ABC System In Hot Water

Special Report - January 13, 2010
Governor Beverly Perdue, many lawmakers, political activists, and citizens are calling for a review of the state’s 75 year-old Alcohol Beverage Control (ABC) system amid surprisingly high salaries and allegations of ethical violations by some local staff and board members. The state ABC Commission is investigating a $12,700 holiday dinner provided by the liquor company Diageo for the chairman and a number of employees of the Mecklenburg County ABC board in November 2009. All three members of the New Hanover County board resigned after The Star News revealed that the father-son administrative team was pulling a combined compensation package that superceded $400,000.

Members and employees of the Mecklenburg ABC Board repaid more than $9,000 of the steak dinner with Diageo. However, the State ABC Commission is investigating as many as 28 possible violations by Diageo, which has also admitted to buying dinners for ABC officials in Asheville, Greensboro, Winston-Salem, and at least four other cities. State agents have already cited Diageo and Mecklenburg ABC for violation of gift bans. Governor Perdue has expressed plans to ask the 163 local boards statewide to agree to tighter ethics rules, including a ban on gifts, which she already imposed on state agencies under her authority.

New Hanover boasts one of the highest grossing ABC systems in the state, bringing in more than $30 million in the last fiscal year. No statewide guidelines exist for setting the salaries of local ABC leaders. North Carolina is one of 18 “control states” in the nation. Local citizens vote on whether to establish a local ABC board, which then runs any local ABC stores, hires and fires employees, and sets salaries. The 163 established local boards run 400 ABC stores. North Carolina ranks 45th nationally in the consumption per capita of liquor, but seventh in revenue generated per gallon.

A 2008 report from the Legislature’s Program Evaluation Division called the state’s ABC system “outdated” and “in need of modernization.” See our previous story for more details on the report’s findings. The primary cited shortfalls were a lack of guidance and unity among state and local board purposes. The recent controversies, combined with the report, have led some, including former Charlotte mayor Pat McCrory, to call for a privatization of the system. A recent study by the Office of State Budget and Management found that privatization could instantly make the state $700 million, not including sales, property, and income taxes that would be collected as a result of selling ABC assets and property.

“These ethical violations are more evidence of the need to reign in the counties’ free-for-all system of alcohol sale and regulation,” said Bill Brooks, president of the North Carolina Family Policy Council. “Privatization is not the answer. These are state jobs. Place a cap on salaries or regulate them. Eliminate the use of ABC positions to fulfill cronyism and political payoffs.”

Brooks added, “Local boards should be even more restricted in their advertising and promotion of alcohol. They should not be allowed to market to low-income areas more than others and the number of stores should be limited in each county.”

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