State Liquor Authority Issues $3.5 Million Civil Penalty Against Wholesale Giant

 

The State Liquor Authority (SLA) today announced the acceptance of a conditional no contest offer from Southern Glazer Wine & Spirits (SGWS) to settle charges that SGWS engaged in “pay-to-play” by providing illegal gifts and services to business to influence their purchasing decisions, for permitting incomplete, inaccurate, and inadequate recordkeeping practices, and for engaging in discriminatory sales.  

Some of these violations constitute serious and systemic violations of the 2006 Wholesale Consent Order and Decree, and this is the first time the SLA has brought and settled charges pursuant to that Order. 

The offer was accepted by the Members of the SLA, Chairman Vincent Bradley and Commissioner Greeley Ford, at a meeting of the Full Board on Wednesday, December 20, 2017. Southern has agreed to pay $3.5 million in civil penalties, the largest fine ever imposed by the SLA, as well as one of the largest fines imposed by any state liquor administrator.  

In addition, Southern and the SLA will continue their cooperation moving forward, and the SLA will enter into an industry-leading Corporate Compliance Agreement, allowing the SLA to obtain information on systemic and systematic practice violations moving forward.

“Pay-to-Play” & Illegal Gifts and Services

In the Summer of 2017, and during the course of other investigations into SGWS, the SLA became aware of evidence that SGWS solicitors and managers were engaging in sales practices in direct violation of the New York State’s Alcoholic Beverage Control (ABC) Law’s prohibition on offering “gifts & services” to induce retail sales.   Illegal gifts and services, commonly referred to as “pay-to-play” schemes, include providing compensation, either in cash or goods, to licensed establishments to secure the right to sell alcoholic beverages, often to the exclusion of competitors. The practice is illegal under the Consent Order and Decree of 2006, Federal Alcohol and Tobacco Tax and Trade Bureau (TTB) regulations, as well as under the ABC Law.

Specifically, SGWS salespersons were running up large expenses on their corporate credit cards at favored retailer’s establishments, without receiving anything in return, to influence their purchasing decisions, an illegal practice commonly known as “credit card swipes.”  On September 26, 2017, SLA Wholesale Investigators interviewed an SGWS District Manager for the Capital Region regarding the questionable charges.  When confronted with the evidence assembled by the SLA’s investigators, the District Manager admitted to running his credit card at favored establishments to artificially lower the retailers’ costs for alcohol purchases and incentivize additional purchases.  SGWS’ Albany District Manager ultimately admitted to making several illegal transactions from January 1, 2017 to June 30, 2017, ranging from $50 to over $1,000 in credit card swipes.  

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Source: The State Liquor Authority