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Continuing the blame game over state liquor policy, legislative staffers on Tuesday blasted the Department of Alcoholic Beverage Control for mishandling a liquor package agency that went bankrupt in the Ogden Valley town of Eden, sticking taxpayers with $300,000 in unpaid bills.
But, likening the situation to state legislative auditors recently recommending that profitable liquor stores be closed to save the state money, liquor-control commissioners say the lawmakers staff has got it all wrong.
Unpaid bills from the liquor inventory were covered by insurance reimbursements, the five-member commissions said in a letter to lawmakers. The actual loss was $110,300 in profits the Eden outlet should have turned over to the state.
Commission chairman Sam Granato sent out an olive branch of sorts by saying that "my hope is that the liquor department and lawmakers can work together. I will do all I can to make sure that this happens."
But in their report, auditors criticized the department for continuing to ship liquor to the Eden agency over several months, despite the store's mounting debt, and for increasing compensation retroactively to reduce the store's dept, despite the unaccounted funds.
"When considered together, these decisions and actions justify our assessment that the DABC exercised poor management of the Eden package agency," said the report.
The Eden store was one of the 100 state package agencies, which are different from larger state-owned stores in that they are privately run outlets in small towns and resorts. Monthly payments from the state to the operators are based on sales volumes.
In summer 2009, liquor commissioners selected Bill Lyman to run the store at 2595 N. Highway 162. The state paid Lyman $1,000 monthly to operate the agency, and initially provided spirits, wine and heavy beer valued at $75,000. After the store closed in July, Lyman filed for bankruptcy, listing liabilities from $500,000 up to $1 million.
Lyman has said the department's decision to close the store "forced me into dire financial circumstances. And I did not have the time nor the money to fight that decision."
Auditors faulted the department for failing to report the package agency to the state Attorney General for possible criminal prosecution. Commissioners said they have referred the case to an assistant attorney general who advises the department.
More broadly, auditors are asking the Legislative Audit Subcommittee to order a full-scale audit of all package agencies, and that the department require criminal background checks for all package agency operators.
Tuesday's audit report is the third critical audit of the DABC in a year. Other reports said commissioners needed to close profitable liquor stores and consider letting go full-time employees eligible for medical and other benefits to save in operating costs, and to develop better business plans.
A subsequent plan to close some stores and jettison their workers was met with widespread opposition, and has been delayed while alternatives are considered.
Liquor audit
Legislative auditors say the state liquor department mishandled a bankrupt liquor outlet in Eden. The department's board of commissioners dispute the findings:
Auditors say department failed to tell commissioners about increased payments to the failing outlet. Commissioners say they knew of the arrangement.
The report says the department lost $300,000. Commissioners say insurance payments covered all liquor inventory losses to the state.
Auditors say the Eden case should be criminally investigated. Commissioners say they consulted a state attorney, who will issue a report.
Auditors say the store should have been closed sooner. Commissioners say the outlet helped dissuade patrons from driving through Ogden Canyon to a state liquor store.