Two large Boston restaurant companies acknowledged Tuesday that they pocketed tens of thousands of dollars in kickbacks from a beer distributor, an arrangement they defended as legal in Massachusetts.
Lyons Group and Briar Group appeared before the state Alcohol Beverages Control Commission to answer charges stemming from the agency’s crackdown on so-called pay-to-play in the state’s beer industry.
Investigators have said the two companies were among five restaurant operators that accepted about $120,000 from the Craft Brewers Guild, an Everett-based distributor, in exchange for placing beers sold by the distributor on tap in their bars and restaurants while freezing out those offered by competing wholesalers.
Stephen Miller, an attorney for both restaurant companies, argued that a 1946 state law banning such inducements in the alcohol industry was only intended to apply to breweries and wholesalers, and did not explicitly prohibit retailers such as restaurants and package stores from accepting or even requesting them. Moreover, Miller said, that law was repealed in the 1970s, and the ABCC regulation that replaced it was never properly promulgated or, until now, enforced.
“Any enforcement of the regulation today is completely and totally inconsistent with the will of the Legislature,” said Miller. “The regulation at best is vague and has been dormant for 46 years.
The ABCC’s chief investigator, Ted Mahony, said he believed the agency’s prohibition is legally in force and applies to both retailers and wholesalers.
“The retailers are as much participants in this scheme as the wholesalers are,” Mahony said at the hearing. “To hold retailers responsible would certainly be just.”
According to Mahony, Briar Group, which operates Anthem, Gather, the Green Briar and other bars, accepted $17,500 from Craft Brewers Guild to carry Yuengling and other craft beers at its restaurants.
Meanwhile, Lyons Group received $22,000 to stock Craft Brewers Guild beers at its establishments, which include Game On Fenway, Bleacher Bar, Kings Boston, and the Lansdowne Pub.
The payments to Lyons Group, investigators added, were funneled through a shell company named Bank On It that listed the same corporate officers as Lyons Group, but had no employees or payroll.
Regulators had brought similar charges against another restaurant company, Wilcox Group. But in July, the ABCC’s commissioners declined to punish the company, even though owner Gordon Wilcox had admitted taking payments from Craft Brewers Guild. The commissioners ruled investigators had proved only that the money went to Wilcox’s parent company — not to the individual bars that are under the ABCC’s jurisdiction, such as the Lower Depths, Bukowski Tavern, and Rattlesnake Bar & Grille.
Miller made similar arguments regarding the Lyons and Briar groups, saying investigators couldn’t show the money passed through the parent companies to the separate businesses that hold the liquor licenses for each bar.
However, investigators produced invoices, checks, and other documents indicating the payments from Craft Brewers Guild to both restaurant companies were in exchange for placing specific beers in specific bars licensed by the ABCC.
Two other companies that were also hit with pay-to-play violations, Glynn Hospitality Group and an affiliate of Cronin Group LLC, had also questioned the legality of the charges at hearings before the ABCC in June. The ABCC is expected to rule on those four cases later this year.
Craft Brewers Guild is an arm of the Sheehan Family Cos., which controls a network of wholesalers spanning more than a dozen states. The company paid the ABCC a $2.6 million fine to avoid a long license suspension over the pay-to-play scheme, but is currently contesting the penalty in state court.