Pa. Liquor Control Board officials got dibs on Pappy Van Winkle, other high-end bourbon lottery leftovers

Thousands of Pennsylvanians try their luck at entering the occasional state Liquor Control Board’s limited-release lotteries with hopes of getting the chance to buy a bottle of high-end limited quantity wine or spirits.

In 2019 and 2020, though, for Pennsylvania Liquor Control Board member Michael Negra and four of the agency’s top-level employees, luck wasn’t needed to claim their bottle or two.

Negra, one of three board members, and the employees were given the chance to buy some of the coveted bottles left over from lotteries before the public even knew there were still bottles up for grabs.

A State Ethics Commission investigation found this sharing of confidential information did not violate the ethics law “due to insufficient clear and convincing evidence of a pecuniary benefit.”

While the commission concluded there was no wrongdoing, the attention to the practice prompted the PLCB to launch an internal investigation and immediately change its practice.

The ethics commission in its orders released on Monday stated that Negra; Cliff McFarland, director of supply chain; Tom Bowman director of product selection; Bryan Kelleher, director of the bureau of business development for wholesale operations; and Carl Jolly, a retail operations manager, agreed to not “purchase any items offered by the Pennsylvania Liquor Control Board outside of the process by which a commonwealth resident may purchase such items.”

PLCB spokesman Shawn Kelly said the agency fully cooperated with the ethics investigation. In mid-2020, the agency changed its practices to ensure all products available through a limited-release lottery are distributed strictly through drawings “and they are now never released for general sale to anyone.”

According to the ethics commission report, former PLCB director of marketing and merchandising Dale Horst recommended the agency discontinue the second-chance drawings for the few leftover limited-release lottery wine and spirits to save time and money.

Horst instead recommended offering those products on a first come, first serve basis on the Fine Wine and Good Spirits website “or otherwise sold by the PLCB in the manner it deemed most appropriate based on operational needs.”

The PLCB accepted that recommendation but never formally voted on it. The first time the lottery items were made available to PLCB employees and officials outside of the lottery process instead of through a second-chance drawing was after the July 10, 2019 limited release lottery.

Horst no longer works for the PLCB, Kelly said. Attempts to locate Horst for comment were unsuccessful.

State senators who currently and formerly chaired the Senate Law & Justice Committee, which provides oversight of the PLCB in that chamber, both accepted the ethics commission’s conclusion in the matter.

Sen. Mike Regan, R-Cumberland/York counties, the current chairman, said the practice of selling the leftover lottery items to employees when others had to hope to have their name drawn in a lottery, doesn’t pass the “sniff test.” But he expressed confidence in the ethics commission finding that it wasn’t actionable. Regan further blamed it on a lack of policy in the PLCB.

Sen. Pat Stefano, R-Fayette County, agreed that the practice of confidentially selling leftover liquor lottery items needed to stop. “No laws or rules were broke but the perception on its surface looks suspicious. Perception can be 99% reality,” he said.

The PLCB spokesman said the practice Horst recommended has since been halted.

“To be clear, the only way any PLCB employee can purchase a bottle offered through a limited-release lottery is to have been randomly selected as a winner through the computer algorithm that selects lottery winners – the same process by which any commonwealth resident may purchase these products,” Kelly said.

“We are confident that by tightening limited-release lottery internal procedures and implementing additional oversight measures we are preventing manipulation of lottery processes and inappropriate sales of lottery products to anyone other than legitimate lottery winners.”

Limited release lotteries are offered periodically by the PLCB with the intention of fairly and equitably distributing high-end, limited quantity products such as highly sought-after bourbons including the Pappy Van Winkle Collection and the Buffalo Trace Antique Collection.

PLCB customers, individuals and licensees, enter the lottery typically over a five-day entry period. Winners are selected at random and limited to purchasing only one item in a lottery. Bottles that go unclaimed can be subject to a second-chance drawing.

The lotteries have been a big draw.

For example, a January 29, 2020, limited-release lottery for the chance to buy one bottle of Pappy Van Winkle Special Reserve 12-year Bourbon, which sells for $100, drew 17,876 entrants. Just 999 winners were selected.

Twenty-four bottles went unclaimed in that lottery.

In keeping with a practice Horst recommended to the PLCB, the PLCB and its executives chose to forgo the second-chance drawing. Horst instead shared with multiple PLCB officials at executive meetings and through informal conversations that limited-release lottery products were available for purchase. That information was not shared with the public or the unlucky lottery entrants.

According to the ethics documents, Jolly, despite not entering the lottery, bought three bottles of Pappy Van Winkle bourbon for $410 and separately a bottle of Weller 12-year Reserve Bourbon for $40.

“On several occasions, Negra, after completion of the limited-release lottery, used personal funds to purchase bottles of liquor at full price,” according to the ethics commission report.

Negra responded in a statement, “The ethics commission determined that no ethical violation occurred relating to my work as a member of the LCB. In addition, no LCB code of conduct violation occurred.”

However, the ethics commission fined Negra $500 for failing to report some sources of income on his statement of financial interest for 2018, 2019, and 2020. Ethics Commission executive director Mary Fox confirmed Negra has since paid his fines and corrected his statements of financial interest for those years.

“The Ethics Commission investigation, which I voluntarily participated in, has had substantial personal cost but I am pleased that it has been fully resolved,” Negra said.

Bowman bought a $40 bottle of Weller 12-year reserve bourbon left over from a July 2019 lottery that drew about 8,290 entrants and had just 180 winners. In December 2019, when another limited-release lottery was held for George T. Stagg Bourbon that sold for $110 a bottle, Bowman staked a claim on one of the 34 bottles leftover from a lottery that drew 9,753 entrants.

While cleared of any ethics violation for that, Bowman was fined by the ethics commission $250 for failing to disclose on his 2019 Statement of Financial Interest a $2,082 “Irish Whiskey Buying Trip” paid for by the Irish Whiskey Association. Fox said he too has since paid the fine and corrected his paperwork.

Kelleher also bought a bottle of the Stagg Bourbon left over from the December 2019 lottery and McFarland, who had entered multiple limited-release lotteries from 2016 through January 2020 and won only once, purchased a $110 Eagle Rare 17-year Bourbon left over from the December 2019 lottery.

This practice of confidentially sharing information with PLCB employees of leftover lottery items was picked up by an auditor in the governor’s Office of the Budget Bureau of Audits.

The auditor found inventory counts did not match items designated for the limited-release lotteries. From July 2019 through February 2020, the auditor found 20 bottles of limited-release lottery items were transferred to the Northwest Office Building where the PLCB is headquartered.

An assistant director of the audit bureau informed Horst of the “possible negative public perception the issue could create,” but according to an ethics commission order, that information never went any further up the agency’s chain of command.

Subsequently, PLCB Chairman Tim Holden was alerted and he instructed the PLCB’s lawyers and executive director to complete an internal investigation. Kelly, the agency spokesman, said the PLCB “immediately put a stop to selling any lottery bottles outside of the established lottery process.”

In addition to the employees named previously who took advantage of this internal access to the sought-after liquor, the PLCB’s chief information officer Nick Melnick also purchased leftover limited release lottery items, according to the ethics commission’s report. All the PCLB employees used personal credit cards to make their purchases.