Since many people on this site are familiar with Sam's, a large retailer here in Chicago, and some do mail order business with the store, I thought you would like to know about this. Also, we periodically have discussions here about the mandatory three-tier distribution system that is unique to the beverage alcohol industry and is a vestige of the repeal of Prohibition.
What follows is a Chicago Tribune story published today. The story as written is a little unclear but what I believe it means to say is that Sam's allegedly set up an illegal distributorship called Skyline. When the article refers to "liquor distributors," I believe it really means--in the parlance of the three-tier system--liquor producers. I'm not sure that's what happened, but the story makes a lot more sense that way.
I'll do a little more research and if I'm reading this wrong, I'll post a correction. Obviously, if anyone else knows more about this incident, please fill in the blanks.
After a 17-month stalemate over the state's allegations that Sam's Wine and Spirits was extorting money from liquor distributors and operating an illegal marketing firm and warehouse, the giant liquor store has agreed to settle the case, Illinois Liquor Control Commission officials said Monday.
Sam's agreed to pay a record $300,000 fine and shut down for the first three days of 2007, state regulators announced Monday.
If the Lincoln Park retailer pays the fine on time it would end a nearly two-year investigation into its business practices. If the case had gone to hearings on the citations, regulators had promised to seek revocation of the store's liquor license. Sam's has annual sales of about $60 million at the Lincoln Park location.
Sam's President Darryl Rosen said the family-owned company is relieved to move on.
"Our position up front was that we did nothing wrong and that's still our position," Rosen said, pointing out that the settlement language allowed the company to stop short of admitting wrongdoing. It did acknowledge the state had evidence to substantiate some of its claims.
He said the decision to settle now was an admission that the ongoing legal battle was too taxing and distracting for the company, and the risks of losing the case were too great.
"Something had to happen. There either had to be an agreement or there had to be a hearing--and when the prosecutor says in the paper that he's going to revoke your license when you've operated without incident for sixty years," the company felt pressured to settle.
While officials called the fine the "largest ever" levied by the commission since its 1934 creation, it is substantially less than the $1 million penalty sources said the state was seeking from Sam's.
The agreement also requires Sam's to remove all alcohol from a nearby warehouse on Kingsbury Street by May 31. Rosen said the company has complied with that order and is seeking to sublet the rented building.
Liquor industry officials in Chicago, especially those in the wine trade, closely watched the case. Because of its size, Sam's wields tremendous influence in the liquor business.
According to the state's initial complaint, Sam's set up a company called Skyline Marketing Co. to extort money from liquor distributors, requiring them to make payments to Skyline if they wanted to sell their products at the store.
The state alleges that Sam's illegally paid business expenses, including some employee salaries, out of the income Skyline received from distributors. Liquor laws prohibit retailers from having marketing relationships with liquor suppliers.
Rosen maintained Monday that Skyline, which maintained its office in the store's building, had no direct ties to Sam's.
Sam's has developed a national reputation among wine connoisseurs with the volume and variety of its stock.
Since the investigation began, the Rosen family has branched out with new stores in Downers Grove and Highland Park.
The settlement calls for the store to pay $150,000 by cashier's check immediately, and another check for the same amount by Dec. 29 of this year. If Sam's fails to pay the fine, the state will suspend the firm's license for another four days, according to the agreement. Rosen said that he had already paid the first $150,000 and would pay the rest when it is due in December.
If the rest of the fine is paid, Sam's will be closed for business Jan. 1-3, 2007, according to the agreement. Coming right after the holiday rush, Rosen said those three days are not big revenue days.