Monarch Beverage Co.’s attempts to enter the liquor business over the past decade were frequently met with displeasure from staffers in the Indiana Governor’s Office and at the Indiana Alcohol and Tobacco Commission, according to private emails brought to light by a recent court case involving a Monarch affiliate.
Indianapolis-based Monarch, the state's largest beer and wine distributor, has for years attempted to sell liquor in Indiana, but has been shot down by the Legislature and in two lawsuits in which it tried to argue the state’s regulatory rules were unconstitutional.
Last week, however, a Marion County Superior Court judge ruled in favor of Monarch affiliate Spirited Sales LLC in its quest for a permit to sell liquor on a wholesale basis.
In her ruling, Judge Heather Welch called electronic communications between the governor's office, ATC and Monarch opponents "disturbing and inappropriate,” saying the “discussions challenge the integrity of the application process and raise questions about the [ATC’s] willingness to serve all citizens of Indiana equally, fairly, and without bias.”
Welch added: "Though political appointees, the Commission is supposed to be an independent agency that grants permits on the basis of merit without any consideration of the applicant's politics. The Commission must not have its judgment questioned by seeking advice on the issuance or denial of permits by having ex parte discussions with staffers of a government office or Remonstrators."
The emails show aides to former Gov. Mitch Daniels and Gov. Mike Pence were regularly in touch with ATC decision-makers regarding various requests from Monarch over the years, sometimes cheering behind closed doors when the company failed. And Monarch’s competitors appeared to have frequent communication with the two entities, calling themselves “the good guys.”
In 2009, a Daniels aide even appeared to direct an ATC commissioner to deny one of Monarch’s requests. The company at the time was seeking permission from the ATC to allow Indiana Wholesale Wine & Liquor Co. to transfer its liquor permit to Monarch's Pendleton Pike warehouse and use its transportation services.
Jessica Norris, policy director for regulatory and administrative affairs under Daniels, wrote in a July 27, 2009, memo circulated in the governor’s office that Monarch was trying to “get into the business of selling and/or distributing spirits.”
“I’ve told Snow this is not something we want to allow, so he will be denying the request unless you have additional concerns,” Norris wrote in the memo. P. Thomas Snow was the chairman of the ATC at the time.
Indiana has a three-tier alcohol-regulatory system that requires manufacturers, wholesalers and retailers to be separate entities. It is the only state in the country that restricts beer wholesalers from holding a liquor wholesale permit.
Monarch—which, like liquor distributors, also sells wine—began its liquor push after its largest wine supplier, E&J Gallo Winery, began also selling spirits. Because Gallo prefers to work with one wholesaler for both wine and spirits, Monarch feared the product line expansion would put its relationship at risk.
Since then, affiliates of Monarch and its opponents have spent vast sums on campaign contributions for state lawmakers—whose lack of action merely ensured the money kept flowing.
Monarch and Spirited Sales are separate companies but have a lot in common. The same shareholders who own Monarch also own EF Transit Inc., a transportation firm that owns Spirited Sales. Phil Terry is CEO of both Monarch and EF Transit.
The commission took the position that the common ownership prohibited issuance of a permit to Spirited Sales. but Judge Welch found that decision was “arbitrary and capricious,” since the ATC had a long history of granting various types of alcohol permits to applicants in similar situation.
Included in the trove of documents unearthed in that case is a February 2010 email from Norris, Daniels' policy aide, to a partner at Ice Miller, Monarch's law firm. Norris wrote that “the governor’s office will not take a position and we’ll remain neutral” on legislation pushed by Monarch and National Wine & Spirits to change the state's liquor laws.
But four days earlier in a memo to Betsy Burdick Wiley, then Daniels deputy chief of staff, Norris cheered Monarch’s failure.
“The Monarch/National bill as you’re aware is dead! Yeah! I’ll be watching to see if they will amend the language in the House,” Norris wrote.
In January 2011, after Monarch renewed its quest for legislation, Burdick Wiley wrote in an email to Norris that the new measure was "obviously a bad bill."
Norris replied with the following: “Oh, and we’re neutral on this bill, unless you want me and the ATC to outwardly oppose it.”
In January 2012, Norris emailed Burdick Wiley to report that one of Monarch’s customers, MillerCoors, had pulled out of a trade group run by one of Monarch’s opponents, Marc Carmichael, to form a new group.
“That’s a big deal—especially with the Monarch bill…” Norris responded.
Burdick Wiley replied, “Bill is still gonna die.”
Later in 2012, Burdick Wiley told Norris that someone “better draft an objection” after Monarch CEO Phil Terry emailed the ATC a document proposing that EF Transit be allowed to provide delivery-only services to Indiana Wholesale Wine & Liquor.
Jim Purucker, who runs the Wine & Spirits Distributors of Indiana, emailed Norris in May 2012 asking to “get on your calendar to talk Monarch issues sometime soon.” The group opposes Monarch's entry into liquor distributing, saying it would have an unfair competitive advantage in the market.
“Absolutely,” Norris replied, and the two set a date to meet the following week.
In other emails, ATC staff came across as frustrated over its dealings with Monarch and Spirited, and annoyed at having to fulfill requests the companies made under the state's public records law that could be used to challenge commission decisions.
“Make it stop!!! Dear God, make it stop!!! Don’t they know that this is an informal hearing where the COMMISSION should be asking for information, not the other way around?” an ATC staffer, Allen Renfro, wrote in April 2014 to ATC Executive Secretary David Rothenberg.
Rothenberg emailed Adam Berry, regulatory policy director and special counsel under Pence, in June 2014 to express his frustration after Spirited sought a continuance of its hearing into whether the ATC would approve its liquor wholesaling permit—the matter that was at issue in the Spirited Court case—because Spirited had yet to receive public records it had requested it believed were relevant to the proceedings.
Rothenberg said Spirited seemed to be making requests for the purpose of “building up a case” against the commission, and said that wasn’t the commission’s job.
“Their requests are indeed [public records] requests, but let’s be honest about their intent—they want to find evidence which shows [the commission’s] conflicting past decisions,” Rothenberg wrote to Berry in June 2014.
Rothenberg wrote to another ATC staff member the next month that his “head was going to explode” after Spirited submitted a motion to disqualify Alex Huskey, then the chairman of the ATC, from hearing its case. Included was an affidavit of a former Indiana State Excise Police officer, who said it was her impression that Huskey “harbored animosity” against Monarch, its CEO Phil Terry and EF Transit.
Rothenberg said they "would have a laugh reading this.”
Monarch’s competitors also didn’t hesitate voicing their glee to ATC staff members at Monarch’s failings at entering the liquor industry.
In a 2012 email between Purucker, who runs Wine & Spirits Distributors of Indiana, and ATC Executive Secretary Davey Neal, Purucker said it was a “good day for the good guys” because Monarch “didn’t do so well.”
Neal responded simply: “You lose some, you lose some."