Worcester County Liquor Board Faulted
By Ben Mook
Daily Record Business Writer
Posted: 7:00 pm Sun, December 12, 2010
An investigation into allegations of price discrimination for sweetheart deals on wine and liquor made to some bars in and around Ocean City could lead to the abolishment of the agency in charge of spirit and wine sales in Worcester County.
Maryland Comptroller Peter Franchot’s office’s investigation of the Worcester County Liquor Control Board has found “substantial” evidence the agency had broken state law. Restaurants, bars and package stores in Worcester, Montgomery, Wicomico and Somerset counties must buy wine and spirits from their county’s liquor control board. Stores in Maryland’s other jurisdictions can buy directly from wholesalers.
Franchot’s investigation, which was concluded last week, turned up evidence of price discrimination and ethics violations at Worcester’s LCB. The agency faces a public hearing, possible fines and the potential it could be abolished in the next legislative session.
“The reason this is troubling is that it’s a legislatively created, publicly regulated liquor board,” Franchot said. “It is important that the businesses and visitors to Ocean City have confidence that they’re not getting ripped off by price rigging or price fixing.”
A field investigator from the comptroller’s office first learned that the Worcester LCB had been selling liter bottles of Stoli Ohranj Vodka for $5 to some customers despite having paid $16.26 per bottle from the supplier. Further investigation of invoices revealed others customers paid $8.74 or even $22.99 per bottle.
The LCB said it offered the $5 a bottle promotion due to a $52,000 credit from the supplier that allowed it to knock down the price. However, the supplier told the comptroller’s investigator the credit was only $3,000.
The LCB is required to offer the same price on wine and spirits to all license holders, and is not allowed to sell product below cost.
The investigation also revealed the agency had been giving away commercial strength juicing machines and printing menus for liquor retailers in Ocean City. It is a state ethics violation for the LCB to give away items a licensed retailer would otherwise have to pay for.
William L. Wilkinson, a Worcester LCB board member, said the violations were technical in nature, and that the agency has taken responsibility for the mistakes that led to the investigation.
“We have admitted that there were technical violations,” he said. “There were no criminal violations. It did not put money in the LCB’s pocket. Everything was done to benefit the licensees.”
The Worcester County Licensed Beverage Association has been critical of the LCB and has supported the abolishment of the agency.
“We definitely feel vindicated, we’ve had these allegations for the last year or two,” said Douglas Buxbaum, owner of Buxy’s Salty Dog in Ocean City and president of the Worcester County Licensed Beverage Association. “When you have a monopoly like the LCB, and there’s price discrimination, then that cuts right into every small business owner. It’s great if you get that low price, but you can’t just pick and choose who’s going to get the deal.”
Worcester County’s Liquor Control Board was created by the state Legislature, works within a set framework of laws and is overseen by an appointed board of three commissioners.
Sen. James N. Mathias, D-Worcester, Somerset and Wicomico, the former mayor of Ocean City, has said that he would introduce a bill to abolish the Worcester LCB if the allegations were borne out and a plan created that would assure the county and municipalities continue to receive revenue from sales.
“They need to come up with a revenue source, and if they do that then I will stand by what I said earlier and put in a bill to abolish it,” Mathias said.
Franchot said if the legislation were introduced to abolish the LCB it would have his backing based on what came out in the investigation.
“These kinds of violations go to the heart of small business,” Franchot said. “It’s probably better that we move forward and put this back in the hands of the private sector, which is much more effective and does a better job with alcohol sales.”
Wilkinson, though, said he is confident the agency can address the violations, fix what needs to be fixed and continue to serve the people of the county as it has for decades.
“I think it would be a tremendous loss to the people of Worcester County if we are abolished,” Wilkinson said. “And, if we were, I think the licensees would find that we were not as bad as they think we are.”