ANDREW M. CUOMO VINCENT G.

BRADLEY
Governor Chairman

LILY M. FAN
Commissioner

GREELEY FORD
Commissioner

New York State Liquor Authority Issues Over $3

Million Dollars in Civil Penalties Due to
Major Corruption, Fraud, and Pay-To-Play
Investigations

Supplier, Wholesale, and Retail Tiers Each Issued Over $1 Million Dollars in Civil
Penalties in 2018
SLA's Major Enforcement Initiatives Root Out Deceit and Deception in the Marketplace
All Three Tiers Under Corporate Compliance Agreements and Programs for 2019

The State Liquor Authority (SLA) today announced the acceptance of conditional no contest
offers in numerous disciplinary cases resulting in over $3,000,000 in civil penalties from all three
tiers of the alcoholic beverage industry. The Members of the SLA, Chairman Vincent Bradley,
Commissioner Lily Fan and Commissioner Greeley Ford, accepted these offers at a meeting of the
Full Board on Tuesday, November 20, 2018.

Wholesalers Jetro Cash & Carry in the Bronx, Milton’s Distributing in Bedford, and Palm Bay
International in Port Washington agreed to pay over $2,000,000 to settle various charges of
corruption, fraud, violations of the 2006 Consent Decree, illegal gifts and services, and “pay-to-
play” schemes. Supplier American Craft Brewery LLC., a subsidiary of the Boston Beer Company,
was fined $250,000 for holding a financial interest in a retailer, a violation of the “tied house”
provisions of the Alcoholic Beverage Control (ABC) Law requiring suppliers and retailers to remain
independent. Retailer Wegman’s Food Corporation agreed to pay $750,000 for effectively
managing five liquor stores without a proper license, arranging sales to specified liquor stores
without a license to traffic in wine, and for aiding and abetting gifts and services violations. Five
retail liquor stores affiliated with Wegmans were each fined $75,000 for allowing Wegmans to
use their licenses, and for receiving gifts and services.

Jetro Wholesale Beer, LLC. – RD America, LLC.

317 Lenox Avenue, New York, NY 10027

The Members of the Authority accepted a conditional no contest offer $1,250,000 from
wholesaler’s Jetro Cash & Carry in the Bronx and Restaurant Depot in Mount Vernon, companies
who share the same corporate principals, for fifteen charges of improper conduct. Improper
conduct includes activities by a licensee, whether such conduct was on or off the licensed
premises, that are of such nature that if it was known to the Authority at the time of application,
the SLA could deny the issuance of a license because of the unsatisfactory character or fitness of
such a person to engage in the privilege of trafficking in alcoholic beverages.

Following an investigation that began in late 2016, SLA investigators found that employees
working for Jetro and Restaurant Depot were engaged in corruption and fraud by using their
access to their employer’s wholesale liquor license and retailer database to charge alcoholic
beverages to various retailer’s accounts, in many cases without the retailers’ knowledge or
consent. These illicit transactions by Jetro’s retail salespersons were purposely, and unlawfully,
attributed to licensed retailers, with retailers receiving no products and potentially incurring an
increased tax liability.

As a condition of settlement Jetro has agreed to enter into a Corporate Compliance Agreement
which they will be obligated under for 2019. As conditions of the Corporate Compliance
Agreement, Jetro will be appointing a Corporate Compliance Officer, implementing compliance
policies, procedures, and protocols, including a reduction in the number of employees who can
access retail accounts and new retailer verification procedures, a new internal audit procedure,
as well as other conditions that will be reviewed by the SLA over the next year.

American Craft Brewery, LLC.

The Members of the Authority accepted a conditional no contest offer of $250,000 from
American Craft Brewery LLC., a subsidiary of the Boston Beer Company, to settle charges that the
company was violating the tied house laws. This is the second conditional no contest offer from
American Craft Brewery in 2018, bringing their total civil penalties in 2018 to almost $1,250,000
for the year.

Under the ABC Law, manufacturers and wholesalers are prohibited from exerting control over
retailers, including restaurants, bars, and liquor stores. The tied house provisions specifically
prohibit a supplier from holding an ownership interest, direct or indirect, in a licensed retailer.
In this case, the SLA received information that American Craft Brewery provided a retailer
permission to open a Samuel Adams Bar at LaGuardia Airport. The SLA obtained a copy of the
agreement with the brewer providing the retailer permission to use Boston Beer’s trademarks
and brand imagery. The tied house provisions of the ABC law help ensure retailers are not
improperly incentivized to sell one suppliers product at the exclusion of others.

As a condition of settlement, American Craft Brewery has entered into a Corporate Compliance
Agreement which they will be obligated under for 2019. As conditions of the Corporate
Compliance Agreement, American Craft Brewery will be appointing a Corporate Compliance
Officer, implementing compliance policies, procedures, and protocols, a new internal audit
procedure, as well as other conditions that will be reviewed by the SLA over the next year.

Wegmans Food Markets Inc. & Affiliated Liquor Stores

The Members of the Authority accepted a conditional no contest offer from Wegman’s Food
Corporation of $750,000 to settle eight charges, including six violations for availing their license
to five affiliated liquor stores, one charge for availing the license of a wholesaler, one charge for
aiding and abetting illegal gifts and services, and one charge for illegally trafficking in wine.
Additionally, the SLA accepted conditional no contest offers totaling $375,000 from five
Wegmans affiliated liquor stores, with each store fined $75,000 for charges of availing their
license to Wegman’s and accepting illegal gifts and services from Milton’s Wholesale. This brings
the total civil penalty for Wegman’s Food Corporation and five affiliated liquor stores to
$1,125,000.

The ABC Law prohibits “chain” liquor stores, requiring each store is independently owned and
operated, in addition to prohibiting grocery stores from trafficking in wine or liquor. The ABC
Law also prohibits wholesalers from giving anything of value to retailers to incentivize sales under
the gifts and services provisions.

The SLA received a complaint that a liquor store, Amherst Wine Partners LLC, doing business as
“Amherst St Wines & Liquors” in Buffalo, was allowing Wegman’s Food Corporation to effectively
control their business by managing purchasing and pricing decisions, as well as the relationship
between Amherst Wine and various wholesalers. The SLA investigation determined Wegman’s
Food Corporation, which is not licensed to traffic in wine or spirits in New York State, was
exercising significant control over Amherst St Wines & Liquors, in addition to four other affiliated
stores including Whitehouse Liquor & Wine in Rochester, Johnson City Liquor & Wine in Johnson
City, Pittsford Century Wines & Spirits in Rochester, and Liquor City Wine & Liquors in
Fayetteville.

In consultation with the SLA and as a condition of the settlement, Wegman’s Food Corporation
has already appointed a new Corporate Compliance Officer and instituted a new corporate
compliance program to prevent additional legal complications going forward.

Milton’s Distributing Company

The Members of the Authority accepted a conditional no contest offer from Milton’s Distributing
Company of $225,000 to settle eight charges, including for allowing Wegman’s Food Market’s to
avail Milton’s wholesale license, five violations of providing gifts and services to Wegman’s
affiliated wine and liquor stores, one charge for sale of alcoholic beverages without employing a
licensed solicitor, and one charge for selling wine to Wegman’s Food Markets when Wegman’s is
not licensed to traffic in wine.
The ABC Law prohibits availing, or allowing a person or entity who is not properly licensed from
using the privileges and benefits of someone who is, prohibits a wholesaler from providing gifts
and services to incentivize retailer behavior, and requires that wholesalers use licensed solicitors
in order conduct business.

During the course of the Authority’s investigation into Amherst Wine Partners, the SLA uncovered
that Milton’s Distributing Company, a liquor and wine wholesaler, was illegally allowing
Wegman’s Food Corporation to use the privilege of Milton’s wholesale license to traffic in wine
and spirits. The SLA investigation uncovered that Milton’s allowed Wegman’s Food Corporation
to use Milton’s license to negotiate and contract with suppliers to obtain liquor and wines for
Wegman’s New York affiliates. As Wegman’s Food Corporation was never licensed to traffic in
wine or spirits at the wholesale or retail level, Milton’s provided Wegman’s with privileged
benefits only available to Milton’s. In addition, the investigation found Milton’s violated price
posting requirements, including when Milton’s employees asked for Wegman’s Food
Corporation’s permission on what prices to post for various products, in effect providing a gift
and service to Wegman’s respective affiliates. Finally, during the course of the investigation the
SLA discovered that Milton’s Distributing conducted business for several years without a single
licensed solicitor.

In addition to the $225,000 fine, as a condition of settlement Milton’s has agreed to enter into a
Corporate Compliance Agreement which they will be obligated under for 2019. As conditions of
the Corporate Compliance Agreement, Milton’s will be appointing a Corporate Compliance
Officer, implementing compliance policies, procedures, and protocols, a new internal audit
procedure, as well as other conditions that will be reviewed by the SLA over the next year.

Palm Bay International Inc.

The Members of the Authority accepted a conditional no contest offer of $225,000 from Palm
Bay, to settle charges that the company engaged in “pay-to-play” violations under the 2006
Wholesale Consent Order and New York State’s illegal gifts and services laws. This is the second
conditional no contest offer from Palm Bay in the past five years, bringing their total civil
penalties in the past five years to almost $1,000,000.

In late 2017, the SLA received a complaint that Palm Bay International, a Port Washington liquor
wholesaler, was providing illegal gifts and services to a restaurant in Oneonta owned by a relative
of a high-level Palm Bay executive. Upon further investigation, the SLA was able to determine
that a Vice President at Palm Bay was allowing other salespersons for Palm Bay to run up large
expenses on his corporate credit card at his father’s restaurant, an illegal pay-to-play practice
commonly known as “credit card swipes.” Following an investigation, the SLA charged Palm Bay
with two violations of the 2006 Wholesale Consent Order and Decree, and two violations of
providing prohibited gifts and services to the Oneonta restaurant.
As a condition of settlement, Palm Bay has agreed to enter into a Corporate Compliance
Agreement which they will be under for 2019. As conditions of the Corporate Compliance
Agreement, Palm Bay will be appointing a Corporate Compliance Officer, implementing
compliance policies, procedures, and protocols, a new internal audit procedure, as well as other
conditions that will be reviewed by the SLA over the next year.

“Ensuring an ethical and transparent industry is at the very core of the SLA’s responsibilities,”
said SLA Chairman Vincent G. Bradley. “The Authority is dedicated to our mission to protect the
health, safety, and welfare of the people of New York, and I am always incredibly impressed with
the hard work of our enforcement and legal teams.”

“These numerous historic settlements show that New York State continues to take the national
lead in the prosecution of corruption, fraud, and illegal behavior within the alcoholic beverage
trade,” said Counsel to the Authority Christopher R. Riano. “We remain laser focused on
compliance with the law, and showing our steadfast commitment to a level playing field for the
entire industry to ensure that no tier is favored. I am thankful to those licensees who work with
us to further these goals, look forward to working with the various parties going forward in the
implementation of their Corporate Compliance Agreements.”

The New York State Liquor Authority regulates and controls the manufacture, sale and
distribution of alcoholic beverages within the State. The Authority works with local law
enforcement agencies and localities across the State to ensure compliance with the Alcoholic
Beverage Control Law. In addition, the Authority issues and renews licenses and permits to
manufacturers, distributors, wholesalers, and retailers of alcoholic beverages.

These investigations were conducted and prosecuted by the major cases team, including
Beverage Control Investigator Ethan Manning, Beverage Control Investigator Brian McLean,
Senior Beverage Control Investigator Martin Liepshutz, and the Authority’s leading major case
prosecutors, AGC William Brennan, AGC Margarita Marsico, and AGC Kayla O’Donnell.