SALT LAKE CITY -- The Utah Attorney General's Office is beginning an investigation into what happened to almost $300,000 missing from a private liquor-packaging agency that was located in Eden.
A legislative audit, released Tuesday and reviewed by the Legislative Audit Committee, looked at the action taken by the Department of Alcoholic Beverage Control regarding the packaging agency operated by Bill Lyman from June 24, 2009, until it closed in July 2010.
"I hold you responsible for this debacle," said Senate President Michael Waddoups, R-Taylorsville. "Is there any reason why I should not?"
"You have every right to feel that way," said Gordon Strachan, vice chairman of the Alcoholic Beverage Control Commission, the governing board for the DABC.
Waddoups said DABC Director Dennis R. Kellen "showed terrible manager skills" by not sharing information with the commission about what was going on with the Eden packaging agency.
DABC officials said the attorney general's office is reviewing the case to see if any criminal charges should be filed.
The DABC continued to ship liquor to the store despite the store's growing debt, according to the audit.
The DABC also failed to follow its own rules for conducting audits of packaging agencies every six months, it states. The DABC didn't do an audit for almost 10 months, and by then, the store had unpaid charges of more than $400,000.
Rep. Gage Froerer, R-Huntsville, said he was contacted by the DABC about two months before it closed the Eden store. He had heard rumors that the store was in trouble.
"The DABC gave me a heads-up that the store was in trouble, and I told them to use good business practices and protect the state's money," he said.
Froerer read the legislative audit Tuesday and said, "I had no idea the amount of money that was involved."
Froerer said it is against good business practice to continue allowing someone who does not make payments "to run up the tab."
"That doesn't make sense," he said.
The Eden packaging agency was approved to be a Type 2 agency, in which the operator receives a set amount of compensation as outlined in a contract, according to the audit.
DABC changed the packaging agency to a Type 3, which allows the operators to be reimbursed based on the volume of liquor ordered.
The reason for the change was that, when the Eden agency opened, a Type 3 agency had closed in Heber Valley and the funds were available. However, the audit showed that no contract for Type 3 had been written for the Eden agency.
When the Eden packaging agency opened, the operator was receiving $1,000 a month, but with the change to a Type 3 agency in April 2010, the operator received almost $8,000 a month and the DABC made it retroactive to January.
When the DABC closed the Eden packaging agency in June 2010, the agency owed more than $417,000 in outstanding inventory, according to the audit. The DABC recovered $93,000 in inventory and stopped a number of shipments, so with the recovered inventory and the issued credits, the final balance owed was $298,177.
DABC officials said the amount lost to the state is closer to $110,000, which is the profit the state would have made from the liquor if it had been sold.
Sen. Jerry Stevenson, R-Layton, attended the legislative committee meeting. He disagrees with DABC's definition of a loss.
"Loss of profit is a loss," he said.
Efforts to reach Bill Lyman for comment were unsuccessful. Phone numbers listed with his residence in Eden have been disconnected. A call to another number under his name was not immediately returned.
DABC officials wrote in the audit that Lyman had gone bankrupt.