
Sturgeon allegedly replied, “there’s ways around everything. Speak to those
above you and try to address this issue for me.”

Both Williams and Kenney
have the same account of this meeting and they were interviewed by this
reporter at separate locations and on different days.

Williams and Kenney both
added that they had never been queried by any other client to go below the
Beverage Journal pricing, including the Wicomico County LCB, whose account
Williams handles.

“It’s a one doc state,
which means it’s the same price for everyone in Maryland,” said Kenney. “That’s
the way it’s always been since prohibition, so unless they know some loophole
that I don’t know about, he blatantly asked me to break the law.”

In addition, The
obtained a copy of an email sent from Sturgeon to at least one
wholesaler in April of 2008, requesting a similar discount below the Beverage
Journal pricing on 10 items, which are notably all premium or big name brands.

In the email, Sturgeon
calls the Maryland Beverage Journal “essentially meaningless, except for the
licensees in WOCO (Worcester County) who use it like a Bible”, and made a
similar request on lower prices than those listed in the Beverage Journal.

“All that I need is a
price below the beverage journal on ten items, which are listed below,” read
Sturgeon’s email. “I will pass the savings onto the licensees. We will all
benefit in the eyes of the accounts here in Worcester County for working
together. If I fail to produce for the licensees, they will continue to push
our Board who will then follow some other aggressive tactics … can you give
Worcester County 15% below Beverage Journal on these items?”

Sturgeon also alluded to
the tension between the wholesalers and the dispensary noting, “The lawyers and
politicians and the Board here have all had their chance to improve this
situation but they have failed … again,” read Sturgeon’s email, “Instead of
wasting our time fighting, we should be spending our time working on a
strategic partnership.”

LCB Board member and
official spokesman Larry Wilkinson wouldn’t speak specifically to the
allegations, but noted, “I will only say that when there is a wholesaler to
wholesaler transaction we are not held to Beverage Journal pricing.”

Gus Montes de Oca, Director
of Operations for the Montgomery County LCB, says that he believes that there
is a gray area concerning what the dispensaries in the state are allowed to do
when it deals directly with wholesalers, and although he says he thinks that it
is allowable, he says he steers clear of things that could cause such

“We basically do
everything direct here in Montgomery, and I think that Worcester is trying to
take a similar route and buy as much as they can direct,” said Montes de Oca,
“but we try to stay out of the gray areas as much as possible because the gray
areas tend to get dangerous.”

Montes de Oca said that
he sat down with Sturgeon in 2007 when he took the local executive director job
and tried to help him navigate his way through a tumultuous territory on the
eastern shore.

“It’s been like this for
decades down there,” said Montes de Oca “and I think in most cases he’s done a
good job for the licensees in Worcester County, but he needs to have a better
relationship with the wholesalers and he’s taking gambles that seem to keep
failing by the revenue stream.”

Montes de Oca said that
Sturgeon also queried him two years ago to buy all liquor from the Montgomery
LCB, thus cutting out all the wholesalers in the state entirely.

“We could have done it,
but we didn’t want to ruin the relationship and basically be responsible for
helping to turn the whole three tier system upside down,” said Montes de Oca.
“It just wasn’t worth doing.”

Kenney believes that the
gray areas on what the LCB is allowed to do creates an environment that even if
there is no wrongdoing, there could be perceived wrongdoing due to the
longstanding contempt between those in the liquor business in Worcester County.

“They hide behind all
the gray areas, said Kenney. “I’m a hardworking guy that wants a fair market
and has no problem competing for my slice of the pie. But how do you compete
against something or someone that either has a different set of rules to
follow, or none at all?”