EXTRA CONTENT: Validity of liquor license applications questioned
A Richmond liquor store operator is asking the Kentucky Alcoholic Beverage Control Board to hold a hearing into whether applications for Corbin's three package liquor stores contained irregularities that could imperil the town's local package store licenses.
C. Wesley Morgan, owner of Liquor World stores in Richmond and Manchester, filed the request for a hearing through the Kentucky Department for Alcoholic Beverage Control last Friday. The move comes nearly three months after Morgan was formally notified he wouldn't be receiving one of three retail package liquor licenses allotted to Corbin. City voters approved a ballot initiative in February that allowed for the expanded sale of alcohol. The number of package store licenses issued is based on population.
In the letter submitted to the ABC requesting the hearing, Morgan's attorney Daniel W. Redding claims that licenses should not be issued to owners of either Liquor Mart, Liquor King or Ernie's Spirits because of procedural deficiencies in their initial applications seeking retail package store licenses. The letter is accompanied by a lengthy affidavit by Morgan.
In an interview Monday, Morgan said he believes he was squeezed out of the Corbin market through political maneuvering and competitive jostling with his main rival, Liquor Mart, that led to blatant disregard of the rules regarding the application process.
Morgan was one of 12 applicants for a package store license in Corbin. He planned to build an 11,200 square foot Liquor World store in south Corbin on property currently occupied by S&H Towing and Repair.
"Their main objective was to keep me out," Morgan said. "Not only did they use political influence to get a license ... but they used it to not get me one."
Specifically, Morgan claims Liquor Mart should be not have been given a license because its owners did not fully and properly disclose "other entities in which they had an interest," and didn't submit a property lease that included the name of all the individuals and entities who had ownership in the store.
Liquor Mart is located on U.S. 25E in the old Dairy Queen building near the Trademart Shopping Center. It opened last Friday. It is owned by Jack Taylor, Frank Shoop and Derrick Sears. Only the name of Jack Taylor and his wife, Jill, appeared on the lease provided to the ABC. The lease did specify that that location would be used for a liquor store.
Since the store is already open, Morgan admitted it would likely be difficult to convince the ABC to revoke or suspend Liquor Mart's license.
Morgan's biggest bone of contention, however, is against Ernie's Spirits, a yet-to-be-constructed 5,000-square-foot liquor store planned for south Corbin just behind Applebee's on Cumberland Falls Hwy. He claims the owners of Ernie's, Kevin Durham and his father Ernie Durham, had numerous problems with their application for a license including: a "fraudulent lease in violation of statutory requirements," and failure to advertise their intent to seek a liquor license in the local newspaper of record before the end of a 30-day window that was allotted to do so.
The lease for the property is between the Durham's and a property holding company they created in August called Matuse Property Holdings, LLC. The lease itself was created in May but is not set to take effect until construction of the liquor store is complete.
Morgan argues the lease can't be valid because Matuse didn't even exist when the lease agreement was created, and the Durham's could not have made such an arrangement since they did not yet own the land.
In an interview with the News Journal, Kevin Durham said Tuesday that he plans to complete purchase of the property this week. Local business owner David Myers, a member of the investment group RJV Properties that owns the property, confirmed that closing on the 1.1 acre parcel is set for today.
"They have been very honest to deal with and have done everything they said they were going to do. They put up good faith money and everything," Myers said.
Durham explained that he had a contract with RJV to buy the land contingent on whether the ABC issued them a liquor license. He created Matuse Properties, he explained, on the advice of his accountant for tax purposes. He said the lease and property arrangement are legitimate.
"The ABC is aware that we don't own the property yet and that the contract on the property was contingent upon us getting a license," Durham said. "I'm putting a large investment into a store in the city of Corbin, so yeah I worry when people challenge things like this. I know I've been working with the ABC in every step of this process. I think everything should be fine."
Some issues regarding the term of the lease, and the fact that originally it stated the land would be used for "residential" purposes were typos that Durham said were corrected and resubmitted to the ABC.
Durham said he was unable to advertise his intent to apply for a package liquor store license in the News Journal until seven days after the deadline to do so because of confusion about where such advertisements were supposed to be placed. Many potential storeowners, including Durham, published their notices in a Times-Tribune in error. The News Journal is actually the legal paper of record in Whitley County due to its much larger paid circulation.
"The state allowed a delay on that because of the confusion," Durham said. "I did end up advertising in both papers."
Morgan said if the ABC extended the advertising requirement, it did so wrongly.
"It's pretty clear you have 30 days to advertise that. You got to do what you got to do in 30 days. There's no extensions," Morgan said. "Everyone is supposed to be playing on the same field and by the same rules."
Lastly, Morgan says the decision by the state's Distilled Spirits Administrator, Danny Reed, to give the Durhams a license constituted "impropriety" because the Durhams are partners with some of Liquor Mart's owners in four other Liquor Mart stores in Kentucky. He said the move essentially consolidates two thirds of the licenses available in Corbin with one group of investors, which could result in anti-competitive behavior.
Durham said he and his father have nothing to do with investors in Liquor Mart when it comes to the operation of Ernie's Spirits and plans to keep it that way. He said he and his father were also applying for a package liquor store license in Somerset on their own as well.
Durham is hoping to have Ernie's Spirits completed and open early next year.
"Since we are building from the ground up, I think everyone understands it's going to take us a little longer," Durham said. "It's a process we are going through, but it is going to be a really nice store."
In his complaint, Morgan claims Liquor King owner William Smith committed a minor error by provided a personal check for fees along with his application for a license instead of a cashier's check. He said he doubts it will actually have any impact on Liquor King's ability to open on schedule, and doesn't plan to vigorously pursue the issue.
On Tuesday, Dick Brown, Executive Director of Communications and Public Outreach for the state cabinet that includes the Office of Alcoholic Beverage Control, confirmed the receipt of Morgan's complaint, but said at this time, no hearing on the matter has been scheduled.
"Additionally, ABC staff has examined the applications in question and are unaware of any irregularities in the process of those applications," Brown said. "There appears there has been no previous hearings on this type of complaint. Whether or not there will actually be one is still up in the air."
Brown said the General Counsel for the ABC would have to study the matter further before making a recommendation on the issue.
Morgan said if he is denied a hearing, or if the outcome before the board is unsatisfactory, he plans to file a lawsuit in Franklin Circuit Court over the issue.
In addition, Morgan claims he has evidence of other impropriety that took place with the application process in Corbin and said he provided an affidavit and other evidence in July to the Federal Bureau of Investigations.
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