When Pennsylvania’s first in the country wine kiosks malfunctioned days before Christmas it set into motion anything but a bubbly holiday for the Liquor Control Board, or for that matter Simple Brands, the company that owns the vending machines.
A faulty resistor, some 60 thousand of the little buggers, is blamed for the widespread breakdown. Those parts are responsible for powering up those high-tech, self dispensing machines.
Auditor General Jack Wagner, nonplussed over the whole affair immediately opened up a review of the why’s behind the breakdown, but Wagner confirmed to Rock The Capital that his audit will go deeper; he now intends to scrutinize the solitary-bid contract that led to an agreement between the LCB and the Conshohocken based Simple Brands.
“We will analyze the contract and find out to what degree it is being adhered to and whether or not the contract is working in the best interests of the citizens of Pennsylvania,” said Wagner.
Wagner says as far as he knows as much as $173,000 worth of taxpayers money is at stake, and he now wants to determine why Simple Brands was the only company to show an interest in obtaining the state contract.
“Am I suspicious when there is only one bidder? I think everyone should be suspicious in a capitalistic system when you hope that you have multiple bidders to give taxpayers the best deal.”
Jim Lesser, the chief executive officer of Simple Brands welcomes the oversight, but says it hardly seems fair. Lesser speaking to Rock The Capital, the other day, noted that he had just returned empty handed from an ATM that failed to dispense cash. “Is someone going to audit that as well,” Lesser asking jokingly.
Lesser says not one tax dollar has been put up for this venture and Wagner will soon learn the truth that the so called “sweetheart” deal he got from the state has been blown out of proportion. Lesser says it’s a joke when Wagner or anyone else talks about putting taxpayers money at stake.
“The state has no financial risk wrapped up in the Kiosks,” says Lesser.
That is not an overstatement. Rock The Capital reviewed the contract and found that Simple Brands had to go so far as putting up a $1 million dollar line of credit that the state can dip into if revenues don’t live up to expectations.
“If at the end of year, Eric, their gross profit from sales of wine don’t exceed their operating expenses including all liquor associated with it, they can go straight to my letter of credit and pull out the shortfalls, they can not lose money,” said Lesser.
Simple Brands owns and maintains more than 30 kiosks throughout the Commonwealth. Lesser has been waiting for the attorney general’s signature to roll out 65 more kiosks.
Lesser acknowledges that his two minority partners, Hebert Vederman and Ira Lubert’s relationship with Governor Ed Rendell certainly did not hurt Simple Brands chances getting the contract, (Vederman and Lubert gave generously to Rendell’s campaigns), but for anyone to conclude that LCB’s bidding process was a sham is false.
“I came to them with an idea of service kiosks. They at first blew me off thinking I was crazy. Then I started showing them safeguards that exist and the technology that exists and how accurate they are.”
A spokesperson for the Liquor Control Board returned Rock The Capital’s call, but failed to find us someone to interview.
How rare is it to have only one company bid a state contract?
“There have been numerous situations in state government, various areas that we have audited where there is only one bidder,” said Wagner.
The kiosks are scheduled to reopen next Tuesday.
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