Three months and no financials?

It's over three months after their fiscal year ended, and the PLCB has still not managed to figure out how to report their financials. By comparison, the Department Of Revenue, an agency more than ten times the size with millions of accounts has somehow managed to get an unaudited year end totals  out which is all we are asking for. And they did it the day after the fiscal year ended!

I think I know what the problem might be and offer this suggestion.

BRIBES are an expense.

However, KICKBACKS are an asset.

There. That should help speed things along. No charge for the service.

Well, the PLCB released some numbers - so how did I do?

A few days after I asked why the PLCB couldn't publish any financial numbers in a reasonable time, the House Liquor Control Committee got some numbers from the PLCB that tried to make themselves look good. If you watch the video, you'll see it didn't work. Here are a few facts and figures. This isn't the same amount of information that it took them over 2 months to release last year, but it is a start and enough to check the predictions I made. Let's see how I did, comparing the actual quotes from my post of July 31 to what came out at the meeting.

The PLCB spin is making me dizzy

1. Prediction: "The PLCB had record sales again. No surprise there with a police enforced monopoly, a growing population and things costing more over time: what else would you expect?"

1. Reality: Hit this one right on the head. 

2. Prediction: "There should be some crowing about record amounts of taxes turned in, but how is that a surprise when sales go up? Tax payments are done by tens of thousands of businesses, but the PLCB is the only one that puts out a press release saying that they did their job. Congratulations, guys."

2. Reality. Yep, they are crowing about it, but things are a bit confused. The PLCB cited various "modernization" efforts, including increased Sunday store hours. Except there weren't any increased Sunday store hours. That particular change is controlled by the legislature, and they didn't vote to increase any Sunday hours. Is the PLCB doing it illegally?

3. Prediction: "The PLCB will not have record Net Operating Income or what they call "profits." It went down last year and I'm betting it will go down again this year. You gotta wonder how they can have record sales all the time, but rarely record profits (or 'unwasted use tax', as I like to call it)."

3. Reality: While no PLCB financial sheet lists "net income," we can figure it out; it came to $121.2 million in FY 2014, which went down to $117 million this year. Damn, right again. Record sales and making less money: it's the PLCB way!

4. Prediction: "Store, Warehouse, and Transportation Costs went up 8% last year and I say they will be up by at least the same amount this year."

4. Reality: Well, they did go up, from $327 to $338 million, but that is not the 8% I predicted, it's only 3% . Can't win 'em all.

5. Prediction: "Administrative, Alcohol Education, and Support Costs went up 9% last year and they will go up again by 8-10%. Don't even think that was because of the education part, since the total was even more in 2011. Went down after Rep. Turzai started pointing it out and then went back up to what it was. It's going to go up again."

5. Reality: In a rebound with a slam dunk! Administrative, Alcohol Education, and Support Costs went up an astounding 29.4% from $62.6 to 81 Million.

So there you have it.  We'll have to wait and see how well my prognostication did whenever the PLCB can figure out how to work those computers. For now, I'm going to say that I did pretty damn well with 4 out of 5.

The  bottom line is that the PLCB took more of the citizen's money and gave less in return for the second year in a row, and for the fourth year in a row did not increase the amount turned in to the general fund, even though all those years had record sales. I know that this number is a request by the Governor, but it is AFTER MEETING WITH THE PLCB, when he knows how much they have.

Time to kill this dinosaur.

END IT, DON'T MEND IT.

Any of this sound familiar?

Has it been 30 years already?

In 1985 it was recommended that the PLCB implement a paperless licensee image filing system, in 1992 the PLCB said it was in the process of doing so. In 2014, 30 years later, the process isn't finished yet: every store has paper files for the licensees that regularly use them.

In 1985 the PLCB was tasked with developing alternative pricing strategies that fit within the liquor code. This was done but never implemented, and here we are in 2014 hearing that as part of "modernization," they want to develop alternate pricing strategies.

Again in 1985 the PLCB was told to "Improve marketing of PLCB products by responding to customer demand and properly handling wine and spirits." In 1992 the PLCB said that "Store customers were surveyed and customer service training for store personnel has been enhanced." I'm not sure I believe that.

This one is too funny to be anything but true coming from the PLCB.  In 1985 they were asked to "Establish accepted business practices for commercial licensees e.g. credit privileges and product delivery." Now they did eventually let licensees pay with credit cards, but said "The delivery option was tested but not implemented due to lack of interest." They must mean the PLCB's lack of interest since you won't find a bar or restaurant that doesn't want liquor delivery.

You might have thought that TableLeaf and the others were new ideas thought up, as Joe Conti lied about, because there was a glut of California wine. But in the late 80's the PLCB established a wine advisory panel to help with its private label wine program.

After it was recommended that the PLCB "Eliminate the requirement that permanent part-time employees be certified by the Civil Sevice Commission," the PLCB said they were working to improve the process. 30 years later, they are still working on it.

If anybody tells you what a great job our state system does just remind them that: The PLCB -- through the spun-off enforcement arm called the BLCE (Bureau of Liquor Code Enforcement) -- isn't doing their job. Between 1989 and 1992 there were 300 arrests for bringing in untaxed liquor from out of state. Last year there were two and this year just one so far out of literally millions if not 10's of millions of violations.

All of the above was taken from the May 1992 Legislative Budget and Finance Committee performance audit of the 1985 Audit recommendations. The more things change, the more they stay the same.

Seriously? This is the agency that wants us to believe that this time they really really are going to do what they said they would. Just trust them this time.

I got a better idea: privatize.

Another Ethics Investigation at the PLCB: this time at the top

The Philadelphia Inquirer reporter who's been covering the PLCB, Angela Couloumbis, dropped a bomb in this morning's edition. The headline:

Top LCB officials said to take gifts, favors from vendors 

That got my attention. The article (citing a leaked report from the Inspector General that was supposed to have been delivered to Governor Corbett in late March) detailed how Joe "Da CEO" Conti, PJ "I Used to Matter" Stapleton, and PLCB marketing director James Short have been found to have "accepted gifts and favors from vendors and other businesses with an interest in liquor," according the Inspector General's office. The IG, Kenya Mann Faulkner

wrote that her agency's watchdog role was limited because the liquor board is an independent agency [a situation I've pointed out before, and one that leads to the agency's incredible arrogance] and its officials could not be compelled to cooperate. As a result, she wrote, investigators did not interview LCB employees or vendors. But they did review e-mails sent on state computers and concluded that the Ethics Act had been breached.

What are the unethical actions that the IG's investigation turned up?

Joe Conti allegedly accepted Phillies and Union tickets from companies doing business with the LCB and "lobbied a vendor and pressed others inside and outside the agency - including Philadelphia restaurateur Stephen Starr - for jobs for his brother and daughter."

PJ Stapleton? "...one LCB vendor secured a round of golf with a pro for Stapleton during a tournament at Aronimink - and sent two employees to serve as Stapleton's caddies." Stapleton also

accepted several gifts from an LCB vendor, North Wales-based Capital Wine & Spirits. The gifts included about $1,700 worth of alcohol for an event at the Hotel Hershey last year that Stapleton and his ex-wife organized - the annual Keystone Weekend, billed as a forum for business, civic, sports, and entertainment leaders to exchange ideas on current issues. Stapleton solicited the alcohol and the LCB vendor donated 60 bottles, the report said. It quoted an e-mail sent to him last Sept. 12 by a Capital executive: "The wine and spirits for Keystone weekend is taken care of."

And James Short? I almost feel sorry for the poor bastard: all he did was take Conti's freebie Union tickets one night when Conti couldn't be bothered to accept one more gift.

According to the article, the report has also been forwarded to the state Ethics Commission. What did the accused have to say for themselves? 

Conti, Stapleton, and Short declined through LCB spokeswoman Stacey Witalec to be interviewed for this article. Witalec said, "The board has never been presented with the report, or notified of any formal investigation. We will be prepared to discuss any details when formally notified."

You know, when I saw that headline, the first thing that flashed through my mind, even before "Ah-HA!", was this. Three years ago, there was a scandal in North Carolina about one of their county ABC Boards (their control is even more byzantine than ours) accepting a sumptuous meal from Diageo reps, a Del Frisco's steakhouse meal for 28 ABC officials and their spouses. This was part of a string of scandals involving the ABC, which included gross nepotism and $20,000 of missing inventory at one store. Now, I'm not saying that the PLCB is the NCABC, it's not like there's been a string of scandals at the PLCB...

No, wait a minute. There is a whole list of truly questionable decisions that have been made by the PLCB: you can find it here. There's the wine kiosk single-bidder fiasco (which triggered a special audit by the Auditor General's office), the questionably-awarded 'courtesy contract' misstep (another audit...), the inventory software screwup (wow, another audit?!), and, of course, the still unexplained incident involving "widespread financial irregularities at the PLCB's Philadelphia warehouse where over 20 employees were suspended.

And before anyone accuses me of dredging up the past, re-hashing old issues...there was this little beauty just two days ago: another Angela Couloumbis article on the lax work habits of the PLCB's stable of private judges. This paragraph pretty much sums it up:

Investigators found that LCB judges rarely stuck to normal workdays, often arriving hours late, leaving the office for hours at a time without taking appropriate leave, and going home early, according to the report. Sometimes, the report said, they didn't show up at all.

Guess we know why it's so hard to get a nuisance bar closed.

These stories are like Christmas morning for me. This is exactly the kind of malfeasance that government monopoly retail breeds, and I was pretty sure it was there...and thanks to Angela Couloumbis, now we know it is. It's very satisfying to see how her stories have changed from slightly pro-PLCB to a more adversarial relationship. After all, as Mencken put it, the only way a journalist should look at a politician is down.

Does this mean anything for privatization? You bet it does; it makes it a LOT harder for the PLCB to claim the moral high ground. Time to press the advantage. Tell your legislator you don't want want a monopoly in the hands of arrogant people with questionable ethics who are clearly out of touch with what Pennsylvanians expect. Break the monopoly; privatize. We have a bill on the floor...fix it, pass it, and let it happen.

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.

Wine Kiosk Debacle Footnote

The Commonwealth Foundation has posted the documents referred to in my previous Wine Kiosk post -- the ones where the PLCB's own internal evaluation committee advised against the wine kiosks -- here.

I don't really think any further comment is necessary.

Wine Kiosks...what a beautiful debacle

The ridiculous Wine Kiosks have turned out to be a microcosm of the PLCB: corrupt, incompetent, inconvenient, bloated, and wildly unpopular with Pennsylvania citizens. They are, as I predicted, a public relations disaster for the PLCB.

• The bidding process was suspect (a single-bid contract).
• The company that made them, Simple Brands LLC (again...a "hi-tech" company with no website?), was suspect (company officers were mostly large Rendell donors, and the principal's main experience before was with neonized skeeball machines).
• The contract was suspect (the PLCB kept saying the machines didn't cost them anything...except maintaining and supplying them, and the drone employees looking at videocamera feeds in Harrisburg, and then the drone employees sitting beside the malfunctioning behemoths).
• The machines themselves were crap.
• The whole concept was flawed from the beginning...and the PLCB knew it.

Eh? What was that last bit? Crazy, but true: jump to this story in today's Pittsburgh Post-Gazette and read about how the PLCB received a report from an internal committee prior to signing the wine kiosk contract, a report that strongly advised against going forward with the contract. For instance, the committee pegged the top problem: the kiosk idea simply sucked.

"The committee has a general concern that the proposed process for purchasing products via the kiosk machine is cumbersome and may meet with public criticism for not being 'user-friendly,'" according to the evaluation memo submitted by Matthew Bembenick, a middle manager who recently left his position with the LCB.

The committee had real problems with Simple Brands, the way they operated, and the contract they presented.

The memo also addressed concerns that Simple Brands continually changed its business plan "on the fly as the committee has broached operational issues and concerns." According to the memo, "The committee is concerned that the lack of a coherent business plan will open the [LCB] up to public criticism and could contribute to a potential project failure."

Smart people they had working at the PLCB...too bad they not only didn't listen to them, they completely disowned the report, and 'disappeared' it in Orwellian fashion:

The day after the committee submitted its recommendation, an attorney for the LCB instructed employees to hand over all hard copies of the report and to delete all electronic copies.

Now...spokesperson Stacey Witalec is quoted in the piece saying that it's normal to destroy electronic copies, it's to maintain the integrity of the original; no bits and pieces floating around. As an old records management type, I can understand that. But...hard copy? That's damage control, and when you do damage control before something even goes public? DING DING DING DING! That's a serious red flag. Hope the upcoming AG audit on the wine kiosks knows about this.

Meanwhile, the PLCB is fighting an endgame with Simple Brands that  looks a lot like a desperate search for an exit strategy that will allow them to can the wine kiosks with a statement that clears them of any blame (or stupidity) while pinning the failure on Simple Brands. Have a look. Simple Brands is exposed as the fly-by-night operation it always was; the PLCB is lashing out in an attempt to blame the failure of the kiosks on the company that they were warned was problematic. No one wants these misbegotten monsters, and is that a surprise to anyone?

 

The kiosks are clearly a failure; they were flawed from Day One, functioned below expectations, were despised by the very people they were meant to enthrall, and every party involved is racing away from the stench of their rotting demise. The Philadelphia Inquirer editorial staff put it so well last month.

With any luck, though, the Commonwealth's beleaguered wine-droid army will someday have one proud distinction: It will be regarded in retrospect as the LCB's Waterloo. Rarely before has any government agency so succinctly, thoroughly, and convincingly made the case for its own elimination.

With any luck, indeed.