Southern Glazer’s fined $3.5m over ‘pay to play’ scheme

Miami-based wholesaler Southern Glazer’s Wine and Spirits (SGWS) has been fined a record US$3.5 million by New York’s State Liquor Authority (SLA) for engaging in “pay to play” schemes to win business, with the violations uncovered described as “truly staggering” by one official.

Souther Glazer’s was fined $3.5m – the largest penalty in the history of New York’s State Liquor Authority

Imposing a fine of $3.5m – the largest penalty ever imposed by the SLA – the agency said it had found the wholesaler guilty of providing “illegal gifts and services to business to influence their purchasing decisions, for permitting incomplete, inaccurate, and inadequate record keeping practices, and for engaging in discriminatory sales.”

Specifically, investigators found that representatives of SGWS would routinely provide illegal gifts, either in the form of cash or goods, at favoured restaurants and retail establishments, running up large expenses on their corporate credit cards – an illegal practice commonly known as “credit card swipes.”

The company was also found in breach of New York State’s Alcoholic Beverage Control (ABC) law for giving certain retailers preferential discounts on stock over others.

“The multitude of violations found during the course of these investigations is truly staggering,” said State Liquor Authority chairman Vincent G. Bradley.

“The SLA remains committed to rooting out abuse and corruption in the alcoholic beverage control industry to ensure a level playing field for all businesses. I am incredibly proud of the work of our enforcement and legal teams, who work hard every day to protect small businesses and consumers.”

In addition to the $3.5m fine, SGWS has also agreed to enter into a Corporate Compliance Agreement, the first of its kind, which will allow the SLA to obtain information on systemic and systematic practice violations moving forward. It will also impose additional obligations and responsibilities on SGWS to report suspicious activity directly to the SLA for investigation and possible prosecution.

“By working together to identify suspicious activity early, SGWS and SLA are creating a new scalable and replicable compliance model for the industry,” the SLA said. “The Corporate Compliance Agreement includes a Code of Business Conduct and Ethics, a Corporate Compliance Program and Policy, and provides for a Corporate Compliance Officer, as jointly appointed by the SLA and SGWS, to monitor and address suspicious activity both to SLA and SGWS.”

In return, the SLA has agreed to suspend $1m of the penalty against SGWS to ensure the company adheres to its Corporate Compliance Agreement, and in recognition of its cooperation during the course of its investigations.

“We will never tolerate systemic and systematic violations of the laws of our great state,” added counsel to the SLA Christopher R. Riano. “This nationally historic settlement is a testament to New York’s strong and enduring leadership in the alcoholic beverage control industry. I look forward to working together with Southern to continue to root out deceit, deception, and exploitation of the system, and I am excited to pilot our new Corporate Compliance Agreement program moving forward.”

2 Responses to “Southern Glazer’s fined $3.5m over ‘pay to play’ scheme”

  1. Bill Tobey says:

    So Southern is fined $3.5 million, never admits guilt and goes on with business.

    When will the State of New York start refusing “no contest” settlements take the companies to court & find them guilty, and put company executives in jail?

    $3.5 million for Southern is probably less that one week’s profit.

  2. Joe A. Vitae says:

    Well that is one way that they “pay to play”. There are others. If you are a small manufacturer of beer, wine, or spirits, you will be forced in a way to work with distributors. You can’t just go door to door selling your artisanal product. Most retailers will only use the larger distributors in their state. Who has distribution in most of the U.S.? If you guessed Southern Glazers Wine and Spirits (SGWS) you are right. As a small manufacturer applying to work with a large distributor, you are met with two problems. Ok, it’s really one problem: they don’t want your product. They are getting a significant amount of cash from the top manufacturers already. As a small producer you are only muddying the water and stealing shelf space from a product that is already selling. Chances are that if you do get “lucky” and land a contract with a large distributor, that you are doomed. They will buy a pallet from you and expend zero effort trying to move it. If you are in a franchise state that makes changing distributors nearly impossible, like nearly half of the U.S., then YOU as the small manufacturer are simply shut down. You may have the distribution network, but don’t expect any reorders. Don’t believe me? Apply to be a supplier for SGWS or any other large distributor. They care about one thing and one thing only: your marketing budget. Marketing budget is a nice way of saying “How much cash are you going to commit to us for selling your product?” 3.5 mil sounds like a lot for the beer guzzling joe, but for the largest distributor in America? Smaller than the potatoes used for making that non-gmo organic craft vodka made by the small manufacturer that is going out of business.

    P.S. An alias was used in posting this comment. I’m a veteran that has sunk his entire life savings into his alcohol business. Although true, these words might result in a lawsuit from SGWS or a large distributor and could possibly end any possibilities of dreams I have for providing for my wife and young children.

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