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 only number you need to know

Do  you want to know how crappy our State Store System is? All you need to know is this single fact. The number of States, Counties, or localities looking to move toward a system like the Pennsylvania liquor system:

NONE, NADA, NICHTS

Since the bad decisions made at the end of Prohibition, no state has ever shifted from a private free market system to a state-run liquor monopoly. Not once, not ever.

Our system is so good that nobody wants it. No one else believes in it except Utah, the only other state that is like us. Even they are somewhat better off since you can buy beer in grocery stores there! Alabama is looking to change, Montgomery County in Maryland, a "control county," has passed a partial privatization this year, Literally hundreds of towns in Texas alone have "gone wet" and even some here in PA, like Antrim Township.

The truth is that most people do not want to live under the quasi-prohibition model of the PLCB, be they in Pennsylvania or even under the more liberal versions found elsewhere. People want to be able to choose what they want and not what some bureaucrat in the capitol decides they should be allowed to have.

We don't want the corruption monopoly brings, either. Graft and corruption is not limited to the PLCB. North Carloina has its share too. Even 40 years ago there were charges and nothing really has changed since then. PA is no different. 5 senior members charged with graft, longstanding nepotism, junkets and "tastings" for members that have no qualifications to select mouthwash let alone wine for the entire state. 

Painting the PA liquor jail cell a nice bright color, putting up new drapes, and calling it "modernization" will not change the way the system works. The state charging more is no better than anybody else charging more, except that in a free market you can shop somewhere else. You don't have that choice in PA; it's the State Stores...or the State Police.

The State Store System does nothing for the citizens. It limits job creation, tax collection, selection, service, choice, and  entrepreneurial  drive of small businesses.  I think we can do far better: don't you?


END IT, DON'T MEND IT!

Gypsies, tramps, and thieves.

By now, you have heard that the leadership of the PLCB is full of crooks. We already knew that it was full of incompetence: just look at date-rape ads, buying mom vodka for mother's day, the born-to-fail wine kiosks, computer systems 158% over budget, and who knows how much more that hasn't even been exposed yet. Meanwhile, the CEO, Chairman, and Marketing Director were out having a good time when they should have been working (The board only works 22 partial days a year as it is), taking gifts and then conveniently forgetting to report them. Maybe "conveniently" isn't the right word, since we all know the PLCB isn't convenient. How about we say "on purpose" instead....yeah they forgot about $2000 golf trips on purpose, or forgot about a few thousand in free booze on purpose. That sounds more like it.

While the ethics committee has no teeth itself, they apparently thought that these good ol' boys were just  playfully forgetful....after all, what PA legislator hasn't taken a favor or two or two or eight thousand? So they got caught; just fill out the paperwork and pay what you should have paid -- nudge nudge wink wink -- and everything will be fine.

I'm not sure if our AG saw a chance to make a point, or if she really felt these people should pay more than restitution, or if it made her skin crawl that a so-called public servant would disrespect the citizens as they did, but she at least refereed the case to the Dauphin County DA, recusing herself... since her husband has a $12 million contract with the PLCB.  Nepotism isn't new in Harrisburg but this was a bit to high profile to not be noticed.

As reported in the Intelligencer:

Unfortunately, this type of corruption is a symptom of a much larger problem: the government’s complete control of the sale and distribution of wine and spirits in Pennsylvania. If government bureaucrats did not have the sole authority to determine what alcohol is sold in all the state’s liquor stores, businesses would have no incentive to bribe them with golf outings, fancy dinners and free liquor.

Hopefully the DA can give the people what they want:

And...now turn left, convicts!

I'm gonna miss Joe "Water Heater" Conti

Acting CEO Joe Conti has finally left the PLCB after collecting about $67,000 for 6 months of "emergency" part-time work.  I say acting because he never really was a CEO. He never took responsibility for anything. Never made a sound business decision and never did anything that improved things for the public or even the store workers. Wine kiosks were "innovative"  so much so that he doesn't care if it takes 20 years to settle the lawsuits. "We may have had an error in judgment, and this may be played out over years or decades in litigation, but this was not a faulty fiscal decision.” . Vodka for Mother's Day went over so well that the ISSU, the union of state store managers, called the CEO and the LCB "You are collectively the number one drug pushers in Pennsylvania.".  Obviously that was $142,000 not well spent.

Then there is the $33 million extra that the new computer system cost.  Why?  The AG says it is because the PLCB basically didn't read and understand the contract.. You can read even more background about the events leading up to this in the 2009 Audit. This lead to the double ordering and storing wine in trailers.

That alone would cause the board or the shareholders (US) to remove the CEO but not old Joe he kept chuggin' along with sweetheart deals for Jose Garces giving him a state store within his restaurant - the only one in the state and never repeated.  That lawsuit by other Philly restaurateurs was settled after Jose Garces actually got a license.  Since that was looking like it would work out for awhile Joe tried to get his daughter a job with Stephen Starr by offering him the same special treatment - or at least that is what the AG says.  That investigation for nepotism and graft is still ongoing but it didn't stop the PLCB from bringing Joe back after he resigned. Supposedly for the emergency reason to find his own replacement even though the Governor said he wasn't going to fill the position. Then there was the questionable contract with the husband of a regional manager to teach the clerks how to say please and thank you. Commonly known as "Smile" training it compared the stress of working a register with the stress President Kennedy felt during the Cuban Missile Crisis.  This went over so well that he approved a second year of it even though customer complaints INCREASED after the training. The Auditor General said: "Although this contract was awarded according to the letter of the law, there are several incidents that occurred that raise serious concerns and put the PLCB's procurement procedures in question." And that isn't the first or second or third time the AG has commented on the PLCB procurement or implementation process. (Audits 1992, 2000, 2007, 2009. 2010, 2012)

There is more, so much more but it all is just repeats of his hubris and lack of business sense and of how out of touch the PLCB system is with the wants and needs of the citizens. "The state alcohol system is a Fortune 1000 company", Conti once said and he was a guy who once helped run a restaurant for a while in charge of it.  He said: "At the end of the day, you want convenience,” and to that end he closed 45 stores, gave us wine kiosks and admitted the state still had 30 unprofitable stores in rural areas, but that they lose less than $1 million annually combined (I guess that makes it OK).  If you can't make money in a liquor store with a complete monopoly then something has to be wrong with the system.

I'm gonna miss you Joe, you were the best friend privatization had but I have faith that whomever they find to replace you or any of the board members will be just as incompetent, inexperienced in business and out of touch with the desires of the public and that gives me hope that privatization will take hold here in Pennsylvania.

How can you hate a guy who's lasting legacy will be making the clerks wear "world -class" aprons like Williams Sonoma?

Privatization IS Modernization - Accept Nothing Less