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Archive for Sunday, February 1, 1998

STATEWIDE ENFORCEMENT OF LIQUOR LAWS NOT 100 PROOF

February 1, 1998

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— Alcohol enforcement has been weakened in Kansas by depletion of ABC staff and a decision to assign agents non-liquor investigations.

The state agency created 50 years ago to guide Kansas out of Prohibition and regulate the liquor industry has become lax in the 1990s.

This assertion by current and former state Alcoholic Beverage Control agents is supported by a secret Kansas Department of Revenue report that confirms the number of ABC agents has been nearly cut in half.

The revenue department also assigns to remaining agents a wide range of criminal tax-fraud cases unrelated to alcohol. In most instances, that occurs without clear approval by the Kansas Legislature.

"Your average citizen doesn't know that ABC isn't out there enforcing the law," said Tom Hanna, a former ABC director.

ABC, a division of the revenue department, previously employed more than 30 agents who focused almost exclusively on retail liquor stores, bars and other alcoholic beverage licensees.

The equivalent of eight full-time agents now handles statewide enforcement of liquor laws for 2,500 businesses serving 2.5 million Kansans, the department's internal report said. That is the smallest liquor-enforcement presence among 15 states reviewed by Kansas auditors.

Police in some Kansas cities have assumed a larger role in alcohol enforcement. Not every jurisdiction has resources to make liquor compliance a higher priority.

One consequence may be more underage drinking.

"In groups that we work with ... we keep hearing that underage drinking is increasing," said Max Sutherland, Kansas administrator for Mothers Against Drunk Driving. "We would be concerned about the lack of enforcement."

ABC Director Bernie Norwood said alcohol enforcement at ABC -- stopping underage drinking is the agency's professed No. 1 goal -- had improved despite reductions in staff and time devoted to liquor.

"You'll find a broad spectrum of opinion on this," said Norwood, of Lawrence. "Naturally, I think we're doing a pretty good job."

Staff in the alcoholic beverage division are "working smarter," said Dean Reynoldson, ABC enforcement manager. "That has enabled us to accomplish more with less effort."

Review of ABC

The Journal-World conducted dozens of interviews statewide and reviewed numerous revenue department and ABC documents to determine the status of alcohol enforcement at ABC.

Key findings:

  • In the early 1990s, the revenue department realized the lack of a tax-investigation unit diminished its ability to collect taxes. The Kansas revenue department addressed its deficiency by assigning tax-fraud cases to liquor control agents.
  • By 1996, less than 40 percent of work by ABC agents involved liquor. ABC officials stated in agency documents they would have cut liquor control further but worried about political backlash. Gov. Bill Graves said he assumed ABC spent more than 40 percent of its time on alcohol.
  • ABC officials say enforcement of liquor laws has been outstanding, but Reynoldson confided in a March 1997 memo titled "Setting the Record Straight" that compliance rates were "unacceptably low."
  • Costs of ABC tax-fraud investigations appear to outweigh benefits. ABC spent $416,000 to investigate fraud in 1995-96 but recovered only $3,200 in restitution.
  • ABC agents, who are state-accredited law enforcement officers, lack basic tools of the trade -- computers, cellular telephones, car sirens. Norwood said the equipment shortfall was due to budget problems. He said agents would receive computers this year.
  • ABC no longer conducts surveillance of liquor stores to identify people buying and selling alcohol illegally. The agency does perform bar checks and recruits teen-agers to make undercover "controlled buys" at retail stores. A lawyer working with liquor-store owners views some liquor-store stings as entrapment.
  • ABC quit monitoring the state border in the Kansas City area to catch people who buy liquor in Missouri -- it's generally less expensive there -- and illegally import it into Kansas.
  • Fines for Kansas businesses that violate liquor laws are insufficient to deter repeat offenders.
  • The revenue department appears to engage in selective enforcement of liquor licensees. A December 1997 memo reminded ABC staff not to investigate chain restaurants, specifically Chi-Chi's and Applebee's. The memo said these establishments had sufficient internal controls.
  • ABC administrators allegedly assigned agents liquor violation "quotas" to boost 1997 enforcement statistics.
  • Agents don't inspect all state liquor licensees "at least once a year" as guaranteed in documents submitted to the 1998 Legislature.

New state audit

State government auditors are preparing a new report for the Legislature on ABC.

This audit is designed to determine whether ABC enforcement of liquor laws has suffered in recent years, whether ABC hiring and promotion practices are properly followed and whether agents have training and equipment to accomplish their duties.

Sen. Lana Oleen, a Manhattan Republican who co-chairs the Legislative Post Audit Committee, said the report was authorized by her committee in response to complaints about mutation of ABC operations.

Critics contend the revenue department improperly assigns ABC agents cases of suspected fraud on motor fuel, illegal drugs, personal income, bingo, business, cigarette and sales taxes and homestead-housing tax rebates.

Agents only have explicit statutory responsibility for liquor control.

"We want to make certain that ABC, as a division, is truly working the issues they ought to," Oleen said.

In addition, there's concern among committee members that the full Legislature isn't aware of the liquor control division's activities.

Legislative Post Audit will make its report public this spring.

Norwood said he wasn't worried.

"The proof of the pudding will be in the final results," he said. "I'm sure our activities will be justified."

Hanna, who headed ABC from 1987 to 1991, has wide knowledge of the liquor industry. In addition to ABC, he worked more than 15 years for Kansas liquor distributors, was employed for five years by a distillery and for four years owned a liquor store.

He said there was no way for ABC to convincingly argue to state auditors that liquor enforcement had improved.

"You can't be running all over town looking for drug dealers and have time and energy left to go check liquor stores," Hanna said.

Internal audit

To examine ABC operations, the J-W requested a copy of the secret 1996 audit prepared at taxpayer expense by revenue department staff.

Revenue Secretary John LaFaver refused to release the report, citing an exemption to the Freedom of Information Act.

A copy of the 75-page report obtained independently by the J-W indicates revenue department auditors believed competing demands placed upon agents made it difficult for them to accomplish statutory mandates related to alcohol and fulfill new tasks foreign to liquor enforcement.

Departmental auditors found the depleted ABC force was dealing with the broadest investigative mandate among 15 states surveyed.

Norwood said some ABC agents had responded well to expansion of investigative assignments while others had not. Resistance to change by disgruntled staff won't alter the new reality, he said.

"We are the law enforcement arm of the Department of Revenue. We are the cops for revenue," Norwood said.

Regarding that expanded role, state auditors asked revenue department officials to make certain that changes in ABC's role didn't conflict with Kansas law. If necessary, auditors said, amendments to state statutes should be proposed to the Legislature. No such proposals have been submitted to the Legislature by the revenue department.

In addition, the internal audit said ABC was "sorely lacking" in methods of quantifying and qualifying the agency's performance. ABC needed systems to accurately track activities of agents, industry compliance rates, liquor fines and payments, and progress on fraud cases.

The revenue department might be more successful if separate investigative teams were dedicated exclusively to tax fraud and liquor enforcement, the audit said.

Auditors lauded ABC for its positive relationship with liquor licensees and reported the division was effective in generating more than $1 million annually from enforcement of the state's tax on illegal drugs.

Public, private views

Norwood, appointed ABC director in 1995 by the governor, and Reynoldson, the agency's No. 2 official, have written that the revenue department's internal audit was "thorough and fair." They concurred with more than 80 percent of that audit's recommendations.

In separate interviews, Reynoldson and Norwood recently said the agency's enforcement of state liquor laws was excellent.

"In comparison to other state liquor control agencies, we do very well," Reynoldson said.

Norwood said he hadn't received complaints from police or sheriff's department officials, special-interest group leaders or the general public.

In the 1996-97 fiscal year, the equivalent of 10 percent of licensees in Kansas were cited for liquor violations by ABC. The division caught 86 licensees selling liquor to underage customers. In addition, 154 licensees were cited for allowing underage people to possess or consume alcohol.

"Where is the deficiency?" Norwood said.

A previously undisclosed written response from Norwood and Reynoldson to the revenue department's audit reveals a different perspective on ABC's administration of liquor laws.

They wrote:

  • "With these competing factors, combined with a field staff of 19 revenue enforcement agents stationed across the state, it is difficult to maintain sufficient levels of investigative efforts across the spectrum."
  • "We agree that the compliance rate among liquor license customers relating to sales to underage persons is too low."
  • "We agree that recidivism rates for some existing bars are unacceptably high."
  • "There are dozens of drinking establishments ... willing to pay fines as a cost of doing business."

Agents' perspective

Current and former ABC agents said no meaningful reforms were instituted at ABC in the wake of the revenue department's audit.

"There's been no corrective action taken," said former ABC agent Phillip Morris of Overbrook, who retired from the agency last year. "This agency is not doing what it was set up to do."

The only substantial reaction, agents say, was that administrators of ABC initiated a "quota" system for liquor violations.

A veteran ABC agent, who spoke on condition of anonymity, said each field staff member was instructed in December 1996 to conduct investigations to detect 10 to 25 violations by March 1997. The statewide goal was to quickly compile approximately 250 liquor violations. It was an unprecedented move by ABC brass, the agent said.

"They're just making stats to look good," said another ABC agent interviewed for this story.

Rebecca Rice, lobbyist for the Kansas Retail Liquor Dealers Assn., said she heard rumors ABC had operated on a quota system.

"We've called them on that several times," she said. "We had a face-to-face with Bernie (Norwood) ... and asked: Are you sending agents out and saying, 'You are failing at your job unless you write our members up?'"

Norwood told Rice, and the J-W, that ABC hadn't established quotas.

Subsequently, ABC agents say, liquor-enforcement goals for individual agents were increased after it became evident last fall that Legislative Post Audit would audit ABC.

Agents say favorite targets of ABC when on the trail of infractions are university towns, including Lawrence and Manhattan. After the J-W contacted revenue department officials about this story, a team of ABC agents was sent to Lawrence on consecutive weekends in January. Agents made about 25 arrests for underage drinking on both weekends.

Morris, the retired agent, said his former colleagues had no choice but to comply with the on-again, off-again enforcement instructions of superiors.

"They're always under threat of losing a job," he said. "There are some damn good agents still on board with ABC. They're doing what they're told."

Training, education

ABC agents expressed concern about their preparation to be tax-fraud inspectors and, to a lesser extent, their ongoing training as law enforcement officers.

In regard to fraud, agents said they lacked adequate expertise in accounting and financial analysis. Agents were given a notebook of information on fraud prepared by ABC staff. Some agents -- not all -- attended an Internal Revenue Service course.

"What we do has to stand up in court," an agent said. "The first thing a defense attorney is going to do is question our credentials. I'm going to look like a fool, and we're going to lose the case."

Agents also believe their continuing law enforcement training was inadequate to comply with regulations for annual recertification as Kansas peace officers. For example, ABC agents haven't attended a required course on hazardous materials in several years.

Norwood said ABC was hiring higher-caliber personnel and making certain agents were better trained.

In the past, he said, "we had people stumbling around making mistakes."

Agents in ABC contend top-level officials aren't qualified to manage the law enforcement division. Reynoldson and Norwood don't have work or educational backgrounds in law enforcement.

"We'd like people who have paid their dues," one agent said.

Added another: "It's not just for our benefit, but it's for public safety."

Police filling void?

An informal survey of Kansas police departments indicated some struggle to be proactive on liquor enforcement. Some could use ABC's help.

Lt. Robert Miller of the Kansas City, Kan., vice and narcotics unit said liquor enforcement -- by necessity -- was a low priority.

"We put more emphasis on narcotics violations simply due to the violence related to narcotics activities that you don't find these days with liquor," he said.

He said a couple of ABC agents could be kept busy working liquor in the Kansas City area.

Capt. Steve French of the Riley County Police Department said he didn't see much of ABC anymore. He said the state was overlooking ABC's need for more field agents.

"Theirs is an area of responsibility that's gotten a lot bigger, but manpower has not increased in that area," he said. "We've tried to pick up the slack, but we've been under budget constraints. I think everybody gets frustrated by that a little bit."

French said ABC was typically able to assist his department when asked on special occasions. The same holds for the police department in Lawrence.

Chief Ron Olin, who has been with Lawrence's department more than 25 years, believes the bulk of liquor enforcement in this city fell to his officers.

"The ability of even 30 people in any specialized area in the state of Kansas is really of minimal impact unless on a special assignment," he said.

In Wichita, police assume a leadership role in liquor enforcement.

"That's part of our job," said Bob Circle, Wichita police spokesman. "We've got one officer who pops over 400 DUIs a year."

In Hays, Police Capt. Don Deines said local officials were compelled to find local solutions to underage drinking. The city passed an ordinance that requires bar patrons to have two forms of identification. It cut into use of fake IDs, he said.

"We're dealing with it the best we can," Deines said. "We've made headway."

Garden City Police Chief James Hawkins said the city didn't have a huge problem with underage consumption.

"If we ... feel a local liquor store is constantly and consistently violating sales laws, then we will call ABC and they'll usually come out and investigate."

Fines ineffective

The revenue department's auditors say ABC's structure of fines didn't deter repeat offenders. Generally, violations are accompanied by a fine of a few hundred dollars.

In many cases, liquor establishments ignore the agency's demand for corrective actions after paying fines. In fiscal year 1996, 42 percent of all fines paid to ABC were by repeat violators.

A textbook case: Last Chance restaurant in Manhattan had more than 110 ABC violation cases from 1991 to 1996. The restaurant was fined by the state more than $25,000 during that period.

The Aggieville hot spot remains in business.

"Unless Kansas adopts stiffer penalties, licensees will continue to disobey the laws set out by statute," the audit said.

In Lawrence, a drinking establishment with a better compliance record than Last Chance recently was persuaded to surrender its liquor license to ABC.

Owners of Jayhawk Cafe, 1340 Ohio, gave up a state license in December. ABC had cited the Hawk for 31 violations in the past three years.

"I'm not defending the bars," one ABC agent said, "but people should be treated fairly, equally."

Result of failure

A few questions can help answer what occurs when young people break liquor laws.

  • How many underage people in Kansas were arrested for driving under the influence from 1983 to 1994? Answer: More than 20,000.
  • Which group of drunken drivers in Kansas has a greater chance of dying in a wreck, someone 16 to 19 or someone 45 to 54? Answer: Teen-agers.
  • The age group in Kansas most likely to be injured while a passenger in a car with someone who has been drinking? Answer: Teens, 15 to 19.

Sutherland, of Kansas MADD, said he suspects the number of DUIs and liquor-related accidents involving underage motorists has been creeping up the past couple years.

"Alcohol seems to still be the drink of choice, and they're drinking it at an earlier age," he said.

April Marvin, state director of the Kansas Drunk Driving Prevention Project at DCCCA in Lawrence, said young people must get the message about the risk of underage drinking and driving.

Parents, teachers, police, ministers, friends and relatives can pass the word. ABC agents have a role as well.

"We have too many victims."

-- Tim Carpenter's phone message number is 832-7155. His e-mail address is tim@ljworld.com.

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