Auditor General: "The Board and the vendor lost credibility..."

I'm back from vacation...and apparently just in time! Auditor General Jack Wagner's audit of the wine kiosk fiasco -- sorry, program -- is out today, and it's pretty much unforgiving. Well, the man's an auditor; of course it's not forgiving, that's not his job, and this was a fiasco. Some pertinent stuff (the full report's here in PDF format; the AG's statement is here (added emphases are mine, of course)):

Wagner’s special performance audit...chronicled the problems that existed from the beginning of the ill-fated kiosk program. The six findings, are:

• The board used kiosk technology that effectively controlled the purchase of alcohol (about the only positive statement in the whole report)
  
• The board followed state procurement requirements, but the request for proposals did not enable fair and just competition
  
• The board and the sole responding vendor negotiated the kiosk contract in ways more advantageous to the vendor than necessary
  
• The board spent $1.12 million more than it took in over two fiscal years and has invoiced the vendor for the losses. But the vendor has not paid
  
• The board and the vendor lost credibility when the kiosks malfunctioned,
  
• The board overstated the convenience of the kiosks

Note that he says "effectively controlled the purchase of alcohol." Not "efficiently," or "nonintrusively." The same thing could have been "effected" by a live person standing at each kiosk -- which the malfunctions eventually also required -- and the statement would have still been true. But weak competition on an RFP, vendor-favorable negotiations (when the vendor is heavily invested in campaign contributions to a sitting governor), losing money on a supposedly cost-free project, operation failures during the busiest sales season of the year, and the total cluelessness on the definition of "convenience?"

Look, read the statement, which covers most of this. Read the actual report, and pay particular attention to Section C, beginning on page 71, where the Board responds to the report. The AG's report takes that response and pretty much shreds it, saying over and over that the Board simply chose not to respond to some (the most awkward) of its findings.

But the message here? The wine kiosk program was a failure. Black and white, accountant-certified, this thing was a catastrophe. The break-even point -- as stated by the PLCB -- was 210 bottles a week per kiosk; only 3 out of 32 machines met that threshold; 17 -- over half! -- sold under 100 bottles a week. They simply didn't work: in the first three months of operation, "auditors determined that 1 out of every 21 transactions was problematic." That's leaving the general shadiness of the contract and the apparent lack of any escape hatch for the Board aside!

And the response from PJ Stapleton (who apparently may have been reading a different report)? "As it has done throughout this process, the Board will attempt to take whatever steps it can to maximize the possibility that the wine kiosk program will succeed."

PJ. Dude. It's over. Walmart blew you off. Wegmans blew you off. Where are you going to put these things? In Post Offices? In courthouses? Wait, wait, I know: how about in the State Stores! 

As I have said for a long time, the major problem at this agency -- beyond the tonedeaf attitude, beyond the terrible business model, beyond the insane insistence that the little stores out in the sticks carry thousands of SKUs when there's no demand for them, beyond the personnel system that doesn't properly reward product knowledge and sales competence, beyond all these serious problems -- is hubris. PJ and his Pals on the Board, Joe Da CEO, and their lieutenants have consistently responded to criticism with an attitude of 'you don't understand, what you call failure is innovation; what you call unethical is faithful to the letter of the law; what you call inconvenient is controlling the best interests of the people of the Commonwealth.' As if we are somehow too stupid to see that this is simply very bad management.

Let me lay this out in such straightforward terms that it can't be ignored.

• The wine kiosks are a public relations and sales disaster that have indeed cost the Board credibility
• The very real disaster of the PLCB's Oracle-based inventory system (subject of another audit) that wound up costing the Board hundreds of thousands in ruined wine (though they say it's fine, and what the hell do they care) and ad hoc storage fees in an absolute orgy of managerial ignorance
• The "courtesy contract," which exposed the PLCB's total lack of basic sales skills and was awarded in a way that showed poor judgment and created the appearance of a conflict of interest, not to mention being an expense that was not worthwhile...according to the AG again (in...yeah, another special audit)
• The embarrassing spectacle of over 20 workers at the PLCB's Philly warehouse being fired for undisclosed "financial irregularities" -- and they are still "undisclosed" 10 months after Joe Da CEO promised an investigation
• The PLCB's large number of unprofitable stores -- in a police-enforced monopoly -- and questionable business models
• The beer registration raid fiasco, where the PLCB's ineptly-kept beer registration database led to pathetically comic 'raids' by armed BLCE officers on three respectable Philly restaurants and one respectable Philly wholesaler, costing them thousands in lost time and sales (read it all here and here)
• The terrible record on nuisance bars (sure, it's the BLCE doing the enforcement, but the PLCB does the administrative punishment, and it's soooooo sloooooowwww....)

That's just in three years. Three years! I mean, speaking pragmatically, PJ and Conti have been a godsend; they're making my job easier. But speaking as a PA taxpayer? When are they going to resign because of their incompetence?! These are major screwups, this is a terribly run agency that lurches from one disaster to another, reacting to the Legislature, arrogantly ignoring the Governor and lawyerly disagreeing with the black and white criticisms of the Auditor General. But who do they answer to? Apparently no one. Which is, in my mind, one of the biggest Reasons of all that they need to be completely restructured, and the retail monopoly taken away from them.

Beer Raid Resolution

Heard from Leigh Maida that the Memphis44Resurrection Raids are officially over; they got closure. All the details are here. What does all this come to? Well, for this incident, exactly nothing. Less than nothing: the BLCE blew thousands of dollars of your money out their collective asses to accomplish...a warning letter about a non-event.

Overall? A LOT of people learned just how archaic PA's booze laws are. That's a win for us. Don't let up!

Video on the Hearings

In case you missed it (I did, and I'm in the damned thing!), Stephen Metzger put together a video report on the hearings, including the kick-ass moment when Representative John Taylor shouted down Major Lutz of the State Police. Check it out here.

The PLCB Hearings, Part I

By rights, I should have posted this here, but the other blog gets a lot more traffic. So rather than double-post, here's a link. This covers the testimony of Leigh Maida (of Memphis Taproom, et al) and Dominic Origlio (of Origlio Beverage), the two raided business owners. Next installment: Joe "CEO" Conti, Major Lutz of the State Police, and Artie Tafoya of Appalachian Brewing. Final installment: comments after the hearing from legislators, video, the after-party, and summation. And then...maybe some follow-up, which is sadly lacking. Until then...

I got some questions about this...

Just sent this e-mail to the members of the PA Senate Law and Justice committee (and my own Senator, Robert Tomlinson). I'll be at the hearings on Tuesday, and I'll report on what happens.

Honorable Senators,
I'll be attending Tuesday's joint hearing conducted by the Law and Justice Committee and the House Liquor Control Committee regarding the recent Bureau of Liquor Control enforcement (BLCE) "raids" in Philadelphia. This is a matter of great interest and concern to me (and to quite a few others, as evidenced by the public outcry at the injustice of these events). I've taken the liberty of creating the following list of questions I'd like to see addressed at these hearings. I hope you would consider them.

•    What purpose is served by brand registration? How does this arcane and clearly imperfect process best meet that need? If that need can be met by simpler means, why not do away with beer registration altogether?

•    Why was the cost of registration recently raised from $25 per brand to $75 (especially when other states have registration fees as low as $1)? Can there at least be an exemption of registration for brewpubs that only sell beer on-premises?

•    Why was the response to this complaint three simultaneous raids carried out by multiple armed BLCE agents, during lunch hour? Why not one plainclothes agent armed with a clipboard to straighten out what is clearly a bureaucratic issue?

•    What is being done to insure that the BLCE's “anonymous complaint” process is not used to harass licensees, either by competitors or malcontents?

•    Where is the oversight on the BLCE? The PLCB repeatedly said, in the aftermath of the raids, that it was not responsible for the actions of the BLCE; the State Police also distanced themselves. For that matter, who does the PLCB answer to, other than indirectly to the Legislature, through the Liquor Code?

•    At the heart of things, is the PA Liquor Code just too byzantine and confusing for licensees – and enforcement agents! – to understand? Could the Code be substantially simplified without undercutting taxation and enforcement?

•    And of course: why does the State continue to hold a retail monopoly on the sale of wine and liquor? As an American citizen in 2010, how is it possibly fair that I cannot legally travel 15 miles into New Jersey, buy a bottle of wine, and bring it home to drink? The monopoly is unfair, and there are no compelling reasons in the public good to continue it.

As I said, I will be present on Tuesday to see how the hearing proceeds, and to report on those proceedings. I hope the hearing is fruitful, and brings progress to the process of making Pennsylvania's liquor laws more fair, more transparent, and more responsive to the desires of the citizens of the Commonwealth.

Sincerely,

Lew Bryson

Vintage beers okay: nothing to worry about!

Just got off the phone with a PA brewer (who prefers to remain anonymous...and as long as the BLCE keeps that up, so will I), who told me they'd talked to the brand registration folks at the PLCB and had this to add to the discussion. Vintage beers -- older beers that are no longer brewed, or beers from defunct breweries like Heavyweight or King & Barnes -- that have already been purchased by a retailer are not in danger of causing a citation for unregistered beers. Once beer is purchased by the retailer, assuming it was registered when purchased, it is "grandfathered in," and the retailer doesn't have to worry. So if you're a bar owner or a distributor or a deli, and you've got beers you're aging? Don't worry about it.

Well, not exactly. Note that wholesalers are not afforded this protection, and there is nothing to keep the BLCE from checking their list, not finding those aging beers, and confiscating them. But you can't be fined or suspended for having them, and you can file paperwork to get them back.

I'm not sure just how good I feel about this.

Not just Philly

Reader David Staab reports on Facebook that three BLCE agents were at Shangy's (the well-known "Beer Mecca" in Emaus, PA) yesterday.

Is this a state-wide "effort"? Gotta be more satisfying than trying to close nuisance bars (the bars noted in State College were the scenes of open underage drinking, countless noise violations, and a murder, but it only took the PLCB four years to close them...and Stapleton's so proud of that he brags about it in the linked editorial). Write your legislator now. This pointless harassment of PA business needs to be stopped.

Beer Raids Part II: dropping the big one

Just saw this on Don Russell's Beer Radar blog. The BLCE raided Origlio Beverage last night. Some points from Don's post:

The Bureau of Liquor Enforcement agents arrived about 7 p.m. last night and conducted a search of the warehouse, specifically looking for Origlio’s share of brands they’d confiscated from the bars last week. This includes: Duvel, Monk’s Cafe Sour Flemish Ale, Hacker-Pschorr and Russian River Supplication.
They reportedly confiscated only the Supplication because they would’ve needed a tractor trailer for the rest. They ordered Origlio not to distribute any of the other brands.

I'm guessing they didn't bring a tractor trailer because they had no freakin' clue how big these brands are in this market.

Here's my question. If the taxes on these beers were paid -- and I have no doubt whatsoever they were -- is the BLCE really holding up thousands and thousands of dollars worth of beer, crimping the business of hundreds of Philadelphia bars, restaurants, and distributors, putting jobs at jeopardy...all over a piddling $600 in registration fees? (That's $75 each for Duvel, Monk's Sour, Supplication, and 5 H-P brands listed on Origlio's website.) Are you shitting me?

Another quote from Don, because he said it just fine:

What we’re witnessing isn’t just bureaucratic incompetence or the result of outdated laws. This is an act of unrepentant arrogance. As one local restaurant operator remarked of the BLE, “They don’t answer to anybody. They’re running amok.”

What have I told you time after time? It's the arrogance of this agency that is simply jaw-dropping.

I'm going to have to quote Buddy "I married a PLCB manager" Hobart to express what I feel about this new initiative. "What I say to the skeptical," said Buddy Hobart, president of Solutions 21, "to those of us in the world who believe we've arrived and don't need to improve: Look up the word arrogant in the dictionary." When you find that page, I believe you'll find the PLCB logo next to that definition. 

They do, however, have some shame. The PLCB has an auto-response going now for e-mails about the raids in which they deny any responsibility. Here's what it says:

This is in response to your inquiry regarding the recent raids of three Philadelphia-area bars, conducted by the Pennsylvania State Police, Bureau of Liquor Control Enforcement ("BLCE"), in which the PSP, BLCE apparently confiscated beers that may or may not have been properly registered for sale in Pennsylvania.
The raids in question were conducted by the PSP, BLCE, not the Pennsylvania Liquor Control Board ("Board"). The officers involved are employed by the PSP,BLCE and not the Board. The Board and the BLCE are two distinct agencies.  Therefore, your inquires should be directed to the PSP, BLCE Harrisburg Headquarters. Their contact number is 717-540-7410.

As always, should you become a subject of ridicule or public outrage, the Chairman will disavow any knowledge of your actions. I always knew the PLCB was arrogant. I didn't know they were also gutless buck-passers, but it shouldn't surprise me. The BLCE is funded by the PLCB, they exist to enforce the PLCB's regulations.

As I keep saying, the thing to do...is write your legislator. Tell them things have gone too far. The PLCB, the BLCE, it doesn't matter which; they're out of control. It's time to break them, to bring them to heel. Rewrite the Code. People keep telling me it can't be done. I don't see any other thing to do.

State Rep John Taylor: "a ridiculous use of enforcement manpower"

Last Thursday's raid on three Philly bars -- all owned by the same couple -- for "unregistered beer brands" has caught fire in the media. Hundreds of comments are swamping stories on the Daily News website, stories like the one today where Rep. John Taylor (whose 177th District is home to the Memphis Taproom, one of the bars raided) blasted the raids.

THE TOP Republican on the House Liquor Control Committee said yesterday that the State Police engaged in "a ridiculous use of enforcement manpower" last week when more than a dozen officers staged raids on three Philadelphia bars, suspected of selling beers not registered in Pennsylvania.
"I don't know why they would use that many people to track down an issue like this that could have been handled with a routine inspection," said state Rep. John Taylor, whose legislative district includes one of the bars, the Memphis Taproom, in Port Richmond.

Taylor puts his finger right on the problem. Here's what I said in a comment on Andy Crouch's Beerscribe blog:

Why is a “raid” necessary? Here’s an option: instead of five armed cops walking in on a lunch crowd and seizing beers, how about one bureaucrat comes by with a clipboard to see if unregistered beers are on the premises? If any resistance is offered, backup is a phone call away, and resistance won’t look good on the complaint. Find the unregistered beers and — here’s another thought — get the wholesaler on the line and arrange for payment of the fee and registration on the spot. Done, under the radar, no business disruption, the beer’s registered, the state’s happy, and it costs so much less than sending five cops (and looking like idiots in the press).

I remember having this same thought about ten years ago when I went to my first State College Micro Expo beer festival (a festival that was largely regulated to death, unfortunately). As I arrived about half an hour before the fest started, one of the fest organizers was being lectured -- hectored, really -- by a red-faced PLCB enforcement agent about unregistered beers at the festival. "There are unregistered beers at this festival," he shouted, "and they will not be served, or I will shut this thing down!" The organizer took care of it -- a pain in the ass, but what are you going to do? -- and later told me that the PLCB had first contacted him about the problem less than two days before.

And I thought to myself then...wouldn't it have been better all-round if instead of getting up in the guy's face like that, the PLCB agent had instead said, I understand there are some beers coming to the fest that are unregistered. Let me help you with the paperwork, you cut me a check, and we'll get that all squared away in time for the fest? No stress, no screaming, and the state...has revenue. Wow. Would that make sense? What am I missing?

Oh, and in case you were wondering? The PLCB went after the unregistered brands at the fest...because of an anonymous tip. Best guesses were that it was a local distributor (Zeno's certainly wouldn't have done it: they were making money hand-over-fist that day selling beer to happy geeks). Kinda makes you think that this "anonymous tip" thing should go away too.

And now...video

Here's the story on Action News. I especially liked this part:

Authorities stress if Hartranft thinks any of the confiscated beer is registered all he has to do is show them the paperwork. "We would happy to have for them to come down, show us they are registered. If they are they can sign the property record and take custody of them," explained Sgt. La Torre.

That would be the same Sgt. La Torre quoted in the Daily News today, I suppose.

State Police Sgt. William N. La Torre, commanding officer of the Philadelphia office of the Bureau of Liquor Control Enforcement, said that he was not aware of any beers that had been mistakenly confiscated.
La Torre said that the beer would be kept in a secured location, as evidence, until the case is resolved, probably in six to eight months. If an administrative-law judge finds that the bars possessed unregistered brands, the State Police typically would seek a forfeiture order to destroy the beer, he said. Depending on the temperature of the storage location, some of the beer will likely turn sour in that period.
Maida said that the couple's attorney had told them that they have until 6 p.m. tonight to compile evidence to prove that the confiscated beer is properly registered.

And if they don't get the evidence by...oh, by two hours ago, they can't get the beer. The Sgt. La Torre on the TV, some time later on than the newspaper interview, sounds like a much more conciliatory man. I reckon he don't need a weatherman...