Attachment 16qON
Attachment #16-q
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CITY OF
BLOOM I NGTON
MINNESOTA
F -V
MIA a
MIA
Debra K. Page
Thomas Heftelfinger
Mark Jacobson
Best & Flanagan, LLP
Lindquist & Vennum LLP
225 South 6th Street
4200 IDS Center
Suite 4000
80 South 8h Street
Minneapolis, MN 55402
Minneapolis, MN 55402
Re* Total Wine & More Application for Off -Sale Intoxicating Liquor License
Dear Ms. Page and Messrs. Heffelfinger and Jacobson:
Thank you for taking the time to come and meet with me yesterday to discuss the data that you
wwill be ng
pro-vid'Irelative to this license application. As you well know, access to the records
relating to the near 100 licenses held by Total Wine in 15 or more states is a very difficult task. I
was surprised to learn that Total Wine itself had not created a central record-keeping system for
its licensing history across the country. Nonetheless, I am confident, Tom, with your access to
Waypoint and your experience in researching federal cases and issues that we will have a more
comprehensive picture of the manner 'in which Total Wine does business.
As discussed yesterday, from my rat of record requests, -I wn most concerned about the types of
violations that occurred in Pennsylvania, New Jersey and alleged in Texas. The information I
currently have about those matters is attached. Please feel free to correct any misinformation I
may have. My concern is quite frankly that Total Wine and its owners in their other liquor
businesses by various names, have engaged in a pattern and practice of violating state resmctions
on the number of licenses, and restrictions on holding multiple types of license, such*as a retailer
also operating as a wholesaler.
After the civil and criminal prosecutions in Pennsylvania for these Violations in the 1990's, I find
it extrem(,mly disturbing that in the 2000's they engaged in the same behavior in New Jersey, and
had this issue credibly raised again m Texas in the past few years in the Gabriel cases (Settled by
purchasing Ms. Gabriel's business). Add to this the record keeping and trade practice violations
in Delaware, Virguua, and Connecticut, as well as the failure to include most of these matters on
their license application- it becomes reasonable to question these owners' willingness ingness and ability
to comply with all applicable laws,
Poly, to reiterate. — Ta)Rcarmh gon takes the liquor business very seriously. Unlike offief cities,
we have in-house legal cad, Heensing staff. We take the time to look carefully at liquor Hccnse
appli-o&nts. Lin many cases, -staff discourages prospective applicants from submitting an
.1 %W prospective applicants
1=4
ATTORNEY'S OFNCE
1800 W. OLD SHAaONH ft&ut Cboo mwGT@N MN 55431-3027 AN AFFIRMATIVE ACTION/EQUAL
PH 952-563-8753 FAN 952-563-8520 77V 952-563-8740 0PP0R7UK1TIE$ EMPLOYER
am
application, explaining that std would likely recommend denial of the license based upon a
demonstrated unwillingness or inability to operate in compliance with law. We have worked in ,
the past, as in Godfather, ,Inc. v. City of Bloomington, 375 N.W.2d 68 (Mm*n.App.1985) rev.
denied December 13,1985; and In Re: Ae Matter of the City of Bloomington v, Fat Tuesday --
'
ICS. , Ltd Partnership, 2000 L 1138275, July 14, 2000, and continue to work, as in In Re. ;
Big Buck's Liquor, License Revocation Hearing — Feb. 24, 2014, to weed out licensees who for
�.,
whatever reason engage in the type of pattern I am seeing M some of the cases involving your
client. The `suitability' assessment that the City engages mallows it to Consider credible
evidence of prior violations even where those matters were settled by agreement and did not
result in a criminal conviction or license suspension or revocation. Having worked for over 20
•
years in this area, I know that many license violations are settled by agreement and involve the
.
payment of what is characterized as prosecution costs, which have a purpose and function ,
indistinguishable from a fine.
Again, thank you for your work on this. I look forward to bringing it to a conclusion.
Ref'r-ards
"
City Attorney '
fun
cc: Mayor and City Council Members '
Mark E. Bernhardson, City Manager
Janet Lewis, City Clerk
Doug Junker, Licensing Examiner
"
Wm, Criffith, Attorney for MLBA
Pennsylvania
RICO Bus.D:isp,Guide 9745 (C.C.H.), 2013 WL 376838, analyzing Michael W. CallahaP4 et al.
v. AEV., Inc.. .FrankB. Fuhrer, Jr.,... JET' Distributors, Inc... RetailServices and Systems,
• Inc. -David J. Trone. et al, 182 F. 3d 23 7 (Yd 0r. 199P)
I
"A large Pittsburgh beer distributor's fraud against the state Liquor Control Board was not the
• proximate cause of economic injury to several smaller beer sellers. The fraud of submitting false
statements and affidavits to the Liquor Control Board, which ultimately enabled an illegal
affiliation of beer supermarkets to dominate the local market, more directly impacted the Liquor
Control Board and the Commonwealth of Penniylvania than market competitors. The smaller
competitors' claim did not satisfy any of the factors that establish proximate causation, because
(I)the causation chain linking the beer giant's fraud to their ability to obtain discount purchase
which eventually caused economic loss to the smaller stores was much too speculative and
attenuated to support a RICO claim; (2) the difficulty in apportioning damages amount the
numerous plaintiffs of different standing suggested a lack of proximate causation; and (3) the
more directly impacted parties were able on their own to vindicate the public interest for the
violation of the Liquor Code, which was not intended to protect retailers and competition."
'Inie Pemisylvania Liquor Code limits the ability of one entrepreneur to own or operate more
than one beer distributorship. Trone apparently evaded these restrictions by placing the Beer
World stores in the names of others, and, while acting as a leonsultanf, effectively running the
stores himself." 182 F.3d at 240,
Michael W. Callahan, et al. v.A.E.V., Inc. -..Frank A Fuhrer, Jr.,... JET AsMbutors, Inc...
. Retail Services andSY stems, Inc. . , . David J. Trone, . . et al, 182 A 3d 23 7 (3' Cir. 1999)
"Trone's family had been in the beer business in H 'sburg and Pittsburgh.for some time.
While a business student at the University of Pennsylvania's Wharton School, Trone apparently
came up with a plan for a new type of beer distributorship business. Prior to his plan, beer
distributors were typically small, low -capitalization "mom and pop" stores of the kind operated
distributors'
ran by the plaintiffs. They usually had ordinary aistributors' licenses and operated relatively small
stores, selling beer by Having people come in and ask for a particular brand. Trone's idea was to
create much larger stores, roughly ten times the square footage of the plaintiffs' stores, to be
operated like a supermarket. ...We chronicle the history and management structure of the stores
because it bears on the contention that Trone improperly controls all of the stores in violation of
the Pennsylvania liquor control scheme, an important part of plaintiffs' antitrust and RICO IMP
claims,
The first Beer World opened in the Pittsburgh area in 1985. Two more stores opened in
Pittsburgh in 1986, followed by the last two in 1987 and 1988.
fog% The first store 'incorporated at Jet Distributors, Inc., is apparently owned by Paul Piho, a
childhood friend of Trone's. Piho initially worked in Chicago after the store opened. For a
short time, he moved to Pittsburgh and managed the store. Currently, he works at a Delaware
branch of a chain of liquor stores apparently owned by Trone.
PM"
The § i
econd store s apparently owned by Trone's wife, who for a time worked at the store, bw_i.
presently spends less than five hours per week there.
The third is apparently owned by Thomas Esper, a retired schoolteacher who apparently.
P" knows little about either the store or the liquor business.
The fourth store is apparently owned by Trone's sister, who has been in school or
other jobs for the relevant period. Before 1990 and since 1994, she has lived outside of
Pennsylvania.
The last store is apparently owned by Albert Vivio, the father of one, of Tiromia's employees,
He stated that he did not pay anything to own the store, but that Fruits 4&4 asked him to
put his name on a license. He testified that he had "no dutiez st the store!' pursuant to an
"agreement with Mr. Trona."
Since the Beer World stores opened, Trone has been employed as a "consultant" for all of them.
...He set up the purchasing and delivery systems...and controlled the day-to-day operations of
the stores."
182 F.3d at 243.
New Jersey
Summary: 10 cases since 1991. In November 2009, Total Wine and More paid at least $1
I * m Ilion1n fines for failure to maintain or produce true books for four separate off -sale licenses.
The initial charges were violations of the state's limitation on the number of licenses held by any
one entity.NZA Sec. 33:1-12. The evidence demonstrated that Total Wine & More made
monetary disbursements to a holding company, RSSI, which controlled the operation of the four
stores. Essentially, the same scheme as used in the Pennsylvania Beer World operations.
Four Consent Orders were issued on July 25, 2005, whereby Total Wine & More, entered a plea
of "non volt" to the negotiated charges of failure to produce books of account vn in seven
business days of demand, agreed to implement a list of corrective actions, and pay $250,000 for
each of the four licenses, over a period of years as `prosecution costs. Total Wine & More also
agreed to the forfeitup, of all alcoholic beverages, cash and personalty seized from the four stores
in connection with the investigifion.
In return for the plea and agreement, the Director of Alcoholic Beverage Control suspended
each license for 3 0 days — b6t the suspension was not required to be served so long as Total
Wine & More complied with the Consent Order.
fowl Other offenses include incomplete or unavailable employee list, no current license application,
no federal tax stamp and underage sales.
The only violations listed on the current Bloomington application from New Jersey related to the
Nov. 21, 1995, underage sale with a $10,000 fine and the July 31, 1998, violations relating to
employee lists, application and underage sale with a $7500 find.
fA"
The notebook purporting to list all violations nationally fails to list any violations from New
Jersey.
1. Case 02-31533., E.G. Holding Corporation, trading as Total Wine and More. Lic. #*, 0252-44-005
Offense: Failure to maintain or rod true- books. Offense date: J1_1ly 2, 2002. Case closed
Nov. 16, 2009. Licensee paid $250,000 fine. 30 day suspension.
"In
2. Case 02-31534, Cherry Hill Wine and Spirits, Inc... trading as Total Wine and More. Lic. #: 0409-
44-001 Offense:
409-
44-001.Offense: Failure to maintain/produce true books. Offense date: July 2, 2002. Case
closed Nov. 15, 2009. Licensee paid $250,000 fine. 30 day suspension.
~' 3. Case 02-31535, E.G. Holding, inc., trading as Total wine and More. L.ic M. 0722-44-046. Offense:
Failure to maintain/produce -true books) Offense date: July 2, 2002, Case closed Nov. 10, 2009.
Ucensee paid $250,000 fine. 30 day suspension.
4. Case 02-31536, Cherry Hill Wine and Spirits, Inc., trading as Total Wine and More. Lic. #: 2019-
44-071 Offense: Failure to maintain roduce true books. Offense date: July 2, 2002. Case
closed Nov. 16, 2009. Licensee paid $250,000.30 day suspension.
5. Case 04-30870, E G Holding Inc., trading as Total Wine and More. Uc. #: 0409-44-001 Offense:
•
(not listed, but notes consolidation with the above cases). Offense date: (not stated). Case
closed February 8, 2007,
6. Case OS -31602, Cherry Hill Wine and Spirits, Inc., trading as Total Wine and More. Lic.#: 0409-
44-001 Offense: Tallgted charies=Offense date: March 26, 2005. Case closed with warning '
letter.
7. Case 98-21677, Cherry Hill Nine and Spirits, ince trading as Total wine and More. Lic. #: 0409-
44.301 Offenses: 1) E141, ,Empipvee list Inc ,plet�not available, 2) APP1 N2 current license
application -- short/loner: ) PULA Saleo underaEe. Offense dates May 5, 1998. Case closed
May 31, 2000, Licensee paid $7500 fine in lieu of 7 day suspension.
8. Case 95-20582, Cherry Hill Wine and Spirits, Inc., trading as Total Wine and More. Lic. #: 0409-
44-001 Offense: Sale to underaae. Offense date: July 20,, 1995. Case closed Jan. 8, 1997.
Licensee paid $10,000 fine in lieu of 7 day suspension.
9. Case 91-18763, Vineyard Liquors. Lic. #: 0409-44-001 Offenses: No federal tax s_ amo or Ind_ icia
• of payment and underage sale. Offense date: July 17,1991. Case closed April 27, 19920
Licensee pay $500 fine In lieu of 10 day suspension.
10. NOTE: License application 0722-44-046-008 lists a January 1.,1997, violation Docket # 06028-
965, prosecuted by Division of ABC, paid $10,000 fine.
Texas
Gabriel Investment Croup, Inc., and Smart Liquors, LLC v. Fine Wines & Spirits of North Texas,
LLC Alal Total Mne, etat., 150th Judicial District, Bexar County, Texas, Cause No. 2013-61-
039961.
.An Order Granting the TRO of plaintiff found:
1) Plaintiff was likely to succeed on the merits... Despite Fine Wines Texas's .appearance that it
is independently owned, it is in fact awned, controlled, funded and managed by R.SS1.
2) This violated Texas alcoholic Beverage Code provisions by (a) engaging in a subterfuge
scheme that surrenders control of the employees, premises and business to a person other than
the permit holder; (b) allowing a person to directly or indirectly hold an interest in more than five
package store permits; (c) conducting business that directly or indirectly coordinates operations
with another package store not wholly owned by the same person.
0