Three prominent Boston bars whose corporate owners accepted payments from a beer distributor to stock certain brews over others will not be penalized, a frustrating setback for state investigators trying to stamp out the banned practice of “pay-to-play” in the Massachusetts beer industry.
There was never any doubt about the conduct — the restaurant groups that own the bars admitted to state investigators they received inducements from the beer distributor. But commissioners of the Alcoholic Beverages Control Commission said Thursday there was no proof the “kickbacks,” as the commissioners termed the payment, were passed on from the corporate parents to their bars.
The three bars, Game On, Gather, and Coogan’s Bluff, last year were accused by ABCC investigators of taking a combined $79,400 from the distributor, Craft Brewers Guild, to place its brews on tap. Such inducements are banned under a state regulation that seeks to limit anti-competitive practices in the alcohol market.
But in their ruling Thursday, the ABCC’s three commissioners said the evidence showed only that the payments went to the parent restaurant groups, which could not be charged because, unlike the bars, they do not hold liquor licenses overseen by the agency.
As a result, the commissioners determined that the bars did not violate the pay-to-play ban, a decision the ABCC’s top lawyer suggested they made reluctantly.
“By the tenor and tone of the decisions, the commissioners seemed to express their displeasure that there was nothing they could do,” said Kris Foster, the ABCC’s general counsel. “The commission is constrained by the Legislature in that it can only regulate licensees,” not their corporate parents.
Game On is a sports bar near Fenway Park that’s owned by Lyons Group; Gather, a Seaport District restaurant, is owned by Briar Group. Coogan’s Bluff is a downtown pub that’s run by Glynn Hospitality Group.
Stephen Miller, an attorney for the Briar and Lyons groups, said his clients were “thrilled” to be absolved. An attorney for Glynn Hospitality Group did not return a call seeking comment.
However, the ABCC did find that a fourth bar, Jerry Remy’s in the Seaport District, violated the pay-to-play ban.
The commissioners said the bar, owned by Cronin Group, accepted $8,420 from Craft Brewers Guild, while disguising the bribes on invoices under code phrases such as “menu support.”
The charge stuck only because the same Cronin subsidiary that accepted the payments also owns Jerry Remy’s and its liquor license.
The company “actively participated in this unlawful scheme, by accepting and depositing the checks,” the ABCC commissioners said, “while knowing that the billing was a ruse for the payment of a $20-per-keg kickback from Craft.”
The agency suspended the Jerry Remy’s liquor license for 18 days, but the bar has to serve only three days unless it commits another alcohol violation within two years.
Jerry Remy’s can ask to pay a fine instead — a figure based on the bar’s sales.
Thomas Kiley, the attorney for Cronin Group, decried the sanction, noting the company took less money than the other restaurant groups and did not have the payments go to other entities.
“If you want to make an example of somebody, we’re the wrong example,” Kiley said. “My client was offered a rebate that was available to everybody, and he took advantage of it. The customers end up getting the benefit of that. I don’t think there’s anything remotely wrong with it.”
Cronin Group has not decided whether to challenge the license suspension in court, Kiley added.
The ABCC did leave open another possible action against the three absolved bar owners. The commissioners said the agency never authorized Lyons, Briar, or Glynn to manage the bars that were charged, and it directed investigators to determine whether those relationships were illegal.
Miller said the Briar and Lyons groups would cooperate with investigators regarding the potential management issue. But he suggested the ABCC should clarify the rules, since many alcohol retailers use similar corporate structures.
As evidence in the three unsuccessful cases, ABCC investigators had submitted invoices and checks detailing the pay-to-play deals between Craft Brewers Guild and the bar owners. The documents note the precise amounts of the payments, the beer brands involved, and which of the restaurant groups’ bars would sell those beers.
But the commissioners said even these records — plus the admissions by three companies — did not prove that the inducements ended up at the bars charged by investigators.
For example, Lyons Group admitted receiving $22,345 from Craft Brewers Guild in 2013 and 2014. In exchange, the firm stocked Yuengling, Lagunitas, and other beers at its Boston bars, which in addition to Game On include Bleacher Bar, Bill’s Bar, and Kings.
Investigators charged only Game On Fenway LLC, a Lyons-controlled entity that owns the sports bar and its alcohol license. But the checks from Craft Brewers Guild were made out to “Bank On It, Inc.,” a marketing entity of the Lyons Group that had no employees or payroll.
“It is clear . . . that Bank On It and/or Lyons received $22,345 as bribes for dedicated tap lines in Lyons-managed restaurants,” the ABCC commissioners wrote. “However, this is inadequate to show that Game On, as opposed to one of Lyons’s other [licensed] establishments (if any of them), actually received any money from the arrangement.”
The commissioners made similar determinations for Briar Group and Glynn Hospitality Group.
Craft brewers have blasted retailers and wholesalers for such schemes, saying they limit consumer choice by awarding tap handles to the highest bidder instead of to the best beer maker. But Miller defended the arrangements, saying inducements help unproven beers get to market and should be permitted.
“Some products, no one would see them if the supplier and wholesaler weren’t supporting them,” he argued. “For a consumer to think it’s scummy or sleazy — it’s the exact opposite. You’re getting more products and much better products for a better price.”
The ABCC commissioners on Thursday did rebuff a key legal argument from the restaurant groups: that state regulations ban only distributors from offering inducements, and do not prohibit retailers from accepting or even demanding them.
The commissioners called that a “convoluted” reading of the rule and insisted the pay-to-play ban applies to bars and restaurants.
The charges adjudicated Thursday emerged from the first-ever crackdown on pay-to-play in the Massachusetts alcohol industry.
In March, the ABCC fined Everett-based Craft Brewers Guild a record $2.6 million for making $120,000 in illegal payments to bars.
The company, part of the multistate beer wholesaling empire controlled by Sheehan Family Cos., is contesting the fine in state court.
Investigators subsequently brought charges against some of the bars that received the payments. In July, the ABCC commissioners absolved a now-defunct bar, Estelle’s in the South End of Boston, on the same grounds — that the payments went to its owner, the Wilcox Group restaurant company, instead of the bar itself.