VIRGINIA ALCOHOLIC BEVERAGE CONTROL BOARD
RICHMOND
IN THE MATTER OF RICHMOND 402, LLC
HAVE A NICE DAY CAFÉ
11 SOUTH 18TH STREET
RICHMOND, VIRGINIA 23223
LICENSE NOS. 019978 – WINE AND BEER ON PREMISES
019978 – MIXED BEVERAGE RESTAURANT
INCIDENT NO. 201210120041
HEARING HELD At Richmond, Virginia
March 4, 2013
ADMINISTRATIVE
HEARING OFFICER CLARA A. WILLIAMSON
APPEARANCES FOR THE BOARD:
Elizabeth A. Flournoy, Esq., Legal Liaison
Monica J. Humphreys, Special Agent
(Present but did not testify)
Anthony R. Jimenez, Special Agent
Garry Thomas, Special Agent
Donovan Wright, Special Agent
FOR THE LICENSEE:
Michael P. Lafayette, Esq.
Lafayette Ayers Whitlock
Crossridge Professional Park
10160 Staples Mill Road, Suite 105
Glen Allen, Virginia 23060
Rodney Peterson, Managing Member
Cite As: IN RE: Richmond 402, LLC, #019978 (04/30/2013)
Reported by Melissa H. Custis, RPR
C O M P L A I N T S
(Wine and Beer On Premises)
(Mixed Beverage Restaurant)
Incident No. 201210120041
1. Between July 3, 2012 and August 27, 2012, the gross receipts from the sale of food and nonalcoholic beverages at the licensed establishment were less than forty-five percent of the gross receipts from the sale of mixed beverages and food, in violation of Sections 4.1-210, 4.1-114 and 4.1-225 1.c. of the Code of Virginia. (Mixed Beverage Restaurant)
2. Between July 3, 2012 and August 27, 2012, the licensee failed to keep complete, accurate and separate records, in violation of 3 VAC 5-70-90 and Sections 4.1-204 and 4.1- 225 1.c. of the Code of Virginia. (Wine and Beer On Premises & Mixed Beverage Restaurant)
3. The licensee failed to submit to the Board a complete and accurate annual review report for the year ending June 30, 2012, in violation of 3 VAC 5-70-90 D. and Sections 4.1-114 and 4.1-225 1.c. of the Code of Virginia. (Mixed Beverage Restaurant)
4. During the preceding license year July 1, 2011 through June
30, 2012, the gross receipts from the sale of food and nonalcoholic beverages at the licensed establishment were less than forty-five percent of the gross receipts from the sale of mixed beverages and food, in violation of Sections 4.1-210, 4.1-114 and 4.1-225 1.c. of the Code of Virginia. (Mixed Beverage Restaurant)
5. Between July 1, 2011 and June 30, 2012, the licensee failed to keep complete, accurate and separate records, in violation of 3 VAC 5-70-90 and Sections 4.1-204 and 4.1-225 1.c. of the Code of Virginia. (Wine and Beer On Premises & Mixed Beverage Restaurant)
6. The characteristics of the food business conducted upon the licensed premises are such that the establishment ceases to qualify as a “restaurant” within the meaning of Sections 4.1-100 and 4.1-210 of the Code of Virginia and 3 VAC 5-50-110 D. and in violation of Section 4.1-225 1.c. of the Code of Virginia. (Mixed Beverage Restaurant)
FINDINGS OF FACT:
1. The hearing in this matter was convened in order to consider the charges set forth in the Notice of Informal Conference/Hearing Before Hearing Officer, License No. 019978 – Wine and Beer On Premises and Mixed Beverage Restaurant – Incident No. 201210120041.
2. An Informal Conference was held prior to the hearing, during which all parties were present and participated. The Bureau of Law Enforcement (“Enforcement”) was represented by Elizabeth A. Flournoy, Esq., legal liaison. Special Agent Monica Jill Humphreys, who coordinated the case for Enforcement, was also present. Special Agents Anthony Jimenez, Garry Thomas and Donovan Wright were identified as agents who would offer testimony in support of the charges. Michael P. Lafayette, Esq., appeared for the licensee and Mr. Rodney Peterson, managing member, was present. Following commencement of the hearing, the license file was made part of the record.
3. As pertaining to Charges 1 and 2, the first time period in this case, Agent Garry Thomas stated that on July 3, 2012, he, along with Agent Jimenez and Special Agent Judith Carmen, conducted an alcoholic beverage inventory at the licensed establishment. On August 27, 2012, another alcoholic beverage inventory was conducted by Agents Thomas, Carmen, Humphreys and Special Agent Jim Fetterman. The goal was to ascertain the total amount of alcoholic beverages available for sale from July 3, 2012 through August 27, 2012.
4. With regard to mixed beverages, the agents reviewed purchase records from the ABC store for this time period and examined the inventory. They utilized a formula which involved determining the total milliliters (ML) sold, subtracting 8% for spillage, converting the ML to ounces, dividing that amount by a 1.5-ounce pour to determine the number of drinks sold and then multiplying that number by $6.00, the rail drink price. Utilizing this formula, the following figures were set forth:
Total ML Sold 319,625
8% spillage 25,570
Net ML Sold 294,055
Net OZ sold (/30) 9,802
/1.5 oz = number of drinks 6,535
Drink Price $6.00 $39,207
Minus 11% City/State tax $35,222
(Exhibit 1, page 3). The net amount of mixed beverage sales for this time period was determined to be $35,322.00.
5. Based upon the food sales for July 3 through August 27, 2012 reported to Agent Thomas by Mr. Juan Braxton, manager, in the sum of $13,007.00, the ratio was computed as 26.91% food and nonalcoholic beverages to 73.09% mixed beverages (see Exhibit 1, page 3). In an e-mail dated September 7, 2012, Mr. Braxton advised that during this time period, food sales were $13,007.00 and mixed beverage sales were $13,961.00, resulting in a ratio of 48% food and nonalcoholic beverages and 52% mixed beverages (Exhibit 2). However, after examining the applicable inventories, purchase records and applying the formula, set forth, supra, the licensee’s ratio figures were determined by Enforcement to be erroneous. Agent Thomas stated that he was satisfied that Enforcement’s figures concerning the mixed beverage total sales and ratio were correct.[1]
6. Agent Thomas further stated that he met with Mr. Braxton on September 24, 2012 and ascertained that the food purchase invoices for June, July and August 2012 totaled $1,215.00. According to Agent Thomas, this would invalidate the food sales figure of $13,007.00 reported by the licensee and is indicative of the licensee’s failure to keep accurate records.
7. As pertaining to Charges 3, 4 and 5, concerning the second time period of July 1, 2011 through June 30, 2012, Agent Thomas referred to the Mixed Beverage Annual Review (MBAR) filed by the licensee for the period ending June 30, 2012. He stated that this MBAR was signed by Mr. Braxton on August 1, 2012 and indicated food and nonalcoholic beverage sales as $117,680.00 and mixed beverage sales as $142,609.00. This resulted in a ratio of 45% food and nonalcoholic beverages to 55% mixed beverages. The total food and nonalcoholic beverage purchases were indicated as $16,783.00 and mixed beverage purchases as $32,325.00 (Exhibit 3).
8. Agent Thomas prepared a spreadsheet of mixed beverage purchases and sales for the period of July 2011 through June 2012, including the name of the product purchased, bottle size, quantity purchased, amount paid and calculated extended sales. He stated that he applied the normal formula to determine the total ML purchased and available for sale. His calculations were shown on the spreadsheet as follows:
Total ML Sold 2,721,050
8% Spillage 217,684
Net ML Sold 2,503,366
Net OZ Sold (/30) 83,446
Total 1.5 OZ Drinks Sold 55,630
Rail $6 $6
NET SALES AFTER MINUS
11% TAXES $300,705
(Exhibit 4, page 37). After determining that mixed beverage sales during this period of time were $300,705.00 and using the food sales figure of $117,680.00 reported on the MBAR, the ratio was determined to be 28% food and nonalcoholic beverages to 72% mixed beverages (see Request for Hearing, page 4)[2]
9. Agent Thomas stressed that the mixed beverage purchases reported on the MBAR were $32,325.00; however, a check of ABC store records indicated purchases of $165,686.00. He later stated that there were inaccuracies concerning the pricing of the liquor bottles purchased and acknowledged that the incorrect pricing would affect his calculations concerning the MBAR figures and the ABC store purchases. This factor would only apply to the period of July 1, 2011 through June 30, 2012. The contents of his spreadsheet concerning the product purchased, quantity and price were provided by Ms. Bonnie Tarabay with ABC and were relied upon by Enforcement for the mixed beverage purchases for the audit year of July 2011 through June 2012 (see Exhibit 4).
10. Agent Thomas stated, on cross-examination, that he used a 1.5-ounce pour in making his calculations concerning mixed beverage sales. That was the pour size that had been provided by the licensee.
11. Agent Thomas stated that, as shown on the spreadsheet, Exhibit 4, the quantity multiplied by the bottle price equaled the extended sales calculations. However, there were a number of inaccuracies concerning the pricing of these bottles. For example, Relska vodka was listed approximately 91 times and the price per bottle for the same size bottle appeared in some instances as $34.40, and in others as $43.00, $86.00, $68.00, $129.00 or $172.00. There were similar errors in the prices listed for Aristocrat vodka, with prices ranging from $25.00 to $42.00 per bottle and Montezuma tequila, with a price range of $27.90 to $111.60 per bottle. He conceded that incorrect pricing per bottle would affect his calculations concerning the figures on the MBAR and the ABC store purchases.
12. Agent Thomas was asked about the fact that the calculated mixed beverage sales of $300,705.00 were approximately double the amount of such sales reported on the MBAR in the sum of $142,609, leaving unreported sales in the amount of $158,000.00. He could not provide any explanation for the discrepancy and no independent observations were made on the premises as to what was being rung up by the bartender or the pour size of the drinks. Agent Thomas stressed that he asked Mr. Braxton about the actual Z-tapes; however, they were unavailable for inspection at that time. Agent Thomas stated that the sales reported on the ST-9 tax forms filed by the licensee were consistent with the figures set forth on the MBAR. He conceded that if the mixed beverage sales calculated were erroneous, that would affect the ratio charge.
13. Agent Thomas was also asked about the 8-week audit between July 3 and August 27, 2012 (Exhibit 1). Again, a 1.5-ounce pour size was used in the calculations, as that is the amount provided by the licensee, with no allowances being made for heavy pours. There was no separate classification for drinks containing multiple liquors.
14. As pertaining to Charge 6, Agent Donovan Wright stated that he was assigned to make observations at the establishment on August 24, 2012, along with Special Agent Stephan Brown. Upon entering the upstairs bar at approximately 11:30 p.m. on August 24, 2012, Agent Wright attempted to order food; however, he was told that he had to order downstairs. They proceeded to the downstairs bar area and requested a menu. They were presented with the same 4x6 card containing the same food items as provided to Agent Thomas by Mr. Ogu on July 3, 2012, and represented as the restaurant menu, i.e., “French Fries,” Mozzarella Sticks,” “Popcorn Shrimp,” “Chicken Tenders” and “Chicken Wings” (see Exhibit 5). Agent Wright ordered chicken tenders; however, after 45 minutes, they had not been served and he observed that no one else was eating. He did not see a food buffet in the establishment, nor did he observe food being served to anyone and there was no separate dining area.
15. Mr. Rodney Peterson, managing member, stated that he first acquired the business in September 2009 and he purchased it as an existing business. He stressed that prior to purchasing the business, he spoke with the ABC compliance officer and was told that everything was okay with the business. After closing on the purchase, he spoke with Agent Jimenez about having a food buffet, and according to him, Agent Jimenez advised him that the buffet could be paid for at the door and be available for patrons. He then established the buffet, and for the last three years, the buffet has been the source of most of the food sales. He did not recall ever receiving any complaints from ABC agents concerning his food sales.
16. Mr. Peterson further stated that patrons pay $10.00 at the door if they wish to purchase the buffet, and these purchases are counted as food sales. If the buffet is not purchased, an admissions fee of $11.00 is charged, which is not counted as food. He stressed that the buffet charge is rung up in the cash register system, as are all alcoholic beverage sales. According to him, the bar manager totals the sales for the day and the daily totals are added to the monthly totals that are reported on the MBAR and the ST-9’s. He asserted that the meals tax returns and cash register records are consistent, and all reported sales are true and accurate.
17. Mr. Peterson stated that he had reviewed the Request for Hearing, which represented that the mixed beverage sales for the MBAR period were actually double those sales reported. He stressed that this was inaccurate, as the bartenders do a free pour, with no measurements being performed. After being notified of the ABC hearing, he approached the bartender and requested that he demonstrate a pour of a single liquor drink. He discovered that the pour range was 2 to 3 ounces. He then had the bartender make a multiple liquor drink and measured 2 to 3.5 ounces and sometimes 4 ounces of liquor being poured into that type of drink. The price for a single liquor drink is $6.00, which is the rail price, and the price for a multiple liquor drink is also $6.00. He explained that approximately 75% of mixed beverage sales are for rail liquor and more multiple liquor drinks are sold than single liquor drinks.
18. Agent Jimenez testified concerning the history. The licensee is a restaurant located in Richmond, Virginia. Wine and Beer On-Premises and Mixed Beverage Restaurant licenses were issued on June 17, 2003. A Consent Settlement Order was entered on June 5, 2008, concerning two charges that on two separate occasions the licensee purchased alcoholic beverages from the Board except for cash in that the checks issued were returned for insufficient funds. For each charge, the licensee was ordered to pay $250.00 as a civil penalty in lieu of a seven (7) day suspension.