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« Federal Judge Orders Forensic Review of Bredesen Administration Computers in Huge TennCare Lawsuit | Main | Where There's Smoke... » November 5, 2007Alcoholic Beverage Commission Runs Amok Under Bredesen's Management
The Tennessean reports that "the middlemen who sell alcohol to Tennessee's liquor and wine merchants have repeatedly ignored laws protecting consumers and competition, but they will escape stiff penalties under a deal reached quietly with the agency that regulates them." Wholesalers treated favored retailers to junkets to places like Chile and Australia, provided gallons of free booze and cut special deals that hurt smaller shops, according to investigators' files. Such actions violate state laws designed to protect consumers from high prices. But as agents in 2005 began compiling dossiers on 19 wholesalers, the head of the state Alcoholic Beverage Commission and the wholesalers' lawyer-lobbyist met and agreed that the agency would go lightly on those who cooperated and would not report violations to federal authorities.Gov. Phil Bredesen's response: Bredesen said that agreeing to go easier on offenders in advance of an investigation is questionable, and pointed out that he does not have power of review over the ABC.Ah, but the governor does appoint all three members of the Tennessee Alcoholic Beverage Commission. Gov. Bredesen appointed the current TABC commissioners. He does have some power to affect change. And yet, he hasn't done it. You might wonder if the $38,400 Bredesen's campaign fund received from all but one of the wholesalers under the state's investigation had anything to do with it. As for the state Alcoholic Beverage Commission, the Bredesen administration has known for months know that the agency is wracked with problems. The state Comptroller of the Treasury published a scathing 37-page audit of the agency in July 2007 which found numerous problems, including: The auditors also were highly critical of the TABC on conflict-of-interest issues, saying the commission "has not developed comprehensive conflict-of-interest policies, and compliance with existing policies is not adequate." The Bredesen administration has controlled the TABC for five years now, and many of the issues found by auditors were repeat findings from previous audits, meaning the Bredesen-controlled TABC has not addressed the problems. The audit's complete section on the TABC's failure to develop a comprehensive conflict-of-interest policy follows... CONFLICTS OF INTEREST We interviewed key commission personnel and reviewed the conflict-of-interest policy to gain an understanding of the policies and procedures regarding conflicts of interest. All personnel records were tested for signed conflict-of-interest disclosure statements. We determined that the conflict-of-interest policy was inadequate and that the required conflict-of-interest disclosure statements were not always completed, as discussed in finding 4. 4. The commission has not assessed and mitigated the risks of related-party transactions The commission has not developed comprehensive conflict-of-interest policies, and compliance with existing policies is not adequate. As a result, the commission has not mitigated the risk of fraud, waste, or abuse of state resources from related-party transactions. The commission"s current policy on conflict of interest is derived from Section 57-1-108, Tennessee Code Annotated, which states, (a) No person shall be eligible to be appointed as a member of the commission, and no person shall be employed in any capacity by the commission, if such person shall have any interest, financial or otherwise, either direct or indirect, in any distillery, wholesale dealer or retail dealer licensed as such in the state of Tennessee. No family member, including spouse, child or children, father or mother, niece or nephew by blood or marriage, son-in-law or daughter-in-law, shall be employed by any distillery, wholesale dealer or retail dealer, nor shall any family member hold or have issued to them any alcoholic beverage license in the state of Tennessee.The commission"s policy 1-1-10 requires all employees to complete a conflict-of-interest disclosure statement every four years and have it notarized. However, commission management has not ensured compliance with this policy. Our review indicated that 31 of the 60 employees (52%) had not completed a disclosure statement in the last four years. Four of the 60 employees (7%) had completed statements, but they were not dated or notarized. One commission member"s statement was not dated or notarized. Only requiring the statement to be completed every four years is not adequate. In addition, the commission"s conflict-of-interest policy and disclosure statement are not adequate. Although the statement addresses commission members, the policy only mentions employees. Also, the policy and statement quote part (a) of the statute mentioned above but do not include parts (b) and (c). Neither the policy nor the statement addresses other potential conflicts of interest discussed in Section 12-4-101, Tennessee Code Annotated: (a)(1) It is unlawful for any officer, committee member, director, or other person whose duty it is to vote for, let out, overlook, or in any manner to superintend any work or any contract in which any municipal corporation, county, state, development district, utility district, human resource agency, or other political subdivision created by statute shall or may be interested, to be directly interested in any such contract.Conflict-of-interest disclosures are designed to ensure that the public"s interest is protected and that employees who make key decisions about investigations and business operations are independent from the other involved parties. Annual written disclosures help to ensure that commission members and employees are acting on the state"s behalf and that they are recusing themselves from decision-making as needed. By failing to establish and enforce such a critical part of effective internal controls, top management is not creating the proper control environment. Commission management should ensure that risks such as those noted in this finding are adequately identified and assessed in their documented risk assessment activities. Management should strengthen internal control by developing comprehensive conflict-of-interest policies. The policies should require commission members and employees to sign and update, as necessary, an annual disclosure statement. Management should also identify specific staff to be responsible for ongoing monitoring for compliance with all requirements and taking prompt action should exceptions occur. All controls and control activities, including monitoring, should be adequately documented. Posted in Tennessee Government News
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The Sunday Tennessean 