City Ethics Commission Documents Improprieties by Honolulu Liquor Commission Representatives

article top

”’This is the recently released Ethics Commission Advisory Opinion No. 2003-2 from the City & County of Honolulu Ethics Commission. The opinion reveals and documents improprieties by representatives of the Honolulu Liquor Commissions, and potential conflicts of interest, but the commission fails to recommend disciplinary action against any of the representatives for their actions. The entire statement by the City Ethics Commission is reprinted below.”’

”’Critics of the ethics commission decision say stronger action should be taken against those who violated city ethics laws, especially considering eight of the Honolulu Liquor Inspectors were arrested last year by FBI agents on a variety of charges including extortion, for accepting or soliciting bribes from establishments with liquor licenses.”’


”I. Summary”

In hosting a conference of state liquor commissioners and liquor industry
members, representatives of the Honolulu Liquor Commission (LQC) accepted
about $9,000 worth of cash, food, liquor and other beverages and services to
support the annual liquor industry conference. The Ethics Commission
(Commission) finds that the LQC accepted donations on behalf of the annual
liquor industry conference and oversaw the coordination of the gifts on
behalf of the participants of the conference. This conduct raised an
appearance of a conflict of interest.

The Commission does not believe the conduct of the commissioners and staff
members involved warrant discipline because the LQC members and staff
obtained little personal benefit, if any, from the gifts. It is recognized
that the liquor and hotel industries had traditionally donated goods and
services to support past annual conferences. Furthermore, the Commission
recommends, and the LQC will adopt, safeguards to prevent similar conduct
from recurring.

”II. Facts”

This matter was brought to the attention of the Commission on or about
October 7, 2000. During the Commission’s investigation, information was
obtained raising the possibilities of ethics violations by a member of the
LQC, as well as certain staff members. As a result of the cooperation of
the LQC’s members and staff and independent witnesses, information was
presented to the Commission. No hearing occurred in this matter and the LQC
agrees, through its attorney, Robert F. Miller, Esq., to the findings of
fact, conclusions of law and recommendations reached in this opinion.

Each year a conference of state liquor commissions and the liquor industry
occurs in one of the counties, on a rotating basis. According to staff
members of the LQC and industry participants, the conferences have occurred
for almost 40 years. The purpose of the conferences is to present and
discuss work-related programs of interest to the commissioners, their
staffs, liquor industry members and members of the public. Traditionally,
the liquor commission of the county where the conference takes place hosts
the conference. In addition, donations of food, alcoholic and non-alcoholic
beverages, door prizes, services, money and other items are provided to the
conference by the hotel and retail liquor sales industry associations and
liquor licensees to the host commission to embellish the social events at
the conference.

During September 24 through 27, 2000, the LQC hosted the 48th Annual
Conference of Hawaii State Liquor Commissioners (Conference) at the Kahala
Mandarin Oriental Hawaii Hotel (Hotel), a licensee of the LQC. Preparation
for the Conference began in late 1999 and later included organizational
meetings called at the request of the Liquor Control Administrator (LCA)
with members of the LQC staff and representatives of liquor licensees. The
purpose of the meetings was to plan for the Conference and designate tasks
among city staff and industry personnel to be accomplished over the next few
months. The LQC received $2,475 in cash donations from the industry
associations and two licensees to partially defer costs of a hospitality
room and other expenses. These monies were deposited into a separate
checking account maintained by the LQC created for the purpose of receiving
donations and registration fees and covering the expenses of the Conference.

Members of the Hawaii Hotel Association (HHA) are LQC licensees. HHA and
some of its members (“licensee-donors”) contributed prizes to the Conference
amounting to an estimated value of approximately $6,000. The HHA routinely
solicits its membership for donations to community events. Some, if not
all, of the licensee-donors were aware that the donations were intended for
the Conference. Several HHA members with hotels or restaurants on Oahu
indirectly contributed about $3,100 in door prizes to the Conference through
HHA. A similar amount was donated through HHA for door prizes by neighbor
island hotels. The door prizes ranged from $40 up to a grand prize worth
$1,100. Further, liquor, beer, food and soft drinks, valued at about $3,000
were received from various Honolulu retail and wholesale licensees. The LQC
staff arranged or allowed for the foregoing contributions to be provided.
Welcome bags provided to participants contained many items of relatively
small value (e.g., T-shirts, key chains, caps, and corkscrews) to be donated
for welcome bags and additional golf prizes. Industry volunteers also
donated their services to help plan and coordinate the Conference.

In late 1999, a member of the LQC, inquired of the Hotel about its room
rates noting the LQC’s interest in having the Conference at the Hotel. He
stated to the sales agent that the offered rate of $185 (which was also the
kamaaina rate) was high in contrast to the $100 room rate charged to the
participants by a comparable hotel at the 1999 conference. The Hotel and
the LQC ultimately agreed to a room rate of $100 per night for mountain-view
rooms for the approximately 40 rooms used by Conference attendees. The
Hotel management states that the $100 per night room rate was reasonable in
light of the overall package contracted with the LQC for the Conference,
including use of Hotel conference rooms and dining facilities. Management
adds that the Conference revenues more than covered its associated costs to
the Hotel.

The LQC regulates all liquor licensees, including the businesses located on
Oahu that contributed gifts to the Conference, and enforces Chapter 281,
Hawaii Revised Statutes (HRS). The LQC does not directly regulate the hotel
and retail liquor industry associations, but their members are liquor

During the period of March 1, 2000 to April 26, 2001, the LQC determined 58
matters involving some of the licensees that made donations to the
Conference. Each of the nine donor-licensees for which we requested
information had at least one matter decided by the LQC and one chain of
retailers had more than 35 actions taken during the period. The matters
ranged from approval of license transfers to fines for sales of alcoholic beverages to minors. The Commission found no documentation of preferential treatment towards these licensee-donors when comparing decisions made after the
Conference gifts were donated and those decisions made before the donations.

”III. Question presented”

The issue here is whether a real or apparent conflict exists for the LQC and
its administrative staff in the performance of their official duties to
receive liquor industry donations to support the Conference.

”IV. Analysis”

A. Whether donations from the licensees to support the Conference were
prohibited gifts