You Were Right; The Pappy Lottery Was Rigged

Reported on PennLive.com: Five PLCB executives were investigated by the State Ethics Commission for, let's not mince words, cheating on the PLCB's Pappy Van Winkle "lottery." 

Let's do a perp walk. 

• Board member Michael Negra
• Cliff McFarland, director of supply chain 
• Tom Bowman, director of product selection
• Bryan Kelleher, director of the bureau of business development for wholesale operations
• Carl Jolly, a retail operations manager

All five of them were found to have participated in a scheme to snap up 'unclaimed' Pappy Van Winkle 12 Year Old bourbon (the "Lot B" bottling prized by the pros) and other allocated whiskeys. See, the PLCB would hold a lottery (which often led to website crashes, and was widely believed to be rigged, though no evidence of that has surfaced...yet) for PA residents to take a chance at buying one of the state's allocated bottles of various whiskey releases. After the results were announced, the winners would then be able to buy the bottles at the PLCB list price, which was, admittedly, often hundreds of dollars less than at private stores in other states. 

'Shopping' at the PLCB Executive Store

But amazingly, not every bottle would be claimed. For instance, the lottery cited in the PennLive article, the January 2020 lottery for the Lot B bottling, had over 17,000 entrants for 999 bottles, and 24 went unclaimed. The rules of the lottery said that those bottles would then be released for a "second-chance" lottery...but the PLCB decided not to do that, and instead the vultures at the top feasted on the remnants. 

Want more? The lottery allowed winning entrants to purchase a single bottle. Ha! Jolly, for instance, despite not having even entered the lottery (why would he? That's for us suckers), "bought three bottles of Pappy Van Winkle bourbon for $410 and separately a bottle of Weller 12-year Reserve Bourbon for $40." That was in one lottery. We're not told how many bottles in total 0were bought by these PLCB parasites. 

There is an aspect to this that is particularly hard to swallow. Their participation is not contested; they all did it, some of them multiple times. They didn't steal the bottles; they bought them, at list price, with their own money. There is apparently no credible evidence that they flipped the bottles to make money; Lot B, for example, is currently going for well over $1,000 in the so-called "secondary market." 

But because there was "insufficient clear and convincing evidence of a pecuniary benefit", the State Ethics Commission found that there was "no violation" of the state ethics code. That's bullshit. The whiskey wasn't theirs to buy, and even if they didn't sell it, they had that potential. That's like saying you're not guilty of theft because you stole a Van Gogh...and then just kept it. I mean, you didn't make any money on it, right? No harm, no foul, baby!

Despite that "innocence," the Ethics Commission's report says that they were each "ordered to fulfill his agreement to not purchase any items offered by the Pennsylvania Liquor Control Board outside of the process by which a Commonwealth resident may purchase such items." Don't the words "fulfill his agreement" sound like a deal was made? 

Of course a deal was made. And once again, the PLCB gets away with this crap. And what do we do? Nothing. That's what we do. Because the miserable PA Legislature has other things to do. Like making it harder to vote, and easier to frack.

Do you remember when the PLCB was the ONLY retail operation to shut down voluntarily in March of 2020? Absolutely closed for six weeks, and not only that, they boarded up the windows because they were afraid of us, that we rampaging drunks would loot their stores. 

Actual PLCB store, Wilkes-Barre, March 2020

Why are these guys still around? Will no one rid us of this troublesome agency?! 

Apparently not, because neither Shapiro's or Mastriano's campaign responded to me when I asked them about their positions on PLCB privatization. I'd remind you that I'm a nationally known whiskey writer, I've testified about these issues before the legislature; I'm not just a blogger howling in the night...but they didn't respond. 

Which leads me to believe that we're screwed. Shapiro is just another Democrat who will veto any privatization bill -- for reasons unclear -- and Mastriano apparently is either beholden to the religiously anti-booze or will be too busy fighting for freedom, whatever he thinks that means. 

But don't worry. These guys promised not to buy booze outside the normal channels again. Pinky swear. 

Looks like it's gonna be a long eight years. 

Out Of Control

I've been at this for years, since 2008, although I did pretty much drop the ball during the pandemic (which I regret, deeply, because a LOT of things needed to be said, but that's virus over the dam now). One of the consistent themes through all of those years was the way the Liquor Control Board was actually out of control. 

I've brought up numerous examples of this. The famous wine kiosks, the Rise of Conti (and the essential abolishment of his CEO position after he fell from grace), numerous clashes with Governor Rendell (told you I'd been at this for years), the lying about 'variable pricing,' and the disastrous allocated whiskey lottery that they never could get right, and finally just gave up on.

Whoops, not THAT Frank Burns!

But one of the most egregious, amazing examples was one I missed during my COVID hiatus, when Representative Frank Burns (D-Johnstown) tried to find out how many "zombie" licenses the PCLB had for future auction (these are seized or unused licenses; after a year, under relatively new law, they revert to the PLCB, where they can be auctioned to the highest bidder). 

The PLCB said no! That's right: a government agency refused to give regulatory information to a duly-elected legislator. So Burns went to the Office of Open Records. They said the PLCB had to give him the information...and The Lords Of Liquor Control refused again, appealing to the Commonwealth Court. The court ruled in Burns's favor, so of course, the PLCB (which has an unending supply of crap lawyers) appealed the ruling to the state Supreme Court. The PA Supremes fairly quickly denied the PLCB's appeal, upholding the Commonwealth Court ruling, giving the agency 30 days to present the information.

Yeah, I'm Frank Burns. Arrest the PLCB.
(And the snozzberries taste like snozzberries!)

Aside from the truly interesting fact that Rep. Burns is a Democrat, and the state Supreme Court has a solid Democratic majority (so they clearly do get what the PLCB is, but consistently refuse to privatize it), what do we learn here? 

The PLCB directly denied a legal request for information from a state legislator. This wasn't a frivolous request, like 'Hey, how many bottles of Maker's Mark do you guys have right now?' It was information that concerned constituent requests and a valid issue, namely, how is a purchaser supposed to know what the value of a license is when the PLCB won't tell them how many are going to be available? 

The PLCB gave its stock answer, which had always worked for it in the past: 'That's proprietary information, my good man.' But this time, they ran into someone who was just as willing to go to court as they were, and they lost. (Burns paid the legal costs out of his own pocket, by the way; the PLCB...yeah, they paid out of our pockets.)

Commonwealth Court Justice Cannon

They not only lost, the judge "bought none -- not one iota -- of what the Liquor Control Board was trying to sell. [Wow, the PLCB sucking at selling something; shocker.] The Right-to-Know Law is clear -- the information here is public record,” said Burns's lawyer, Terry Mutchler, the first director of the state's Office of Open Records. “It is a very strong decision that advances the law by giving deeper guidance on the components of records that agencies consider pre-deliberative. And also, because it points out that although the LCB may be ‘business-like,’ it is not a business.” (Yes, that's why I included the entire quote.) 

This is classic PLCB style. Don't just be wrong; deny you're wrong, waste thousands of taxpayer dollars denying you're wrong, and then when you're proven wrong, be assholes about it. Assholes? Yeah, the PLCB's main comment on the Supremes' decision was along the lines of, 'Wow, we were really looking forward to proving our case, but we've been denied justice.' Typical. 

This is all by way of proving the point I've been making for years, the one I simply cannot believe the General Assembly does not get: the PLCB is a rogue agency. Burns gets it. He believes that the Board wields too much power and has become arrogant and unresponsive to the public’s wishes. “The LCB has their own little kingdom with a moat around them for protection,” said Burns. “They’re not accountable to anyone, and that has to change. If they can treat a legislator like this you can only wonder how they treat other people out there.”

Bang on, Rep. Burns. The Liquor Control Board is literally out of control, and the reason is that it is answerable only to itself. It is a government agency with its own plentiful source of revenue. It has its own enforcement arm, its own courts and judges; it regularly thumbs its nose at the legislature, the governor, and the Pennsylvania courts; and it arbitrarily changes state-written regulations by 'interpreting' them as they wish.

It does not need to be reformed, or 'brought to heel,' or be regulated. It needs to be done away with. It serves no purpose that is not either anti-consumer or superfluous. Everything the PLCB does can be done more efficiently by existing state agencies. Except the actual wholesale and retail sale of booze: thanks, we can do that better on our own, no state agency required. 

Here's how I laid it out almost exactly 14 years ago in this blog: "...privatize booze sales, put licensing and inspection in the hands of the Dept. of Agriculture, tax collection in the purview of the Dept. of Revenue (they've got some experience with that), put the anti-alcoholism and underage drinking prevention programs under the Dept. of Health, and fully hand over enforcement to the State Police. [Then] give a re-write of the [Liquor] Code over to a commission that includes interested consumers for a change, and charge them with writing a simpler, more understandable Code."

The PLCB shut down for six weeks during the pandemic, and Wolf himself said  (link goes to a PDF) we didn't need them, because now we could buy booze at the Acme store. The PLCB is corrupt, the PLCB is outdated, the PLCB has only 600 stores for the entire state. The PLCB won't let you buy booze in Jersey or Delaware, they force us to buy from them. 

Why the hell aren't we done with this? Why does the Legislature put up with it? 

Privatize. End this out of control agency. 

What Might Privatization Look Like?

The future is as clear as vodka...

Two years later...I haven't given up, but I'll admit that the pandemic re-ordered my priorities. I've got [THE RAGING FEAR] my concerns under control now, and I'm starting to think about other stuff again. Like privatization. 

There's talk of using a state constitutional amendment to get rid of The Police-Enforced Monopoly that is the State Store System. This tells me two things. One, Republican legislators are tired of Democratic bullshit about this issue, and they're going nuclear. And two, that Republican legislators have stopped thinking clearly. 

Demolition of the PLCB, amendment-style!

It's my strong opinion that this would be the bluntest of instruments to achieve the goal of privatization of booze sales in the state. An amendment would not have the detail necessary to do this well, and would leave open all kinds of maneuvering room for backroom deals of the type I'm pretty sure we all know would happen. 

What kinds of deals? How about minimum square footage requirements, like they included in Washington State's privatization deal? The "reason" is that they're 'saving' us from 'a liquor store on every corner,' but it's really a deal for big-money donors like chain grocery and liquor stores to get a new oligopoly on retail liquor stores, trading a shitty monopoly for a still-limited oligopoly. We don't want that, believe me. 

Or they'll boost taxes to "make up for the shortfall" from the loss of the PLCB "profits." Once again, like Washington State's privatization deal, this is wrongheaded, and will lose us the greatest benefit of privatization: competition. It will put PA liquor stores (and bars, and restaurants) firmly behind neighboring states' stores on price, leading to even more border bleed. 

Because you know that the hated Police-Enforced Monopoly will not go away. We'll still be forced to buy booze in PA. Bullshit on that. Bullshit!

Okay, calm down, Lew. The constitutional amendment idea is not a good one, despite the Democrats forcing consideration of such extreme measures by their bullheaded intransigence on this issue. We need to come up with some way to make this an attractively bipartisan issue. 

Some of the problem is that the lazy legislature acquiesced when the PLCB put the supermarket safety valve in place, and didn't do the right thing: create a separate grocery/deli/c-store/gas station license for retail off-premise sales. That led to supermarket and c-store chains buying R-licenses at insanely inflated prices (over $500,000 in some instances), and now — shocker! — those businesses are dead-set against any move toward such a license. Great. 

But that's a whole other post, and I will get to that, and soon. I'm back on this. 

Time to take over the world, Pinky!

Meanwhile...What do I want to see in privatization? All open to tweaking, but...

First, and non-negotiable: the PLCB ceases to exist except as a regulatory agency...if needed. No state stores, no state wholesale. They've proven that they cannot run this fairly or honestly. They're done. As a regulatory agency, their operations must be made more transparent, and their power to "interpret" state laws and regulations to the point of nullification must end. 

Second, very important: learn from Washington State's mistakes. And they made plenty of them. A study panel should look at what Washington did, and what Alberta did, and come up with recommendations to make sure that we do better. Ask consumers in those places, too. 

Those two are huge, big picture things. Here are more direct things. 

1. Allow ALL R and Hotel licensees -- bars, restaurants, hotels -- to sell any type of alcohol beverage to any legal customer for on-premise consumption. With the purchase of an additional Off-license permit (for a reasonable annual fee to the state), they would be allowed to sell full bottles/cans to go. No more limits, no more "step outside and you can buy another" bullshit. Licenses increased to one per 500 adults in a county. Licenses become non-transferable five years after passage, which should end the ridiculous secondary market in paper.

2. Beer Distributors become all-alcohol stores with off-premise sales. Beer distributors MAY dispense draft beer in sealed (have to work on that definition) to-go containers. Number of licenses is increased to one per 500 adults in a county. License is non-transferable, starting five years after passage.

3. Create a new license for grocery stores, convenience stores, drugstores, and gas stations. Takeout ONLY, no on-premise consumption. Number of licenses are not limited, pay a reasonable annual fee to the state (with allowance for review after five or ten years), and are not transferable. License holders MAY also buy or retain a separate R-license for on-premise consumption if they want. 

4. Open up wholesale. Beer wholesalers may add all other alcohol. New wholesalers allowed, reasonable annual permit, non-transferable. More wholesalers means more competition, which means better prices and service. Charging $100 million for a wholesaler license is not a way to get more wholesalers. This may need tinkering; for instance, are multi-state wholesalers allowed to operate in the state? We may want to say no to that, or we may not. 

5. Pennsylvania citizens AND licensees may buy and sell from out of state. Period. This has gone on for way too long. If the state can't tax and regulate booze in a manner consistent with neighboring states, that's too damned bad. Look at it as incentive to do better. 

6. Sales tax to be applied at wholesale (or producer) level. Convert the Johnstown Flood Tax from a tax on price to a flat gallonage tax, like the rest of the country, and peg it to current national average. If that means less revenue, screw 'em. What Pennsylvania's tax does -- unintended consequences -- is make blotto booze (cheap wine, cheap vodka) even cheaper, while making better booze even more expensive. If we're taxing alcohol for some health or moral reason, the gallonage tax is more honest; if it's just about raising revenue...well, why not put an excise tax on everything and share the pain?

7. Rip out the old Liquor Code and start over. Aim for simple, understandable laws that ruin as few businesses as possible, but changes them where they are unfair, or not in the public interest. For instance, booze wholesale should emulate food wholesale: competition allowed, exclusivity as something that suppliers would pay for. The Code is currently open to way too much interpretation and confusion, and that has to end. 

8. Perhaps the most important is this: when this is done, when it's being written and decided upon, it must be 100% transparent. There must be citizen and industry representation on whatever task force does this rewriting of the Liquor Code, and regular reports must be presented; weekly, if necessary. There's too much money at stake to do otherwise, and we've already seen that it causes corruption. Obviously, I volunteer. Seriously, there should be representatives from all sides: wholesale and retail booze business (but only one each), consumers (one or two), anti-alcohol types (gotta be fair), the UFCW (no, really, it's only fair), and politicians. Maybe more stakeholders, that's just a first cut, but there must be representation and openness. 

These points will make me no friends in the industry. They completely upset the apple cart, and may ruin long-established family businesses. But they will create new businesses, and the solid family businesses will thrive and succeed...as long as big businesses, chain retailers, aren't allowed to write this privatization bill. And of course...nothing's set in stone, and politics is the art of the possible. 

It's about time, it's long past time, that the consumers, the voters, had a large say in how this gets done. 

Privatization. Yesterday, today, forever.