The owners of Lawrence’s Cork & Barrel liquor stores have begun talks to settle state charges of illegal activity, but they still face the prospect of losing their liquor licenses.

Pete Bodyk, an operations officer for the state’s Alcoholic Beverage Control unit, confirmed Wednesday that Cork & Barrel owners Dan and Jill Blomgren had reached a tentative settlement related to charges ranging from improper liquor sales to illegal operation of a catering business.

“They have stipulated to several violations, and now it is just in the process of everyone checking the paperwork before the agreement is signed,” Bodyk said.

But Bodyk said Cork & Barrel officials still were contesting the most serious charges that allege the Blomgrens had a hidden ownership interest in a west Lawrence liquor store.

If convicted on those charges, the Blomgrens would lose their liquor licenses and could be permanently barred from operating a liquor store in the state.

“We consider hidden ownership to be one of the most serious violations of the state code,” Bodyk said.

Hearing scheduled

State law limits an individual to ownership of one liquor store or a husband and wife to two stores. ABC officials are alleging that the Blomgrens had an ownership interest in three Lawrence liquor stores. The couple own the two Cork & Barrel stores at 901 Miss. and 2000 W. 23rd St. But state regulators charge that in parts of 2001 and 2002 the pair also secretly owned Parkway Liquor, 3514 Clinton Parkway.

The Parkway Liquor store has since been sold, and the allegations do not involve the current owners.

Patrons exit Cork & Barrel liquor store, 23rd and Iowa streets. Store owners reportedly reached a tentative settlement Wednesday with state officials relating to charges including illegal operation of a catering business and selling items other than liquor in their stores. State officials said the owners still were contesting more serious charges of illegally operating a third liquor store.

Dan Blomgren previously owned the Parkway Liquor store before he opened the Mississippi Street Cork & Barrel store. The store was sold to Kerry Zimmerman, a Topeka resident and a friend of Blomgren’s.

ABC officials allege that Zimmerman never took ownership of the store and that Blomgren continued to operate the business.

Blomgren on Wednesday declined to comment on the case or any settlement talks. But in a previous interview, Blomgren said Zimmerman had no real desire to run the day-to-day operations of the liquor store, so Blomgren negotiated a “management agreement,” whereby Blomgren would run the operations of the store for a flat monthly fee. The agreement ended in late 2002 when Zimmerman voluntarily surrendered his liquor license after ABC officials began questioning him about the agreement.

Blomgren contended the management agreement was legal, but state officials have said it was an illegal mechanism to get around the one-license-per-person regulation. That regulation has been part of the state’s law since 1949 as a way to prevent corporate ownership of liquor stores and to ensure that an individual is accountable for any violations at a store.

Bodyk said none of the settlement talks had involved the hidden ownership issue. He said Cork & Barrel owners were scheduled to contest those allegations at a March 25 administrative hearing. If Cork & Barrel loses that judgment, it can appeal the decision to the Kansas Department of Revenue, which oversees the ABC, and to district court.

Reduced fines

Bodyk declined to comment on the specifics of the tentative settlement before it becomes final. But he said Cork & Barrel had stipulated to a “variety” of the lesser charges the ABC had filed in the case.

Among the charges filed were:

• Operating an illegal catering business. The ABC alleges that the Blomgrens operated a catering business that served alcoholic beverages. Generally, liquor store owners cannot own another business that sells or serves liquor.
• Selling liquor on credit. The department alleges Cork & Barrel allowed customers, such as bars and restaurants, to take possession of liquor before they paid for it, which is a violation of state regulations.
• Selling items from their 23rd Street store other than alcohol, such as soda, glasses and bartending supplies. Liquor stores, by law, are allowed to sell only liquor and lottery tickets.
• Allowing customers to return liquor for store credit.
• Delivering liquor to nonapproved locations. Liquor stores are allowed to deliver to wholesale customers, such as bars and restaurants, but generally are not allowed to deliver to other locations.
• Selling liquor for resale to a group that didn’t have a license to resell liquor. Specifically, the department alleged Cork & Barrel sold liquor to a wine and cheese club that was not licensed to resell.

Originally, the Cork & Barrel stores were facing $120,000 in fines, Bodyk said. But he said that amount likely would be lowered, but he could not say by how much.

“Since they have stipulated to some violations, I’m sure that they have negotiated that some charges be dropped, which will reduce the amount of the fine,” Bodyk said.