Report Findings Likely To Decide LCB’s Future

OCEAN CITY — A spokesperson from Maryland Comptroller Peter Franchot’s office confirmed this week that the findings of the nine-month investigation of the Worcester County Liquor Control Board (LCB), which Franchot himself called “one of the most intensive” ever, could be announced publicly as early as next week.

“I can’t say for sure when the exact date is going to be at this time, but the report is done and it will be announced very soon”, said Christine Feldman, deputy director of communications for the comptroller.

Last March, investigator Anthony Hatcher was sent to the county to explore allegations against the county’s 75-year-old liquor dispensary for price discrimination amongst various other charges. Most notably, the LCB was accused of offering bottles of Stoli Orange Vodka to three different licensees for three different prices on the same day, thus potentially violating Article 2-B of Maryland Law.

The law requires the monopoly dispensary to offer sale items to all licensees, and everything must be offered at the same price. In addition, dozens of the county’s 187 licensees claimed that they were never offered the $5-a-bottle Stoli promotion that ran in March.

LCB officials contested that an email was sent to all licensees, but the email they provided, obtained by The Dispatch in April, never listed the price of the promotion, only the fact that there was a promotion forthcoming leading with the phrase “remember your first orange crush.”

The investigation, or perhaps the events that sparked the investigation, brought the longstanding bad blood between the LCB and the county’s licensees to a boil as more allegations surfaced including price gouging against the LCB, even though the county dispensary claimed it dropped prices by 4% in order to help the licensees through the tough economy.

“When we realized what we had done in lowering the prices that much, we knew we had to fix it and raise the prices back up,” said LCB Board member Joe Jackson in July.

The reason the prices were raised, according to Jackson, was because the LCB realized that the revenue it lost after following a county commissioner order to drop prices to an 18% markup across the board, substantially diminished the money they gave back to Worcester County and the various municipalities, who all benefit from the non-profit monopoly’s revenue.

In fact, the sum was the lowest ever, as the LCB gave Worcester County a check for a little more than $110,000, of which they took half and dispersed the other half to Ocean City, Snow Hill, Berlin, and Pocomoke. Yet, the sum was three times less than it was in 2009, and six times less than it was in 2008, all while the LCB totaled more than $14 million in sales each of the three years.

LCB officials say a cocktail of sorts, equal parts increased costs, a bad economy, and the aforementioned too low of price points for licensees all played a role in their dwindling paybacks to the county.

“We still ended up giving back a $100,000 to the county in a time when people were going out of business and the economy was horrible,” LCB Board member Larry Wilkinson in June. “I’d be surprised to find many other businesses that are still turning a six-figure profit in these conditions.”

Yet, money has always been at the heart of this debate. The licensees claim that the LCB tacks on as much as 20-25% to their bottom lines with mark-ups, when they could get the liquor from wholesalers at the beverage journal prices. After the prices were hiked back up in June, some licensees reported mark-ups for some items that reached 60 and 70 percent for booze markups.

The direct purchase of alcohol seems to be simmering somewhere beneath all the investigations and allegations, as the admitted full court press-like push for the LCB to buy more liquor direct from the suppliers, thus skipping over the wholesalers altogether, has ironically mirrored the dispensary’s drastic freefall of revenue since Executive Director Brian Sturgeon took over in 2007.

In addition, the allegations against the LCB and the Comptroller’s investigation caught the eye of then Delegate and now State Senator Jim Mathias, who announced early on that, if elected, he would introduce legislation to abolish the LCB on the grounds that the licensees come up with a formula to replace the money. Mathias stands by that statement today.

Buxbaum said the licensees are considering “numerous options” in hopes of coming up with a sum that would be feasible, but inside sources say the number the county is looking for is at least a half a million dollars annually, which is about half way between the $110,000 the LCB gave back this year and $900,000 in 2003.

Many believe the future of the dispensary will hinge on Franchot’s findings, more so than the legislation for abolishment that Mathias is said to be considering.

“Whatever happens, we stand by all the allegations and believe that the Comptroller’s report will be thorough and just,” said Buxbaum yesterday. “I think we are all looking forward to getting some sort of closure on all that’s happened in the last nine months.”