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Attachment 16aAnT`ncC n(,znt 9IL 6 = m [Aj ku 1. The City does not have a legal to go obligation to grant Total Wine & More"s 11 ("Total Wine") license. In Minnesota,, the ability to sell liquor is a privilege, and no one has a right to sell intoxicating liquors. The City has broad discretion to deny a liquor license application. Even if Total Wine's application is complete and meets the minimum application requirements, the City has no legal obligation to approve a liquor license merely because the application is complete. 2. The City can and should deny 0 Total Wine's liquor license application based on the proposed concentration of liquor stores. The proposed liquor license would result in two off -sale liquor stores in the same shopping center, and three liquor licenses within a quarter=. 'lle of each other (Rainbow Wine Sp*Irelts & MGM Liquor Store). Under Minnesota law, the City can deny the license based on the proposed density of liquor stores if the City determines that its needs are met by the existing establishments, or if the City Council believes that granting the license would be contrary to the welfare of the community. 3. The City can and should deny Total Wine's license based on David and Robert Trone*os pattern and practice of disregarding local liquor laws. Under City and state law, the Citycannot issue a liquor license to "a person not of good moral character or repute." Minnesota law allows the City council to consider the record of misconduct associated with any businesses that the Trones were involved with at the time that the misconduct occurred. This includes fines, liquor law violations, and payments to liquor authorities. in at least two states, the Trones, agreed to pay the state liquor authorities " reimbursements" for costs of multi-year investigations into the Trones' business practices: a. Pennsylvania0 : in 1994,, David Trone paid $40,,000 to the Pennsylvania Liquor Control'Board. b. New Jersey: in 2002, Total Wine agreed to a settlement in which each of its four stores in the state would pay $250,004 over five years to the New Jersey Division of Alcoholic Beverage Control. ($1,000,000 total). These payments were both. part of agreements to avoid continuing investigations into the Trones' businesses. This is a recurring pattern,, and the costs associated with violating state liquor laws is simply a cost of doing business for the Trones. By David Trone's own admission, the $1 million dollar settlement in New Jersey was minimal compared to the profits. This pattern has a direct bearing on the applicants' moral character and repute. 4. RICO and antitrust charges. against David Trone were dropped in Pennsylvania only after he agreed to "reimburse" the state for investigation costs and limit his abiitly to own liquor stores in the State of Pennsylvania for three, years. In 1993,, David Trone was charged by the Pennsylvania State Police under the Racketeer Influenced and Corrupt Organizations Act ("RICA") and federal antitrust statutes for the manner in which he operated his liquor stores in Pennsylvania. The charges were only dropped after David Trone agreed that neither he nor any business that he owned stock in i.e., RSSI) could own any interest in a liquor license in the state, for three years without approval from the state liquor control board. The agreement also involved the $40,,000 payment to cover the costs of investigating him. 5. Children own the majority o -f Minnesota Fine Wine &Spirits, LLC. Minnesota Fine Wines &Spirits,. LLC is ninety (90) percent owned by trusts #or the benefit of David and Robert Trone's children. Both Woodbury and Minnesota law, prohibit issuing a liquor license to a person under the age of twenty-one (21). However, 67.5% of the ownership interests are held by Trone children who are under twenty-one (21) .and could not hold a license individually (their initials are NRT, RJT, and SPT),, One of these children, SPT, is estimated to be no more than. twelve -X12) years old. This interest in Minnesota Fine Wine &Spirits, llC's liquorlicense would: circumvent Minnesota interest ,law by giving aanownersh1pto children who. are otherwise ineligible to. hold a license.. Even if the: trusts. distributions to minors, a future interest in. a trust constitutes a beneficial interest in the company. Furthermore, the- Minnesota Fine Wine&Spirits operatIng, agreementexpressly .references that SPT has an "interest" in the business that, she can sell.. 6�6 Total Wine has an, active iisinformaton campaign in Bloomington. The City of Bloomington has created a website to counter Total Wine's intentional misinformation campaign about their attempts to get a liquor licensein Bloomington. Total Wine withdrew its liquor license application on April 10th. Notwith stand i ng the fact that Total Wine has not had a pending liquor license for more than a month, it has been actively spreading misinformation to Bloomington residents who visit the Roseville store. Bloomington residents are being told to contact their councilmembers to encourage the approval of Total Wine's non-existent liquor MMM�� license application. The Bloomington City Attorney has directed Total Wine to cease its misinformation campaign. 7. Total Wine has repeatedly failed to disclose an accurate record of liquor l iIs censing violations. Total Wine has repeatedly failed to accurately disclose its record of liquor lava v- lolations, throughout the country. In each application, Total Wine's violations disclosures havegrown to correspond with the violations that the MBA has brought to light, and never anything more. For example, until the MLBA discovered the $1 to 10 million settlement with the New Jersey Division of Alcoholic Beverage Control, Total Wine never disclosed its existence. Total Wine's number of disclosed liquor law violations has more than doubled since its first application in Bloomington. Total Wine's application discloses that David and Robert Trone operatedbeer stores in Pennsylvania until 2010. However, they have failed to disclose at least twenty-two (22) liquor violations and $28,800 in fines, resulting from beer store operations in Pennsylvania. These stores are. affiliates of Retail Services & :Systems, Inc. (RSSI),, the Trones' consulting business, which provides the accounting,marketing, and management of these stores. Many of these affiliate entities still identify RSSI as the mailing address in state filings. Total Wine's failure to disclose an accurate violation record of associated businesses has a direct bearing on the applicants' moral character and repute. �2�ifYlo►1c� in�lt�l'U1 (� (1 Analysis Pennsylvania Operations The sublil-anittal of Total Wine's second Bloomington application and the Woodbury application include references to David and. Robert Trone's liquor -related activities in the State of Pennsylvania., Total Wine does not operate in Pennsylvania because the state controls the sale of hard liquor and w8ine; h owever; private beer stores or distributors, are allowed. In the applications, Total Wine acknowledges four violations associated with beer distributor Case Beer Soda Outlet, Inc. that occurred while David Trone owned the company in 1984 and 1985, after which, the company was operated by Trone through RSSI. The applications do disclose the fact that David and Robert Trone continued to operate off -sale beer stores in Pennsylvania until 2010, but make no further reference to these stores, also operated by R, -SSI-, which gave rise to significant litigation, incl-u:ding civil and criminal charges in the state. We have identified 22 additional undisclosed violations for these RSSI=operated affiliates, totaling $28,800 in fines. This failure to provide an accurate record o -f the Trone,'s business practi ces and lilaw voolations iquors a recurring pattern with Total Wine applications. It is also significant that in both applications Total Wine make much of the fact that of the 23 criminal charges against David Trone in 1992 (includingRac tee r I nfluenced Criminal Organization (RICO) charges and antitrust charges), all charges were eventually dropped. However, the applications do not re..erence that these charges were dropped only after David Trone agreed to pay $40,000 to the State Attorney General for "reimbursement" of the costs associated with investigating Trone's business activities. This agreement prohibited Trone or any company in which he was an officer, director, or shareholder, from owning any company licensed as a beer distributor for three years without first getting permission from the Pennsylvania liquor licensing authorities. This agreement was dated September 7, 1994,. and the remaining charges were dropped against David Trone 9 days later, on September 16,1994. Bloomington License Application Total Wine's liquor license application to the City of Bloomington has been submitted under a newoperatwing co- 'p'any, DRT Wine &Spiri ts, LLC ("DRT"). DRT is wholly owned by David and Robert Trone. The previous application was, submitted. under Minnesota Fine Wine S pirits, LLC ("MEWS"), of which, 9090%was owned by trusts for the benefit of the Trones' children. DRT is the new applicant because the City attorney took the position that the beneficial interests of the Trone children required that they each needed, to submit an application and qualify for licensure. DRT is generally subject to thes,ame operating structure as MEWS, with David and Robert Trone each owning 5% of the Class A shares; however, unlike MEWS, the Class B shares constituting 90% ownership, are divided equally among David and Robert Trone instead of the trusts for their children. The LLC operating agreement for D T has specific language that prohibits the transfer of an ownership interest to any person directly, indirectly or having a beneficial interest in a trust to any person who is under 21,, without an opinion of regulatory counsel that minors may have ownership in DRT. This language was presumably added to satisfy the concerns previously raised by the City Attorney about minor ownership. Notwithstanding this language, the operating agreement does make reference to "SPT," Robert Trone's minormchiMId, having an interest in DRTM Woodbury License Application We have confirmed that Total Wine's liquor Iicense app lication has been scheduled for Woodbu s C:Ftv Council meeting on June .25th a.t 7--.30 gym. According to the City Clerk, the public notice will be published -on June 11th. Total Wine's operating company in Woodbury continues to b,e M.FW.S, which is 90% owned by trusts for the benefit of David and Robert Trone's five children. A 67.5% ownership interest continues to be held by Trone c hildren under 21, who are ineligible i'nd'ividually for a license. Consistent with Total Wine's practice in Burnsville, the trusts have been modified to prohibit distributions to the children until 21 years of age. In addition to David and Robert Trone, Total Wine was also required. to submit background checks for each of the trustees. While the background checks were comprehensive, they yield little information that will -aid in op -posing the'license application. Because the Woodbury license application uses M;FWS as the operating company, we will continue to take the position that the minor ownership issue violates both state and local liquor licensing laws. In addition, the proximity of, the proposed Total Wine store to both the Rainbow Wine & Spirits and. the MGM Liquor store allows the MLBA to emphasize the city council's d iscretion to deny the liquor license application based on concentration of the resulting liquor stores. Conclusion Given that each application was submitted under a different operating company , we will be using sl'ghtly varying approaches to opposing the Total Wine licenses in each City. In both cities, however, we continue to emphasize and reframe the T-rones.9 history of pattern and practice of disregard for liquor licensing laws, which has a direct bearing on Total Wine's eligibility for licensure. We will continue to- track both applications and keep the M,LBA apprised of any updates ouch. anges in status. L a rkip n Hoffna. AT11ANITS Memorandum To: Frank Ball From: William C. Griffith Date: March 25, 2014 Larkin Hoffim2n D* &*-daren Ltd. %0 1500 Wells Fargo Plaza 7900 Xerxes Avenue South Minneapolis, Minnesota 554314194 arrimmu. 952-835-3800 VAV 952-896-3333 WE M www.larkiiihoffinan.com Re Total Wine & More-, Talking Points for MLBA Members Not For Distribution, Our File #: 37,117-03 The following talking points relate to Total Wine & More's ability to hold a liquor license under Minnesota and Burnsville law. 11 Ni . nely Bereent L90%). of the Coml2anx .is owned by Trusts with Unknown Beneficiaries David and Robert Trone only own ten percent (10%) of Total Wine & More stores in Minnesota, the remaining ninety percent (90%) of the company is owned by trusts with unknown beneficiaries. Total Wine & More has refused to disclose the 'Identity of the beneficiary interests of these trusts, who presumably benefit from the company's estimated $1.5 billion per year in revenue, Total Wine & More's extensive record of unlawful activities should raise significant questions about who actually owns and profits from Total Wine & More's business operations., Furthermore, this ownership scheme is unlawful in Burnsville, as the Burnsville city code states that no license can be granted to a person who is not "the real party in interest or beneficial owner" of the licensed business. 2, Pennsylvania - "Straw" Owners and Undisclosed Violations (New Information) Total Wine & More's principal owners, David and .Robert Trone, failed to disclose. numerous violations against Case Beer & Soda Outlet (CBSO), a business that was controlled by the Trones in the 1980s -1990s. These omissions include: eight (8) flues; at least four (4) liquor license suspensions; two (2). liquor license revocations (+disposition unknown); and a $40,000 settlement agreement to "cover the costs of the investigation" into the Trones' business practices. At that time CBSO was owned by the John Trone (the trustee of "SPT 2013 Trust," a 45% owner of Total Wine & More's Minnesota operations), and controlled by Retail Services & Y1 Total war: MN liquor lobby takes on wine superstore ;'. v E t:z C, C a, BLOOMINGTON, Minn. —Its members maybe in the liquor business, but the Minnesota Licensed Beverage Association might as well be a teetotaler when it comes to increased competition, says one player entering the Twin Cities market. The powerful trade association and lobbying group representing big and small liquor license holders is trying to prevent Minnesota from becoming the 16th state with Total Wine &More superstores. The chain has 102 locations with 8,000 winesits and 2 ,3,000 spirits 500 beers on display in 25,000 -square -foot stores, drawing customers from 10 to 15 miles away. "This, is the biggest hurdle we've had in a1115 states," said Robert Trone, co-owner of Total Wine &More. "We've certainly come across groups before that tried to stop competition, but never as organized and fierce as this group. Their sole stated objective is to stop competition." The confrontation includes owners of liquor stores just up the street from proposed Total Wine locations. The owner of Fairview Wine & Spirits, Steve Burwell, "didn't think his career would end this way, but if the license goes through neither he nor several other stores will be Ok around next year,"according to minutes from a Roseville City Council meeting. City Councils considerincTotal Wine licenses in Roseville and G;V - - Bloomington were recipients oflast-minute document dumps, courtesy of MLBA attorneys. The files raise questions about the superstore's legal and business records in several states, going back to the 198os. The association's initial attempt to stop Total Wine from receiving its first license through the courts, however, came up short in a February Minnesota Court of Appeals ruling. "... Because the liquor -licensing laws are not 'intended to protect competing liquor stores, we conclude that relators (MLBA) do not have standing to challenge the city's grant of Minnesota Fine Wines (Total Wine) application for transfer and renewal of its liquor license," wrote Edward J. Cleary, chief judge of the Minnesota Court of Appeals in dismissing the case. Read Minnesota Court of Appeals order. The decision paved the way for the debut of Total Wine's first Minnesota store in Roseville. Yet the law firm representing MLBA in contesting liquor licenses maintains cities have "broad discretion in N,N7hether to approve or deny a license." "The Association is interested in a fair application of the rules for liquor licensing applied to all," said Bill Griffith, an attorney NNrith Larkin Hoffman Attorneys in a memo provided to Watchdog Minnesota Bureau. "That is what the Association is 'Interested in — a full and fair hearing with all the facts in front of the City Council." The November opening of the Total Wine store in Bloomington was postponed, pending further consideration of the company's legal and business practices, scheduled to happen during a City Council meeting in April. The store stands empty along the busy Interstate x.94 strip. "I can guess at the motives of the attorneys xjvho are sending the materials in opposition," said Sandra Johnson, city attorney for Bloomington. "But they raise good issues. So I can't just say, 'Oh, you don't like the competition.' If they raise a good issue, I have to follow- up on it." Presented with the same information, the city of Roseville dismissed concerns about transferring a liquor license to Total Wine. City officials indicated the company fully disclosed litigation in other states and that "staff did not consider them pertinent to this City license," according to council meeting minutes. The city attorney "found nothing to date on any of those cases that would indicate more turpitude or character, causing this body to deny transfer or renewal based on his review," Just last week, Bloomington received another batch of documents critical of Total Wine's operations from a law firm. representing an anonymous "major food and beverage retailer." "I think there's a lot at stake and we understand that. This is a business," said Johnson. "They assumed a risk when they outfitted a store and entered into a lease. That to me was rather shocking. But it's important to them, and we're going to give it the time it requires." At the same time, Total Wine continues to pursue approval for a third store in the suburb of Burnsville. 41 I think the only thing they're doing now is throwing mud against a wall and hoping something sticks and try and delay our opening pi ocess and really make Minnesota uncomfortable for us to deal in," said Trone. "Eventually, when the facts come out completely, I believe we'll get licenses in all the places we apply for." From behind the counter of Fairviev►r Wine &Spirits, Burwell said, I think we're just going to move forward and keep working hard and stress our customer service, our convenience, our location and I think we'll turn out OK when it's all said and done. We would have preferred to have them not so close, but that was a decision of the city council. It's something we're going to live with." tic Current talking points for the City of Woodbury as of Thursday, May 22, 2014 Total Defense Team I. The City does not have a legal obligation to grant Total Wine & More's ("'Total Wine") license. In Minnesota, the ability to sell liquor is a privilege, and no one has a right to sell intoxicating liquors. The City has broad discretion to deny a liquor license application. Even if Total wine's application is complete and meets the minimptin application requirements,, the City has no legal obligation to approve.a liquor license merely because the application is complete. Z. The City can and should deny Total Wine's liquor license application based on the proposed concentration of liquor stores. The proposed liquor license would result in two off -sale liquor stores in the same shopping center, and three, liquor licenses within a quarter -mile of each other (Rainbow Wine & Spirits & MGM Liquor Store). Under Minnesota law, the City can deny the license based on the proposed density of liquor stores if the City determines that its needs are met by the existing establishments, or if the VV Council believes that gTanting the license would be contrary to the welfare of the Con -nim'' kms! TMECjjv. a. 7? DRS ca'ty can Z'ndshouRd"', dltenn,-y Total Wine's license based on David and Robert Tirane'tsEm, and practice of disi-ega rdDIng local liquor laws. Under City and state law,, the City cannot Issue a liquor license to "a person not of good moral character or repute." Minnesota law allows the City council to consider the record of misconduct associated with any businesses that the Trones were involved with at the time that the misconduct occurred. This includes fines, liquor law violations, and payments to liquor authorities. In at least two states, the Trones agreed to pay the state liquor authorities ##reimbursements "for costs of multi-year Investigations into the. Trones' business practices: a. Pennsylvania: In 1994, David Trone paid $40,000 to the Pennsylvania Liquor Control Board, 13. New Jersey-, In 2002, Total Wine agreed to a settlement in which each of its four stores in the state would pay $250,000 over five years to the, New Jersey Division of Alcoholic Beverage Control, ($1,000,000 total). These payments were both part of agreements to avoid continuing investigations into the Trones" businesses. This is a recurring pattern, and the costs associated with violating state liquor laws is simply a cost of doing business fdr the Trones, By David Trone's own admission,, the $1 million dollar settlement In New Jersey was minimal compared to the profits. This pattern has a direct bearing on the applicants" moral character and repute, 4. RICO and antitrust charges against David Trone were dropped in Pennsylvania only after he agreed to "reimburse" the state for investigation costs and limit his ability to own liquor stores in the State of Pennsylvania for three years. In 1993, David Trone was charged by the Pennsylvania State Police under the Racketeer Influenced and Corrupt Organizations Act ("RICO") and federal antitrust statutes for the manner in which he operated his liquor stores In Pennsylvania. The charges were only dropped David Trone agreed that neither he nor any business that he owned stock in (i.e., RSSI) could own any interest in a liquor license In the state for three years without approval from the state liquor control board. The agreement also Involved the $40,000 payment to cover the costs of investigating him., S. Children own the majority of Minnesota Fine Wine & Spirits, LLC. - Minnesota Fine Wines & Spirits, LLC is ninety (90) percent owned by trusts for the benefit of David and Robert Trone's children. Both Woodbury and Minnesota law prohibit issuing a liquor license to a person under the age of twenty-one (21). However, 67,5% of the ownership interests are 'held by crone children who are under twenty-one (21) and could not hold a, license individually (their initials are NRT,., RJT, and SPT). One of these children, SPT, is estimated to be no more than twelve (12) years old. This interest in Minnesota Fine Wine & Spirits, LLC's liquor license would circumvent Minnesota law by giving an ownership Interest to children who are otherwise Ineligible to hold a license. Even if the trusts prohibit distributions to minors, a future interest in a trust constitutes a beneficial Interest in the company. Furthermore, the Minnesota Fine Wine & Spirits operating agreement expressly references that SPT has an "interest" in the business that she can sell, 6. Total Wine has an active misinformation campaign in Bloomington. The City of Bloomington has created a website to counter Total Wine's intentional misinformation campaign about their attempts to get a liquor license In Bloomington. Total Wine withdrew its liquor license application on April 10th. Notwithstanding the fact that Total Wine has not had a pending liquor license for more than a month, It has been actively spreading misinformation to Bloomington residents who visit the Roseville store. Bloomington residents are being told to esi contact their councilmembers to encourage the approval of Total Wine's Ian - e tent liquor license application. The Bloomington City Attorney has directed Total Wine to cease its misinformation campaign, 7. Total Wine has repeatedly failed to disclose an accurate record of liquor licensing violations. Total Wine has repeatedly failed to accurately disclose its record of liquor law violations throughout the country. In each appUcation, Total Wine's violations disclosures have grown to correspond with the violations that the MLBA has brought to light, and never anything more. For example, until the MLBA discovered the;$I mill.ion settlement wit'll the New Jersey Division of Alcoholic Beverage Control, Total Wine never disclosed its existence. Total Wine"s number of disclosed liquor law violations has more than doubled since its first application in Bloomington, Total Wine's application discloses that David and Robert Trone operated beer stores in Pennsylvania until 2010. However, they have failed to disclose at least twenty-two (22) liquor violations and $28,800 in fines, resulting from beer store operations in Pennsylvania. These steres are affiliates of Retail Services & Systems, Inc, (RSSI), the Trones' consulting business, which provides the accounting, marketing, and management of these stores, Many of these affiliate entities still identify RSSI as the mailing address In state filings. Total Wine's failure to disclose an accurate violation record of associated businesses has a direct bearing on the applicants' moral character and repute. Roseville City Council Talking Points Monday, November 25, 2013 • Beon • Give Your name and whe you live and yaur business e address the Mavor and Council persons as "Mayor„ Qr "Co c' cr-son" there is a-name.P.LULin-ftowt of each. You are limited to five (5) minutes to testify. Present your story and your plea or use some of the talking points listed below. When you have completed your testimony, say thank you and let them know you appreciate what they do! am a tax payer and I vote in Roseville and I need your help" I am a small business operator and have been doing business in Roseville for....years, we have always been a good partner in this -city" 0 "By granting this out of state applicant a license, you are putting.me out of business in Roseville I live here, this is my city" "This is a very important decision you have to make, I don't ask for much, but I'm asking you to vote "no" to the applicants license." "You have the information about this applicant in front of you, you are already aware of their practices elsewhere, don't let them do the same to us in Roseville" my business will close" "We have enough liquor stores in Roseville, and we all get along and are responsible off sale stores, you don't know these new people" 0 "Weare asking for help, and we really do appreciate the opportunity to speak on this matter we know you will do the right thing. You don't know these people, you already know us, we'll begone this time next year". "Thank you for allowing me to speak here tonight, and I hope you make the right decision" "We have always been able to talk about our problems, but this one is going to close my store, E need your help, please vote no to this license". 0 "We are a family run business in our neighborhood. The citizens know us and like us, please help us and do not approve this, '1 0 s, license" Building a store and moving alcohol around without proper authority is a blatant disregard for your authority and public safe, don't allow this application in Roseville, you already know how they do business". As a store owner, a taxpayer and a good business partner in the City of Roseville, I ask you to please deny this liquor license" "The newspaper ad said this new store picked Minnesota because of the relatively weak competition; that is us, we are not weak, we are professional and we serve our neighbors, and our stores will close if this license is approved"' "You, the city council have the authority to issue or not issue a liquor license, it's your decision, and yours only, please make the right decision for your city and deny this application". Current talking points for the City of Woodbury as of Thursday, May 22, 2 Total Defense Team 1. The City does not have a legal obligation to grant Total Wine & More's ("Total Wine") license. In Minnesota, the ability to sell liquor Is a privilege,, and no one has a right to sell intoxicating liquors. The City has broad discretion to deny a liquor license application. Even if Total Wine's application is complete and meets the minimum application requirements, the City has no legal obligation to approve a liquor license merely because the application is complete. 2. The City can and should deny Total Wine's liquor license application based on the proposed concentration of liquor stores. The proposed liquor license would result in two off -sale liquor stores in the same shopping center, and three liquor licenses within a quarter -mile of each other (Rainbow Wine & Spirits & MGM Liquor Store). Under Minnesota law, the City can deny the license based on the proposed density of liquor stores if the City determines that its needs are met by the exa*st!ng establishments, or if the City Council believes that granting the license would be contrary to the welfare of the community. 3. The City can and should deny Total Wine's license based on David and Robert Trove's pattern and practice of disregarding local liquor laws. Under City and state law.. the City cannot issue a liquor license to "a person not of good moral character or repute."' Minnesota law allows the City council to consider the record of misconduct associated with any businesses that the Trones were involved with at the time that the misconduct occurred. This includes fines,, liquor law violations, and payments to liquor authorities. In at least two states, the "hones agreed to pay the state liquor .authorities "reimbursements," for costs of multi-year investigations into the Trones'business practices: a. Pennsylvania: In 1994, David Trone paid $40,000 to the Pennsylvania Liquor Control. Board. b, New Jersey: In 2002, Total Wine agreed to a. settlement in which each of its, four stores in the state would pay $2501,000 over five years to the New Jersey Division of Alcoholic Beverage Control. ($1,000,000 total). These payments were both part of agreements to avoid continuing investigations into the Trones' businesses, This is a recurring urring pattern, and the costs associated, 0 with violating state liquor laws is simply a cost of doing business .for the 'crones. , By David Trone's own admission, the $1 million dollar settlement in'New jersey was minimal compared to the profits, This pattern has a direct bearing.on the applicants" moral character and repute. 4. RtCO and antitrust charges against David Trone were dropped in Pennsylvania only after he agreed to "reimburse" the state for investigation costs ondlimit his ability to own liquor stores in the State of Pennsylvania for three years, In 1993,Ezvnkd, 7rone was charged by the Pennsylvania State Police under the Racketeer Influe-macced'aind Corrupt Organizations Act ("RICO").arid federal antitrust statutes for the ta which- he operated his liquor stores in Pennsylvania. The charges were only dropped er David TroPeagreed that neither he nor any business that he owned stock in (i.e., RSSI) could own',a'n'y interest in a Hquor license in the state for three years without approval from the state liquor control board. The .agreement also involved, the $40,000 payment to -cover the costs: of Investigating him. 5. Children own the majority of Minnesota Fine Wine & Spirits, LLC. Minnesota Fine Wines & Spirits,, LLC Is ninety (90) percent owned by trusts for the benefit of David and Robert Trone's children. Both Woodbury and Minnesota law prohibit issuing a liquor license to a person under the age of twenty-one (21). However, 67.5% of the ownership interests are held by crone children who are under twenty-one (2 1) and could not hold a license individually (their initials are NRT, RJT, and SPT). One of these children, SPT, is estimated to be no more than twelve (12) years old. This interest in Minnesota Fine Wine & Spirits, LLC's liquor license would circumvent Minnesota law by giving an ownership interest to children who are otherwise ineligible to hold a license. Even if the trusts prohibit distributions to minors, a future interest In a trust constitutes a beneficial interest in the company. Furthermore, the Minnesota Fine Wine & Spirits operating agreement expressly references that SPT has an "interest" in the business that she can sell, 6. Total Wine has an active misinformation campaign in Bloomington. The City of Bloomington has created a website to counter Total Wine's intentional misinformation campaign about their attempts to get a liquor license in Bloomington. Total Wine withdrew its liquor license application on April 10th. Notwithstanding the fact that. Total Wine has not had a pending liquor license for more than a month, it has been actively spreading misinformation to Bloomington residents who visit the Roseville store. Bloomington residents are being told to contact their councilmembers to encourage the approval of Total Wine's non - !existent liquor license application. The Bloomington City Attorney has directed Total Wine to cease its misinformation campaign. 7. Total Wine has repeatedly failed to disclose an accurate record of liquor licensing violations. Total Wine has repeatedly failed to accurately disclose its record of liquor law violations throughout the country. In each application, Total Wine's violations disclosures have grown to correspond with the violations that the MLBA has brought to light, and never anything more. For example, until the MLBA discovered the $1 million settlement with the New Jersey Division of Alcoholic Beverage Control, Total Wine never disclosed its existence. Total Wine's number of disclosed liquor law violations has more than doubled since its first application in Bloomington, Total Wine's application discloses that David and Robert Trone operated beer stores in Pennsylvania until 2010. However, they have failed to disclose at least twenty-two (22) liquor violations and $28,800 in fines, resulting from beer store operations In Pennsylvania. These stores are affiliates of Retail Services & Systems, Inc, (RSSI), the Trones' consulting business, which provides the accounting, marketing, and management of these stores. Many of these affiliate entities still identify RSSI as the mailing address in state fihngs. Total Wine's failure to disclose an accurate violation record of associated businesses has a direct bearing on the applicants' moral character and repute, 1. There is No Right to Hold a License. Ininnesota, the courts have held that the right to sell liquor is a privilege, and that no citizen has an inherent or vested right to sell intoxicating liquors. Municipal authorities have broad discretion to determine the manner in which liquor licenses shall be issued and regulated. Sabes v. Minneapolis, 120 N.W.2d 871,876 (Minn. 1963),, Moreover, Minnesota courts have held. that a city is not compelled to approve a liquor license merely because the applicant has met the application requirements. See Country Liquors, Inc. v. City of Minneapolis, 264 N.W.2d 821,824 (Minn. 1978) (holding that the mere completion of the liquor license application requirements does not mean the City must grant the license, nor shall it fail to evaluate the merits of the application). 2. The Applicant's Pattern of Misconduct Warrants a Denial. The City Code incorporates state law by reference, which prohibits the issuance of a liquor license to "a person not of good moral character or repute." City Code sec. 3-1-11(A); Minn. Stat. sec. 340A.402. The Applicant's extensive history of liquor law violations in other jurisdictions can be imputed to the current application. See Godfather, Inc. v. Bloomington, 375 N.W.2d 68,70 (Minn. Ct. App. 1985) (upholding the city's denial of a liquor license application based on evidence of misconduct associated with the applicant's prior businesses). Here, the Applicant has an extensive history of violating liquor license laws in numerous jurisdictions, resulting in fines well in excess of a million dollars. 3. The Applicant has Failed to Disclose Material Facts to the City. Notwithstanding the Applicant's recent disclosure of violations not Is previously disclosed to other municipalities, the Applicant has still failed to disclose material. facts to the City, which is a direct violation of the Burnsville Liquor Control Ordinance, which states: "It shall be unlawful to make any false- statement in an application." City Code § 3-1-5-3. The Applicant has failed to disclose at least twenty-six (26) liquor law violations;flour (4) liquor license suspensiuons; two (2) liquor license revocations (disposition unknown); and an estimated $68,150 in fines or penalties,, 4. Approval Would be Contrary to the Intent of 2009 Ordinance. If the City finds that approval of the application would result in an unprecedented concentration of liquor stores that would be .contrary to the intent of the ordinance and not in the interests of the health, safety, or public welfare of the community, then denial of the license would be a valid act See Wajda v. City of Minneapolis, 246 N,W.2d 455 (1976) (holding that a city council is vested with broad discretion in determining whether to issue a liquor license, and that the city's decision will only be overturned if it is arbitrary and capricious). If approved, the Applicant would be the fifth off -sale liquor license within less than ahalf-mile from the proposed store. The concentration of off - sale liquor stores in the Burnsville Center Area would be contrary to the intent of the City's 2009 liquor license amendments. 5. Approval Would be Contrary to the Comprehensive Plan. State law requires that all zoning regulations must be consistent with the City's adopted comprehensive plan. Minn. Staff. sec. 473.858, subd. 1. However, the proposed planned unit development amendment, required for the Applicant to establish an off -sale liquor store, would be contrary to the stated objectives and policies of the Comprehensive Plan and the Zoning Ordinance, See City Code sec. 10-5-5 (requiring that the proposed development conforms to the comprehensive land use plan of the city). Approving this application would create a concentration of a single land use type, off -sale liquor, in the Burnsville Center Area, contrary to the stated objectives of the comprehensive plan to maintain a reasonable land use balance. City Comp. Plan 1i -64,13.A. The Economic Development Chapter of the Comprehensive pian also states that the City strives to create "a strong, diversified and balanced economic base." Comp. Plan III -2, Policy 2.1 (emphasis added). 6. The City is Sufficiently Served by Existing Concentration of Businesses. The City has authority to deny the application based on the current concentration of liquor stores if it determines the existing needs of the City are fulfilled. See Polman v. Royalton, 249 N.W.2d 466 (Minn. 1977) (affirming the denial of a liquor license application where city's. existing liquor establishments "fulfilled the need of the community"). Further, if the Council believes that it would be contrary to the welfare of the community to increase the concentration of off -sale liquor stores in the Burnsville Center Area, it has the authority to deny the license. See State ex rel. Howie v Common Council of City of Northfield, 101 N.W. 1063 (1904) (holding that a city council has the power to refuse a license or to limit the number of licenses to be granted, when, in the judgment of the council, the action protects the public welfare). 7. The Applicant has Failed to Disclose its True Beneficial Owners. The Applicant is ninety (90) percent owned by trusts, which conceal the real party or beneficial owners. City Code section 3-1-11(D) states that no license shall be granted to a person "who, in the judgment of the Council, is not the real party in interest or beneficial owner" of the licensed business. The Applicant's extensive record of violations and significant fines related to failure to disclose actual ownership should prompt further investigation into the true ownership interests of the Applicant. If the City Council determines that the Applicant is not the true beneficial owner of the Company, then the ordinance prohibits the issuance of the license. The Applicant operates approximately 100 stores nationwide with revenues of $1.5 billion, and the projected revenues from the proposed license could be in the area of $ 15 million per year. However, ninety (90) percent of the ownership interest is unknown; this raises significant concerns as to the identity of the real party in interest. Updated Talking Points for Burnsville City Council Members On 12/3/2013, Bloomington City Attorney Sandy Johnson mef with Total Wine's attorneys. Following her meeting, she expressed concern about the lack of record keeping and the pattern and practice of violating state licensing restrictions, based on Total Wine's practices in Pennsylvania, New Jersey and Texas. See attached Letter. She invited Total aline to correct any misinformation or provide any information related to those violations. As of today, she has received absolutely' nom onse or additional 'information. Bloomington City staff plans to recommend that the application be turned over to the Office ofAdministrative Hearings because of the extensive record of violations, Total Wine claims that the violations constitute only a handful of minor violations, which can be expected for a company with over 100 stores, However, Total Wine failed to disclosenineteen (19) liquor law violations and over $1 million in -fines. These fines were not spread over x11100 stores, bun. -involved penalties imposedagainst just four (4) stores for $250,000 each. in fact, the penalties were in lieu of a 30 -day suspension at, each store. Total Wine has accused thaMinnesota Licensed Beverage Association (MLBA) of anti-competitive practices, but Total Wine has an extensive history of anti -competitive practices, including suing state, andlocal, governments to enjoin competitors, and liquor licensing agencies- that otherwise prevent Total Wine from making profits. They, have repeatedly attempted to use unlawful ownership schemes to circumvent liquor licensing regulations in order to 'gain a larger market share. Total Wine has also used their numerous LLCs and affiliates to benefit politicians who assist Total Wine in making profits. For example, Peter Franchot, Maryland Comptroller, has, received an estimated $80,000 in contributions, from Total Wine entities and affiliates after he agreed to end protracted, litigation with the Troves. See TFWS, Inc., v, Franchot, 572 F.3d 186 (4th Cir. 2009); see also attached Article -(note that Beltway Fine Wine and Spirits is owned by the Troves). 'Retail Services & Systems Inc. (RSSI), is'listed as the employer for both David and Robert Trone. In various court and administrative documents RSSI is referred to both as a parent -company of Total Wine, as well as a. consultant. However, the exact role RSSI plays is unclear, as the applicant, Minnesota Fine Wines & Spirits LLC is owned by David and Robert Trone, as well as ahumber of trusts. RSSI only appears as the employer for David and Robert Trone, though, and is party to the lending agreement, The Trones' use of RSSI in operation, management, and ownership of Total Wine stores has been the basis for many of complaints against the Trones, and has been involved the sealed settlements in both New Jersey and Pennsylvania, and the recent litigation in Texas regarding subversive ownership. At minimum, the City should request clarification as to RSSI's role in the ownership of Total Wine,, I�u,�riSU� lit �% Larkin Hoffman Memorandum UAdn Hoffinn Daly & Un*m U& 1500 Wells Fargo Plaza 7900 Xerxes Avenue South Minneapolis, Minnesota 55431.1194 ratumu 952-835-3800 FAX: 952-896-3333 WEB: www.larkinhoffman.com To: Frank Ball, Minnesota Licensed Beverage Association (MLBA) From, William C. Griffith Date: June 4, 2014 Re: MLBA: Outline of Opposition to Woodbury Total Wine & More Off -Sale Liquor License Application; Our File # 37,117-04 1. The City does not have a legal obligation to grant Total Wine & More's ("Total Wine") license. a. In Minnesota, the ability to sell liquor is a privilege, and no one has a right to sell intoxicating liquors. The City has broad discretion to deny a liquor` license application.' b. Even if Total Wine's application is complete and meets the minimum application requirements, the City has no legal obligation to approve a liquor license merely because the application is complete.2 2, The City of Woodbury can and should deny Total 'Wine's liquor license application based on the proposed concentration of liquor stores, 8. The proposed liquor license would result in two off -sale liquor stores in the same shopping center, and three liquor licenses within a quarter -mile of each other (Rainbow Wine & Spirits & MGM Liquor Store). b. In Minnesota, the City can deny the license based on the proposed densiv of liquor stores if the City determines that its needs are met by the existing Sabes v. Minneapolis, 120 N.W.2d 871, 876 (Minn. 1963). See Country Liquors,. Inc. v. City of Minneapolis, 264 N.W.2d 821, 824 (Minn. 1978). Wabl�'shments, oT if the City Council believes that granting the license would be contraq to the wed Fare of the communitY.3 C. Because the existing liquor licenses serve the City's needs, and the Total Wine's license would create an unnecessary density of uses, the license should be denied. 3, The City can and should deny Total Wine's license based on David and Robert Trone's pattern and practice of disregarding liquor laws. a. Under City and state law, the Cicannot issue a liquor license to "a person not of good moral character or repute. 117 b. Lin ea the Godfather case, when the City evaluates the applicant's moral character and repute,9 der the record of misconduct associated with any it may consider businesses that the Trones were involved with at the time that the misconduct occurred.3 (1) This includes fincs, liquor law violations, and payments to liquor authorities. C. In at least two states, the Trones agreed to pay the state liquor authorities (A 16 reRmbursements" for costs of multi-year investigations into the Trones' business practices. Penngylvania: In 1994, David Trone paid $40,000 to the Pennsylvania Liquor Control Board. (2) New Jersey: In 2002, Total Wine agreed to a settlement in which each of its four stores in the state would pay $250,000 over five years to the New Jersey Division of Alcoholic Beverage Control. ($1,000,000 total)* d" p wh large settlement payments to the govenunent required modifying Total V V'Uri ne/RSS I business practices to comport with the �alw. e. Large cash settlements are simply a cost of doing business for the Trones ff$1 A 11040,000 total). 3 See Polman v. Royalton, 249 N.W.2d 466 (Minn. 1977) {affirming the denial of a liquor license application where city's existing liquor establishments "fulfilled the need of the community"); State ex rel. Howie v. Common Council of City ofNartl!fteld, 101 N.W. 1063 (1904). 4 Minn. Stat. Sec. 340A.402. 3 See Godfather, Inc. v. Bloomington, 375 N.W.2d 68,70 (Minn. Ct. App. 1985) (upholding the city's denial of a liquor license application based on evidence of misconduct. associated with the applicant's privy businesses j. 1) 4. The City can and should deny Total Wine's licemse, bE2,ed, on TotLl V&SIS ftflure �O disclose such liquor law violations voluntarily. a. Violation disclosures have grown from a single page to the thousand-plus page Waypoint Report, which is still deficient with respect to Pennsylvania. b, The violations and the failure to disclose an accurate violation record has a direct bearing on the applicants' moral character and ability to hold a license. C. ATTACHMENT: Violations Record. 5. The Godfather case also permits the City to consider the record of misconduct associated with Retail Services & Systems, Inc, (RSSI). a. The majority of the Trones' legal troubles and massive payments to liquor licensing jurisdictions arise out of RSSVs often *indistinguishable overlapping relationship with Total Wine. b. Total Wine's Waypoint Report provides the following insight about RSSI: (1) RSSI �s David and Robert Trone's employer-, (2) RSSI owns the name "Total Wine & More" and all of Total Wine's trademarks; (3) RSSI provides accounting, marketing and management services to all Total Wines; (4) RSSI is central to David Trone's "centralized business model" used to operate Total Wine and More; (5) RSSI is owned by David and Robert Trone, and five trusts for their children; (6) RSSI is currently associated with or has been associated with at least I I different business entities in the State of Pennsylvania. C. Despite acknowledging RSSIs affi RHation with these I I Pennsylvania I pi businesses, the Waypoint Report fails to disclose any of the extensive violations against the RSSI-affiliates. d. ATTACHMENT: Waypoint Report reference of at least I I entities in Pennsylvania,, but failing to disclose anything about those entities. 6. Pennslivania: Total Wine continues to fail to disclose adverse facts regarding RSSI's extensive violation records in Pennsylvania-, 3 a. The Waypoint Report stated that the data request to the State of Pennsylvania was expected to be completed by March 28, 2014; however, Total Wine has never supplemented the Waypoint report with the results of this request. b. The MLBA has received in excess of 5,000 pages regarding fiquor ficensing violations associated with the Trones and R.SST-affiE'Ved bushlesses. C. The MLBA has identified at least twenty-two (22) liquor violations and $28,800 in fines, resulting from RSSI/Trone beer store operations in Pennsylvania, which Total Wine has still failed to disclose. d This pattern of hiding adverse facts has a direct bearing on, the applicants" moral character and ability to hold a license. 7. Pennsylvania: Nature of RICO/Antitrust Settlement, a. In 1994, RICO and antitrust charges against David Trone were dropped in Pennsylvania only after he agreed to "reimburse"' the state for investigation costs and limit his ability to own liquor stores in the State of Pennsylvania. b. Criminal Charges were only dropped after David Trone agreed that neither he nor any business that he owned stock in (RSSI) could own any interest in a liquor license in the state for three years without approval from the state liquor control board. C. The agreement also required a $40,000 payment to "cover the costs" of investigating Trone's business activities. d. ATTACHMENT: 7 -page settlement agreement, 0 S. New Jersey; Following several years of invesag0kno into Total Wine & More operations, Total Wine agreed to pay $1,000,000 In a settlement agreement to the State of New Jersey. a. Total Wine, RSSI, and the Trones, were 'investigated for violations of New Jersey liquor licensing laws governing the ownership structure used to control the four (4) Total Wine stores in the state. b. David and Robert Trone entered into an agreement whereby they would make changes to the manner in which they operated their business and pay $ 1,000,000 Division to the New Jersey Dvision of Alcoholic Beverage Control (ABC). c The terms of the consent orders suspended the Total Wine licenses -in the state for 30 days, but the suspensions were stayed, subject to the payment of $1,000,000 to the New Jersey ABC. d. The only explanation offered by Total Wine is that they were making enormous amounts of money, and the .$ 1,000,000 in settlement costs was gust a cost of doing business. 4 e. This information was never voluntarily disclosed until after the MLBA uncovered it, f ATTACHMENT.- Consent Order. 9. Texas: Was sued for ownership subterfuge, or concealing the true nature of RSSI's ownership interests, a. In 2013, a Texas court issued a restraining order against Total Wine's operating company (Fine Wines & Spirits of North Texas, LLQ, finding that the opposing party (Gabriel's Investment) was likely to succeed on the merits of their case against Total Wine. b. At issue was the fact that Total Wine's appeared to be an independently owned and operated company, but it was in fact owned, controlled, funded and managed by RSSI, in violation of state law. C. After what is understood to be a private agreement between the parties, Gabriel's dropped their suit against Total Wine. d. ATTACHMENT: Order granting restraining order. 10. Children own the majority of Minaesots Fine Wine & Spirits, LLC. a. Minnesota Fine Wines & Spirits, LLC is ninety (90) percent owned by trusts for the benefit of David and. Robert Trone's children, b. Both Woodbury and Minnesota law prohibit issuing a liquor license to a person under the age of twenty-one (2 1). However, 67.5% of the Ownership interests are held by Trone children who are under twenty-one (2 1) and could not hold a license individually (their initials are NRT, RJT, and SPT). C. One of these children, SPT, is estimated to be no more than twelve (12) years old, d. This interest in Minnesota Fine Wine & Spirits, LLC's liquor license would circumvent Minnesota law by giving an ownership ititerest- to children who are otherwise ineligible to bold a license. e. Even if the trusts prohibit distributions to minors, a future interest in -a trust constitutes a beneficial 'interest In the company. furthermore, the Minnesota Fine Wine & Spirits operating agreement expressly references that. SPT has an `interest" in the business that she can sell. Total Wine is, or was, actively ei ngaged n misleading the residents of the City of Bloomington. a. Total Wine withdrew its liquor license application on April 10th. Notwithstanding the fact that Total Wine has not had a pending liquor license for 5 more than a month, it has been actively spreading misinformation to Bloomington residents who visit the Roseville store. b. Bloomington residents were being told to contact their councilmembers, to encourage the approval of Total Wine's non-existent liquor license application. C. The City of Bloomington had to create a website to counter Total Wine's intentional misinformation campaign about their attempts to get a liquor license in Bloomington. d. The City Attorney directed Total Wine to cease its activity. e. ATTACHMENT: Email from Sandy Johnson. 12. The applicant has a pattern and practice of misleading the public and regulatory authorities; violating the iaw- and when caught, using money to make regulatory problems go away. a. This has a direct bearing on the character and moral repute, and the liquor license application should not be granted. b. These business prawkeswPU111 be de-,,trimental to the City of Woodbury. C. The City should deny the flquior Hk ,, 4813-8934-7867. v. 2 N