The Past is Prologue: don't forget the wine kiosks

"Those who do not learn history are doomed to repeat it." 

 We laugh at the idea of the wine kiosks now. That was in the past, and it was crazy, but, we tell ourselves, it's over now, and even the PLCB gets it. That was just that crazy Joe "Da CEO" Conti and his effort to make the PLCB "modern" (and maybe pay off some political cronies).

Except many of the people responsible for the wine kiosks, the bureaucrats, are still in place. Conti's gone, and PJ "PJ" Stapleton is gone, and James "Fall Guy" Short is gone (though still not sentenced...), but the faceless minions at 910 Capital Street are largely still there, still making some great decisions.

Remember those? Going $33+ million over budget for the new computer system, basically because they couldn't read a contract. Storing wine in un-air conditioned trailers in the summer. The keen plan to undercut PA wine producers with out of state house brands. And paying an out of state company about $4 million to come up with the incredibly generic "Fine Wine And Good Spirits." (Considering they were called "Wine and Spirits Shoppes" before, that comes out to about $2 million a word for adding "Fine" and "Good." Great spend, guys.)

Wine Kiosks Redux

Still, the wine kiosks were such a disaster, one that made Pennsylvania a national laughingstock, that it's worth having a full look at just how stupid it all was, and exactly how it happened. First, a summation from House Speaker Mike Turzai, from when the kiosks fell apart, back in September 2011.

Wine Kiosks A Big Mistake From The Beginning 
9/20/2011 – Majority Leader Mike Turzai (R-Allegheny) released the following statement regarding the Pennsylvania Liquor Control Board’s (PLCB) decision to end the wine kiosk program:
“I don’t think it comes as a shock to anyone outside the PLCB’s top echelon that the wine kiosk program was a complete failure. The kiosk program was a joke from the very beginning and the PLCB knew it. The agency’s own internal evaluation committee recommended against the kiosk idea. Yet the board went through with the cockamamie program anyway.
“This is just another example of why a government agency should not be attempting to mimic private industry. The wine kiosk program resulted in machines that sometimes worked, and sometimes didn’t; and it forced consumers to actually blow into a cumbersome machine – no one wants to buy wine that way. Real customer convenience will only come once the sale of wine and spirits is moved to the private sector.”

How did it actually happen? How did we wind up with the Incredible Robot Wine Army? We've got it all, right here.

PLCB Wine Kiosk Timeline: (be sure to check the links!)

• March 28, 2008 – Public Notice of Wine Kiosk RFP on PLCB and DGS websites; proposals due May 8, 2008. Simple Brands (Simple) is the only applicant.
• July 9, 2008 – PLCB RFP Evaluation Committee submits report to PLCB Chief Counsel’s Office for inclusion in that day’s board meeting. Report advises against contracting with Simple, not a well-founded business plan; failure to get advisory opinion from TTB (federal government) on permissibility of Kiosk program; awards Simple a score of 305 out of 1,000 points for its proposal.
• July 9, 2008 – RFP Evaluation Committee advised that the board would not be reviewing the committee’s report; committee members told to destroy all copies/documentation relating to the report; and that CEO Joe Conti would meet with them on July 10.
• July 9, 2008 – LCB members met and voted to approve Simple Brands proposal.
• July 10, 2008 – Conti met with Evaluation Committee members, told them not to speak of the evaluation; to destroy all copies; and their concerns would “be taken care of.” (Copies of cover-up RFP and emails)
• January 29, 2009 – Effective date for Contract 20080318 between LCB and Simple for 100 wine kiosk vending machines.
• June 30, 2009 – Relationship between Simple investors and former Governor Ed Rendell discovered: Investor Herbert Vederman gave Mr. Rendell $346,276, including a $100,000 lump sum in 2002, campaign finance records show. Mr. Vederman also served as the governor's campaign finance chairman. His business partner, Ira Lubert, meanwhile, gave Mr. Rendell $140,980 in that time period.
• June 23, 2010 – LCB places two kiosks in Harrisburg area grocery stores: Giant Foods in Dauphin County and Wegman’s in Cumberland County.
• June 30, 2010 – End of FY 09-10, Profit and Loss statement. Kiosk program showed a net loss of $255,077.
• July 9, 2010 – LCB conditionally accepts delivery of two kiosk machines subject to Simple remedying operational problems with the machines (doors failing to open or close, credit card machine failures and general failures with particular transactions).
• September 1, 2010 – Second letter sent to Simple giving conditional acceptance of two kiosks provided they remedy operational problems within 60 days of notice.
• September 8, 2010 – Contract with Simple amended to include a $1 per transaction fee (collected from the consumer and paid to Simple) and a 50-cent per bottle “advertising fee.” The amount to be paid to Simple for advertising was capped at $1.5 million per year. PLCB also warned Simple that it would not accept delivery of additional kiosks (only two were in operation at the time) unless the various problems previously identified by the board were remedied.
• October 15, 2010 – LCB announces roll-out of more kiosks throughout the state. According to LCB press release: “We’ve been testing the Pronto Wine Kiosks at two supermarkets in the Harrisburg area for the past three months,” said Board Chairman Patrick J. “PJ” Stapleton. “The kiosks have proven to be safe and reliable and we are looking forward to giving consumers across Pennsylvania the opportunity to do one-stop shopping.”
• December 21, 2010 – PLCB takes all 29 wine kiosks out of service due to systemic problems. (Note the date: right in the midst of the busiest booze sales of the year.)  LCB Press release: “While customer satisfaction with the six-month old kiosk program remains high, recent problems -- such as product not dispensing -- require us to take immediate action while we wait for the manufacturer to correct all of the identified issues,” said Pennsylvania Liquor Control Board Chairman Patrick J. “PJ” Stapleton. “We apologize for any inconvenience this may cause our customers and supermarket partners, but felt this temporary closure was critical to the future success of the program.”
• December 22, 2010 – Board notifies Simple that the Kiosks were taken out of service because Simple failed to remedy the various problems with the Kiosks. According to the Board: “While most of the several hundred specific instances were eventually resolved, the recurring nature of the problems confirms that the problems are systemic, rather than isolated.” Simple was advised to deliver fully functioning wine kiosks, and a certification that the systemic problems had been rectified by March 14, 2011
• December 30, 2010 – PA Auditor General notifies the board of its Wine Kiosk performance audit and advises LCB to preserve and maintain any and all documents and materials (including e-mails) relating to the kiosk project. 
• February 22, 2011 – Simple hopes to expand to smaller kiosks at convenience stores like Wawa and Sheetz – per letter to the Board.
• June 2010 – Wegman’s notifies LCB it will terminate its “kiosk” relationship.
• June 25, 2011 – Right-To-Know-Law request submitted to LCB by House Majority Leader Turzai requesting a copy of the TTB advisory required by the RFP; all costs associated with Kiosk program and all invoices to, and payments from, Simple pursuant to the contract
• June 30, 2011 – End of FY 10-11, Profit and Loss statement. Kiosk program showed a net loss of $843,369 for FY-10-11; Additional losses (not accounted for on prior FY P&L statement) of $24,877. Total net loss for project: $1,123,323.
• August 4, 2011 – Response from LCB indicates Simple failed to obtain TTB advice and that no billing had been done up to that point, but LCB was in the process of sending the Profit and Loss statement to Simple for payment.
• August 5, 2011 – Board demands payment from Simple.
• August 15, 2011 – Walmart advises PLCB it will not participate in the Kiosk program (23 machines were planned for Walmart stores).
• August 17, 2011 – PLCB chief Joe Conti indicates the agency will continue the wine kiosks once its litigation is resolved. "This was not a faulty fiscal decision," Conti said.
• September 1, 2011 – PA Auditor General issues audit detailing the failed program.
• September 16, 2011 – PA Independent reporter Eric Boehm reports, contrary to public comments and direct testimony, PLCB failed to conduct any market research in relation to the kiosk program.
• September 20, 2011 – PLCB announces the end of the failed kiosk program; it pulls the plug on remaining machines in several supermarkets. 
• January 25, 2015 – PLCB legal costs for the "free" kiosks have exceeded $300,000 pushing total losses to $1.5 million, not counting PLCB resources and personnel costs, which have never been accounted for.

So here it is, five years later, and the PLCB insiders and their supporters have made sure that NOBODY has been held responsible, even though there are absolute violations of the PLCB Code of Conduct in that: "No member or employee of the Board shall: use for personal gain or for the gain of others any information obtained as a result of service or employment with the Board, and not available to the public at large."

Having reports destroyed does not make things available to the public at large. Plain and simple.

While the Board may have changed, the entire Directorship are people who were brought up in this system, ingrained with this way of doing things and tacitly approved the entire fiasco by not doing or saying anything. These are the people who are going to "modernize" the PLCB. Do we really need them to do that? Do we need them at all?

Privatize.

The PLCB has nothing to hide...unless it makes them look bad

Chairman Tim Holden:
What's the PLCB hiding?

As reported Sunday in the Pittsburgh Tribune-Review the PLCB, an agency with no business reason to hide anything (since they have no competitors), has not been very open or honest when dealing with their bosses — that us, the citizens of Pennsylvania. After all, that's what their supporters keep telling us, that we're the owners of a "valuable public asset." Shouldn't the "owners" be able to ask questions and get answers?

That's not what happened, according to the Trib's reporter, Kari Andren; instead, the LCB instructed their press secretary to delay the release of such information by forcing the Trib to go through Right To Know channels:

The agency's board members directed a press secretary not to provide basic information about a former employee, such as dates of service, job title and salary, unless the reporter filed a formal request — a move that could have delayed the release by more than a month, the emails obtained under the state's Right to Know law show.

“We have to watch what we ‘give' her regarding employees without going through the Right to Know channels, even if it is public information,” board member Michael Negra wrote in a Sept. 23 email. “Agree,” Chairman Tim Holden responded the same day.

LCB spokesperson Elizabeth Brassell said the agency, “fully respects and supports the release of public information to interested parties.” But Erik Arneson, head of the agency charged with overseeing the state's open records act, said the board members' actions were not in keeping with the intent of the law. “The Right to Know (RTK) Law was not designed to be a tool used by agencies to delay access to clearly public information,” Arneson said.

More proof of this use of delaying tactics is the now 111 days over which the PLCB has refused to release their yearly financial statements. Some were verbally stated during the Ross hearings over two months ago, but so far nothing has shown up on paper or online. If the PLCB were a "real" business, they would have had to release their yearly statement before the first quarter earnings statement. However, the PLCB doesn't update the citizens with quarterly statements. Why not? It's a painfully simple answer: they aren't a real business, and never have been, and never will be.

Melissa Melewsky, a media lawyer with the Pennsylvania NewsMedia Association, agreed that the LCB's approach doesn't follow the spirit of the open records law, or Gov. Tom Wolf's call for government transparency. Wolf said he was “confident in Chairman Holden's ability to continue to make the LCB more transparent,” and the previous Chairman (and still current board member) Skip Brion has said, “This is a state agency; we should be as transparent as possible.” Apparently he has changed his mind.

This is not the first time the board has used RTK to delay, or has done things in the dark that should have been in the sunshine of public scrutiny. Years of notational votes (where the Board members meet informally and off the record to make decisions, and then only vote on 'that thing we talked about' in official meetings) and vague to non-existent board meeting information have keep the "owners" (you and I) in the dark about the working of the PLCB.

Who knows, if the public were privy to the machinations of the State Store System, we may never have had wine kiosks, or $66 million in computer system cost overruns, or paid over $4 million for an out-of-state firm to come up with that snappy "Fine Wine And Good Spirits" branding. All money well spent, I'm sure...once the real facts finally come out in a few years, the brilliance of it all will shine clear. Or not.

This is not the first time the PLCB has been publicly charged with ignoring the intent of state law; this is not the first time they've lied by omission. This is not the first time they've delayed the release of reports on their performance. So we have to ask: why the delay this time? We see the smoke, what is the fire that the PLCB is trying to hide while privatization is still a very real possibility in the Legislature? We urge the Trib to keep digging — faster, if possible — and encourage the reporters at the Inquirer, PennLive, the Daily Record, and the Post-Gazette to do the same. Because we the citizens — the owners — need this story to come out before privatization slips away. It's clear that the PLCB feels threatened by it; that's enough reason to dig out the truth.

The time to privatize is now.