The Report That Turned the City Liquor Board Upside Down
Last July, Baltimore’s chief liquor inspector, Samuel Thornton Daniels Jr., handed a 124-page report to Mark S. Fosler, chairman of the city’s Board of Liquor License Commissioners. In the report, which was ordered by Fosler, Daniels alleged and documented administrative corruption that improperly allowed inactive liquor licenses to remain valid. Shortly thereafter, Daniels also gave the report to the state prosecutor’s office, fueling its then-budding—and still ongoing—corruption investigation of the city liquor board and its staff.
While the contents of that report have not been shared with the public previously, the issues it raised have, contributing to the liquor board’s turbulent soul-searching ever since, as recounted in extensive Sun coverage. Its title—“180 Days: A Report on Administrative Licensing Practices”—belies its punch. Ever since Daniels started his investigation last May, a long-simmering internal cold war between the administrative and enforcement sides of the agency, while already warm, has been getting hotter.
On Jan. 24 the cold war boiled over. That’s when the liquor board commissioners named Daniels the acting executive secretary, replacing Nathan Irby, a former state senator who’d run the liquor board since 1997. Irby and deputy executive secretary Jane Schroeder, an agency veteran since 1981, were the prime suspects in “180 Days.”
Schroeder says she has not seen “180 Days” but understands its contents. “Mr. Irby and I never were allowed to see it, but we heard about it from the newspapers,” she says. (Those Sun accounts recounted the report’s existence, and what it was believed to contain, but were not based on access to its contents; City Paper has obtained a copy of the report.) Asked about the report’s impact on the liquor board’s recent upheaval, she says only, “I’m not jeopardizing my position by talking about that.”
Daniels, asked the same question, doesn’t hesitate to say that “180 Days” “has had a significant impact” on the liquor board’s recent battles.
Just before Daniels took over for Irby, it appeared that Fosler and another of the three politically appointed commissioners, Ed Smith Jr., were themselves on the way out the door for displeasing state senators from Baltimore. But Gov. Robert Ehrlich stepped in, withdrew their names as nominees, and installed them as interim appointees—a situation that could keep them in their seats for an as-yet undetermined length of time.
“I don’t think a situation like this has ever occurred before,” Fosler says of the new order at the liquor board. “And I’m sure it’s going to be day-to-day.”
Later in the conversation, with a tone of exasperation, he adds, “This is an agency that is in crisis. The board has gone from week to week with crisis situations, while trying to hold the agency together.” Fosler acknowledges that “180 Days” was a factor in the furor over reform during the last several months, but also points out that other issues—getting the inspection staff to attend fully to their duties, for instance, and heavy fines levied on licensees caught selling liquor to minors—also raised hackles among critics of the reform-minded commissioners.
For now, though—and perhaps for a while—Daniels retains his duties as chief inspector and simultaneously runs the administrative side of the agency—the same side of the liquor board that he alleged in his report was subverting the law. “I am now in a position to get to the bottom of some of the issues the report brought up,” he says.
On the first page of the report’s three-page forward, Daniels’ core finding is bluntly stated: “The report will demonstrate how members of the administration, with knowledge, have been ignoring and subverting the law.” He then explains that the statute that kills a liquor license after it has fallen into disuse was not being applied uniformly by the liquor board.
But liquor licenses are five-digit assets in Baltimore City—and their value is likely to increase with scarcity as old licenses die. A dead one is worth nothing, so keeping a license from dying protects a valuable asset.
The law states that when a bar, club, or liquor store closes for more than 180 days, its liquor license should be revoked. In addition, the law states that when a license is being transferred to a new owner, that transfer must be completed within 180 days of the liquor board’s approval. Daniels’ report found that, in both cases, the law isn’t always being followed.
His investigation found 33 establishments that had been closed for at least eight months—in fact, he found many that had been shuttered for longer than 360 days, the maximum amount of time an establishment can retain its license when an exception is granted for hardships. Of those 33, Daniels examined the liquor board records of 12 licenses. In each instance, he found irregularities that indicated that the 180-day rule had been subverted in one fashion or another. The path of this analysis is littered with documents signed by Irby or Schroeder that, in effect, allowed the defunct licenses to remain active, despite the fact that the establishments tied to them had been shuttered long ago.
Schroeder defends the situation by pointing out that the rules governing liquor license expirations give the commission discretion in allowing some licenses to remain alive past 180 days.
“It wasn’t a problem until someone said it had been abused in the way it had been handled,” she says. That someone, Schroeder says, was Daniels, who agrees that the board has the discretion to save or kill an inactive license. However, he asserts that in many cases administrative maneuvering has kept the commission from even knowing about licenses that are languishing, much less examining their particular circumstances to determine if they should be allowed to survive. Schroeder denies keeping the commissioners in the dark on inactive licenses.
The current commission has put in place some procedures—and plan on more—to help assure that inactive licenses will be handled openly and clearly, Daniels and Fosler say. What used to be informal, off-the-record meetings with licensees whose establishments remained closed passed the 180-day limit, for instance, will now be on-the-record conferences with open discussion.
“180 Days” also discovered that owners of some licenses paid annual renewal fees 11 months after the payments were due each May, without penalty. Schroeder maintains that this has long been liquor board practice. “You could catch up on the fees whenever the license was going to be re-activated,” she says.
For those holding multiple licenses, such as vending-machine companies and other secured creditors, “the value of late term payment constitutes a prolonged utility of thousands of dollars,” according to “180 Days.” “The more subtle benefit of late term payment caters to license holders’ greed by hedging: If a license is sold during the first 11 months of an unpaid term, the purchaser pays the fee for the expended year.”
The liquor board files on long-closed establishments contain “transparent, possibly fraudulent, transfer references to ‘muddle’ the 180 day tolling,” Daniels wrote in his report. Some licenses, the records show, are allowed to make end-of-year renewal payments for years on end. The board’s administrative staff, the report asserts, “routinely ignores the inescapable fact that late term payment is prima facie evidence that the involved establishments were closed for greater than 180 days. . . . The accessibility and ease in detecting these practices seems to represent an administrative arrogance that is egregious and embarrassing.”
Daniels, who has spent six of his 18 years at the liquor board as chief inspector, says he actually believes the 180-day rule is a bad law. Establishments sometimes need extensive renovation, he explains, and bureaucratic delays can scrap licensees’ plans to open in a timely fashion. But as law, it should be enforced uniformly, according to the statute’s words, he adds, until the legislature changes it.
“The city senators have gotten very upset about the commission’s application of the laws that they wrote,” he says. “Don’t want it enforced? Then don’t write it—and you can quote me on that. But once it’s written, no agency should be caught in a trick bag of responsibility: When the law is good for the senators, enforce it, but when it is enforced against someone with whom they’re friendly, don’t enforce it so much.
“I’m about correction,” Daniels continues. “And that report deals with problems, and I’m very serious about making the corrections. If the corrections work, everybody wins—because the best way to get rid of a bad law is to enforce it.”
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