It's Easy As ABC to Create Poor Ethics Environments

Update: February 3, 2010 (see below)

A NC Local Government Blog post yesterday made me aware that there have recently been some very public conflict of interest issues involving North Carolina's alcoholic beverage control (ABC) system, the state liquor sales program, which allows each city and county to have a local alcoholic beverage control board and employees (163 boards in all).

ABC Employees are not considered state or local government employees, but they are hired by boards that are appointed by local elected officials. State law has conflicts provisions for board members (see p. 17), but these do not include gift provisions. Each board is supposed to create its own personnel rules for employees.

According to an article last weekend in the Sun News, a liquor company gave many free meals to board members across the state, including a $12,000 dinner for the members of two county boards.

In addition, local boards sometimes pay their administrators unusually high salaries and bonuses. Most egregious appears to be Hanover County, whose administrator made, last year, well over $250,000 plus a $30,000 bonus for a relatively small operation, according to another article in the Sun News. The assistant administrator is the administrator's son, who was paid $120,000 with $20,000 bonuses each of the last four years, according to an article on the wral.com website. The state ABC commission chair referred to the Hanover County board's "culture of entitlement."

But it's much more than that. It is a culture of nepotism, of secrecy, and of non-accountability. The county commissioners appointed the board, but provided no oversight. Nor did the state commission do anything about the situation. Since the board was self-sustaining, even profitable, it did not have to do what was necessary to get county or state funds.

In fact, Hanover County's ABC made an $11.2 million profit last year, which went to state and local governments. So it is in the interest of the state and of local governments to turn a blind eye to profitable ABC boards; they're a good way to keep taxes down.

According to an extensive Star News article, one of the Hanover County ABC board members hid important information, including bonuses and longevity pay, from the county commissioners when they sought to investigate the situation after it was disclosed by the local newspaper. When this coverup was uncovered, the board resigned en masse, and the county commissioners appointed three top county administrators to the board.

Setting up a state monopoly run by local boards appointed by local officials whose governments profit from it, and providing no serious oversight, is an excellent way to ensure that more people than usual will use their positions for their personal benefit. There is talk about ethics reform in the ABC system, and even some talk about taking the state out of the liquor business, but it will probably take more than a few minor scandals to get state and local governments to give up, or provide independent ethics enforcement for, such a nice cash cow, especially at a time when governments have budget deficits.

Update: February 3, 2010
According to an article in yesterday's Charlotte Observer, the state ABC commission has sent the local ABC commissions a set of ethics guidelines on gifts, travel, and conflicts of interest. The guidelines, if accepted by local commissions, would bar board employees from giving or receiving "any special treatment, consideration or advantage" from anyone because of their position.

The gift provision prohibits the taking of any gifts from liquor suppliers, even promotional objects.

The Mecklenburg ABC was the first to pass the ethics guidelines.

Robert Wechsler
Director of Research-Retired, City Ethics

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