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HomeMy WebLinkAbout1804 JollyPHONE: 717-783-1610 TOLL FIREE: 1-800-.932.-0936 In Re: Carl Jolly, Respondent STATE ETHICS COMMISSION FINANCE BUILDING 613 NOR-m STREET, ROOM 309 I1ARRISB(,JRG, PA 17120-0400 File Docket: X-ref., Date Decided: Date Mailed: FAGS IMI[�E: 7,17-787-0806 WEBSITE: wwwethics. a. ov 21-004 Order No. 1804 6/28/22 6/29/22 Before: Mark R. Corrigan, Acting Chair Roger Nick Melanie DePalma Michael A. Schwartz Shelley Y. Simms Rhonda Hill Wilson Paul Parsells "This is a final adjudication of the State Ethics Commission, Procedurally, the Investigative Division of the State Ethics Commission conducted an investigation regarding possible violation(s) of the Public Official and Employee Ethics Act ("Ethics Act"), 65 Pa.C.S, § 1101 et seq., by the above -named Respondent. At the commencement of its investigation, the Investigative Division served upon Respondent written notice of the specific allegation. Upon completion of its investigation, the Investigative Division issued and served upon Respondent a Findings Report identified as an "Investigative Complaint." A Stipulation of Findings and a Consent Agreement were subsequently submitted by the parties to the Commission for consideration. The Stipulated Findings are set forth as the Findings in this Order, The Consent Agreement has been approved. That Carl Jolly, a public official/public employee in his capacity as the Director of Retail Operations for the Pennsylvania Liquor Control Board, violated Section I I 03(a) of the Ethics Act when he used the authority of his public position and/or confidential information obtained tbrough his public position for the private pecuniary benefit of himself and/or a member of his immediate family, when he obtained information not obtainable from reviewing a public document or making inquiry to a publicly available source of information as a result of his public position, and used that information to purchase, at a price significantly below market value, alcohol that was limited in quantity and not available to the public when said purchase was made. 11. FINDINGS: .lolly, 21-004 Page 2 1. Carl Jolly ("Jolly") was employed by the Pennsylvania Liquor Control Board ("PLCB") from September 8, 1984, until he retired on December 11, 2020. a. Jolly began his career with the PLCB as a store clerk and was promoted to General Manager II on May 13, 2000. b. On October 26, 2014, Jolly was promoted to PLCB Retail Operations Manager II. c. Jolly was promoted to Director of Retail Operations on July 5, 2016. 2. Jolly's duties and responsibilities as PLCB Director of Retail Operations included the following: a. Make recommendations to the Chief Operating Officer (COO) regarding the formulation and revision of policies and procedures to improve operations, profitability, and customer service; b. Research and review programs and legislation to develop executive policy recommendations; C. Serve as the primary administrator providing guidance, leadership, and vision for retail operations within the PLCB; d. Oversee and directed property management; e. Plan and oversee the implementation and monitoring of retailing, wholesaling, and in-store storage of all wine and spirits sold in PLCB stores; f. Meet with public and private organizations, industry representatives, vendors and licensees, government officials and the public in order to interpret, clarify, or promote PLCB policies; and g. Oversee the implementation of statewide retail customer service programs. 3. As the PLCB Director of Retail Operations, Jolly was a "public employee" as defined in the Ethics Act. 4. The PLCB is governed by a three -Member Board appointed by the Governor and confirmed by two-thirds of the Pennsylvania Senate. a. The Board appoints a Chief Executive Officer. 5. The mission of the PLCB is to responsibly sell wine and spirits as a retailer and wholesaler, regulate Pennsylvania's alcohol industry, promote alcohol education and social responsibility, and maximize financial returns for the benefit of all Pennsylvanians. Jolly, 21-004 Page 3 6. The PLCB regulates the manufacture, importation, sale, distribution and disposition of liquor, alcohol, and malt or brewed beverages in the Commonwealth. 7. As a control state, the PLCB is the only retail seller of spirits in the Commonwealth. a. The PLCB may grant licenses to entities/establishments for the sale of alcoholic beverages for on -site consumption as well as to vendors who sell products for off - site consumption. b. In order for an alcoholic beverage to be sold in Pennsylvania, it must be authorized for sale by the PLCB. THE FOLLOWING FINDINGS PERTAIN TO THE PLCB'S LIMITED -RELEASE LOTTERY OF WINES AND SPIRITS. S. The PLCB is statutorily -mandated by the Pennsylvania Legislature to ensure the equitable distribution of alcoholic beverages to licensed businesses and consumers within the Commonwealth. 9. As part of this statutory mandate, the PLCB conducts allocated spirit lotteries, also known as Limited -Release Lotteries. a. The PLCB has been conducting Limited -Release Lotteries since October 2015. 10. The purpose of the Limited -Release Lotteries is to fairly and equitably distribute the ability to purchase high -end, limited quantity wine and spirits to both individuals and licensees within the Commonwealth. 11. All PLCB customers, both individuals and licensees, may enter Limited -Release Lotteries for an opportunity to purchase limited quantity products including highly sought after bourbons such as the Pappy Van Winkle Collection and the Buffalo Trace Antique Collection. 12. In order to enter the Limited -Release Lotteries, Commonwealth citizens must register on the PLCB's fnewineandgoodspirits.com website ("FW&GS website") and agree to and accept the terms and conditions. a. Limited -Release Lottery items are highly sought after because of limited allocation and availability for purchase in the Commonwealth only through the Limited - Release Lottery process or from a licensed seller (such as a restaurant or bar). 13. The PLCB posts the Limited -Release Lottery terms and conditions on the FW&GS website. Lolly, 21-004 Page 4 a. The PLCB Limited -Release Lottery Terms and Conditions for Participation by Individual Customers ("Limited -Release Lottery Terms and Conditions") were last updated on October 31, 2019. b. The Limited -Release Lottery Terms and Conditions provide for the following: 1. To enter the PLCB Limited -Release Lottery, an individual customer must enter on the FW&GS website and have an FW&GS account; 2. Limited -Release Lottery winners are selected randomly through a computer algorithm; Limited -Release Lottery winners must be Pennsylvania residents and be twenty-one years of age to enter; and 4. Limited -Release Lottery winners are permitted to purchase no more than one Limited -Release Lottery item per individual customer or household. 14. The PLCB does not prohibit PLCB employees or officials from entering Limited -Release Lotteries or from purchasing items if they are selected as a Limited -Release Lottery winner. a. The Limited -Release Lottery Terms and Conditions do not exempt PLCB officials and employees from the Limited -Release Lottery Terms and Conditions. 15. Prior to each Limited -Release Lottery, the PLCB issues press releases that detail the entry period, rules to enter, items available, the cost for each item, and the total quantity made available to both individual customers and licensees. 16. A Limited -Release Lottery winner is contacted by email and given the opportunity to purchase the Limited -Release Lottery item through the FW&GS website. 17. The Limited -Release Lottery item is shipped to the winner's address or designated FW&GS store from the PLCB Fulfillment Center (East Greenville Business Center, 668 Gravel Pike, Suite 500, East Greenville, PA 18041) after receipt of payment. 18. The quantity of items that remain in inventory following a Limited -Release Lottery is not released to the public through press releases or any other method of communication. 19. The Limited -Release Lottery Terms and Conditions, "Second Drawings and General Sale," reflect that remaining items are to be made available during a second drawing, made available on the E-Commerce website, or otherwise sold by the PLCB in the manner it deems most appropriate. a. "If a winning entrant's order is unable to be processed because of payment issues, or if the entry of a winning entrant is determined to no longer be eligible for any other reason, the time associated with that order or entry may be subject to a second Jolly, 21-004 Page 5 drawing, to the extent that any other eligible entries remain in the applicable individual consumer drawing pool for that product code. If a second drawing is not conducted, then any remaining items of any product code will be released for general sale on the FW&GS website on a first -come, first -served basis, or will otherwise be sold by the PLCB in the manner it deems most appropriate based on operational needs. The one -bottle -per -individual consumer and one battle -per - household or billing -address restrictions will continue to apply to the general sale or any other sales offers. Entrants selected as winners during a Lottery will not be eligible to purchase products through the general sale or any other sales offers." 20. The total number of Limited -Release Lotteries varies from year to year. a. The PLCB has typically conducted one Pappy Van Winkle Collection Limited - Release Lottery and one Buffalo Trace Antique Collection Limited -Release Lottery each year and has made other highly sought after bourbons available through additional Limited -Release Lotteries. b. The PLCB has no formal policy or lists as to what qualifies as an item to be sold via a Limited -Release Lottery. 21. Prior to July 2019, Dale Horst ("Horst"), the PLCB Director of Marketing and Merchandising, recommended to the PLCB and PLCB Executives to forgo a second Limited -Release Lottery drawing. a. Horst made the recommendation based on operational needs and to save money. 1. Horst informed the PLCB and PLCB executives that due to the cost and time to conduct a second drawing for a few items, it made the most business sense to discontinue it. 2. Instead of a second drawing, the remaining Limited -Release Lottery items were to be made available on a first -come, first -served basis on the FW&GS website or otherwise sold by the PLCB in the manner it deemed most appropriate based on operational needs. b. The PLCB agreed to forgo a second drawing based on Horst's recommendation. C. No official vote was taken by the PLCB to discontinue a second drawing. d. The Limited -Release Lottery Terms and Conditions were never amended by the PLCB to include the decision to discontinue a second drawing. The Limited -Release Lottery Terms and Conditions under Second Drawings and General Sale state: "If a winning entrant's order is unable to be processed because of payment issues, or if the entry of a winning entrant is determined to no longer be eligible for any other reason, the time Jolly, 21-004 Page 6 associated with that order or entry may be subject to a second drawing, to the extent that any other eligible entries remain in the applicable individual consumer drawing pool for that product code. If a second drawing is not conducted, then any remaining items of any product code will be released for general sale on the FW&GS website on a first -come, first -served basis, or will otherwise be sold by the PLCB in the manner it deems most appropriate based on operational needs. The one -bottle -per -individual consumer and one -bottle -per -household or billing -address restrictions will continue to apply to the general sale or any other sale offers. Entrants selected as winners during a Lottery will not be eligible to purchase products through the general sale or any other sales offers." 22. The first Limited -Release Lottery where a second drawing was not conducted by the PLCB was the July 10, 2019, Limited -Release Lottery. a. This was the first Limited -Release Lottery where allocated Limited -Release Lottery items were made available for PLCB employees and officials to purchase outside of the Limited -Release Lottery process. b. Multiple PLCB employees and officials, including Jolly, made purchases outside of the Limited -Release Lottery process. THE FOLLOWING FINDINGS RELATE TO JOLLY'S PURCHASE OF LIMITED - RELEASE LOTTERY ITEMS 23. Jolly, through communications with Horst, requested Limited -Release Lottery items, including Weller 12 Year Reserve Bourbon, Pappy Van Winkle Special Reserve 12 Year Bourbon, and Pappy Van Winkle's Family Reserve 15 Year Bourbon, which were transferred to the Northwest Office Building for him to purchase. a. Jolly was able to purchase items only available through Limited -Release Lotteries even though Jolly never registered for a Limited -Release Lottery. b. Jolly learned of the availability of Limited -Release Lottery items during interactions with Horst. C. This information was not available to the public. 24. In July 2019 and February 2020, Jolly was told by Horst during PLCB executive meetings and informal conversations that Limited -Release Lottery items were available for purchase. 25. In July 2019, Horst told Jolly that Weller 12 Year Reserve Bourbon, a Limited -Release Lottery item, was available for purchase. 26. In February 2020, Horst came to Jolly's office and informed him of available bottles of Pappy Van Winkle bourbon that were "left over" from the Limited -Release Lottery. Jolly, 21-004 Page 7 a. The information provided by Horst was not available to the public or Limited - Release Lottery entrants. b. Jolly informed Horst that he was interested in purchasing Pappy Van Winkle bourbon, and Horst provided him with options to choose from. C. After informing Horst of his selections, several days later Jolly purchased the items at the Northwest Office Building second floor Cost Center register. d. Jolly purchased three bottles of Pappy Van Winkle bourbon for personal use. e. The availability of "leftover" Limited -Release Lottery items was never made known to the general public. 27. In the Commonwealth, the only lawful way an individual customer or licensee can purchase Limited -Release Lottery items is through the Limited -Release Lottery. a. Limited Release Lottery items are not readily available for sale in FW&GS stores or even on the E-Commerce website. b. Limited -Release Lottery items are highly coveted and in limited supply. 28. Jolly never entered a Limited -Release Lottery. 29. PLCB transfer records confirm that Horst transferred three bottles of Weller 12 Year Reserve Bourbon (Product 74658) from the Fulfillment Center (Store 4650) to the Northwest Office Building (Store 2298) on July 26, 2019. a. Horst transferred one bottle for Jolly to purchase at his request. b. The remaining two bottles were transferred for PLCB Member Michael Negra ("Negra"). 30. At Jolly's request, Horst brought the Weller 12 Year Reserve Bourbon and the Pappy Van Winkle bourbon to Jolly's office in the Northwest Office Building. 31. On July 29, 2019, Jolly purchased one bottle of Weller 12 Year Reserve Bourbon at the Northwest Office Building second floor Cost Center register for $39.99. a. Jolly purchased the Weller 12 Year Reserve Bourbon with his personal Visa credit card. b. Jolly purchased the Weller 12 Year Reserve Bourbon for the same price as that paid by Limited -Release Lottery winners. Jolly, 21-004 Page 8 32. Approximately 8,290 eligible individual PLCB customers entered the July 10, 2019, Limited -Release Lottery for an opportunity to purchase one bottle of Weller 12 Year Reserve Bourbon. a. Of the 8,290 Commonwealth citizens who entered to win a chance to purchase a bottle of Weller 12 Year Reserve Bourbon, only 180 winners were selected. 33. Four bottles of Weller 12 Year Reserve Bourbon remained after the July 10, 2019, Limited - Release Lottery. a. The four bottles were available due to Limited -Release Lottery winners not completing the purchase. b. No members of the public were made aware of remaining bottles available to be purchased or given an opportunity to make a purchase. 34. On February 10, 2020, Horst emailed PLCB Ecommerce Category Manager Dirk Peterson ("Peterson") regarding obtaining the number of bottles that remained in inventory following the January 29, 2020, Pappy Van Winkle Collection Limited -Release Lottery. a. Horst wrote, "Dirk, once Pappy is completed, let isle know what is left over." b. On February 11, 2020, Peterson emailed Horst regarding 22 remaining Pappy Van Winkle Limited -Release Lottery items. c. Peterson wrote, "Dale Here's what my report shows re: Pappy products. I sent this to Dave and also to 4650, once they confirm that counts I'll let you know." Item Item Description Pack Base Store SOH Store on Size Retail order 9530 Van Winkle Special Reserve Straight Bourbon 12 Year Old 90 Proof 3 99.99 17 0 9532 Pappy Van Winkle's Family Reserve Straight Bourbon 20 Year Old 90 3 249.99 12 3 Proof 10849 Pappy Van Winkle's Family Reserve Straight Bourbon 23 Year Old 95 3 39M9 5 0 Proof 14280 Van Winkle Straight Whiskey 6050 mL Library Set 1 2199.99 1 0 14362 Van Winkle Straight Whiskey 4050 mL Library Set 1 1199.99 1 0 14467 Van Winkle Straight Whiskey 3050 mL Library Set 1 999.99 2 0 30591 Old Rip Van Winkle Special Reserve Straight Bourbon 10 Year Old 107 3 89.99 15 9 Proof 30744 Van Winkle Family Reserve Straight Rye Whiskey 13 Year Old 95 Proof 3 159.99 3 0 34155 Pappy Van Winkle's Family Reserve Straight Bourbon 15 Year Old 107 3 149.99 15 6 Proof 99000 Van Winkle Straight Whiskey 5x750 mI. Library Set 1 1899.99 0 0 35. Horst forwarded by email the Pappy Van Winkle bourbon spreadsheet sent by Peterson, to Negra, PLCB Chairman Timothy Holden ("Holden"), and PLCB Executive Director Charles Mooney ("Mooney") on February 11, 2020. Jolly, 21-004 Page 9 a. PLCB Member Mary Isenhour was not included on the email. 36. Horst completed the transfer of one bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon and three bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon to the Northwest Office Building (Store 2298) on Monday, February 24, 2020. a. Horst transferred one bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon and two bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon for Jolly to purchase. b. Horst transferred one bottle of Pappy Van Winkle's Family Reserve 15 Year Bourbon for Negra to purchase. 37. Jolly initially purchased one bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon and two bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon on February 24, 2020, at the Northwest Office Building second floor Cost Center register. a. Jolly received a $40.00 Iicensee discount on the purchase and paid $381.57 for all three bottles of Pappy Van Winkle bourbon. b. After realizing he received the discount by mistake, Jolly returned the Pappy Van Winkle he purchased on February 26, 2020. C. To complete the return, Jolly provided PLCB salesclerk Jo -Ann Perry Woods with his driver's license d. Jolly's name and phone number are included on the sales journal for the return. Jolly repurchased the bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon and two bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon for $410.17 after he completed the return using a Visa credit card. 38. The PLCB allocated 145 bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon for the Limited -Release Lottery, including 109 bottles for individual customers and 36 bottles for licensees. 39. Approximately 17,876 eligible PLCB individual customers entered the January 29, 2020, Limited -Release Lottery for an opportunity to purchase one bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon. a. Of the 17,876 eligible individual customers who entered to purchase one bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon, 999 winners were selected. Jolty, 21-004 Page 10 40. Approximately 18,678 eligible PLCB individual customers entered the January 29, 2020, Limited -Release Lottery for a chance to purchase one bottle of Pappy Van Winkle's Family Reserve 15 Year Bourbon. a. Of the 18,678 eligible individual customers who entered to purchase one bottle of Pappy Van Winkle's Family Reserve 15 Year Bourbon, 109 winners were selected. 41. There were 24 bottles of Pappy Van Winkle Special Reserve 12 Year Bourbon available following the January 29, 2020, Limited -Release Lottery. a. The bottles were available due to Limited -Release Lottery winners failing to complete the purchase. b. The public was not made aware of remaining bottles available to be purchased. C. Based on Horst's recommendation to the PLCB, no second drawing was scheduled, nor were the leftover items made available for sale to the general public. 42. There were five bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon available following the January 29, 2020, Limited -Release Lottery. a. The bottles were available due to Limited -Release Lottery winners failing to complete the purchase. b. The public was not made aware of remaining bottles available to be purchased. 43. The PLCB listed the price to purchase the Pappy Van Winkle's Family Reserve 15 Year Bourbon at $149.99 per bottle. 44. The PLCB listed the price to purchase the Pappy Van Winkle Special Reserve 12 Year Bourbon at $99.99 per bottle. 45. Jolly paid the PLCB listed amount for the two bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon and one bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon. 46. Jolly, in his capacity as a public employee, used the confidential information he obtained due to his position to request Horst to transfer Limited -Release Lottery bottles to the Northwest Office Building. a. In this instance, PLCB individual customers or licensees were not afforded the opportunity to purchase a Limited -Release Lottery item if they failed to win the Limited -Release Lottery as they were not informed by Horst as to what items were available to be purchased. Jolly had no knowledge of the extent to which Horst shared information about the availability of the items and of whether Horst shared such information with PLCB individual customers or licensees. Jolly, 21-004 Page i 1 b. A PLCB individual customer or licensee can only wait until the next available Limited -Release Lottery or for the PLCB to release the items for general sale for an opportunity to purchase an item. THE FOLLOWING FINDINGS RELATE TO INVESTIGATIONS COMPLETED BY THE COMMONWEALTH OFFICE OF THE BUDGET BUREAU OF AUDITS AND THE PLCB. 47. The Commonwealth Office of the Budget Bureau of Audits ("BOA") acts as an independent observer for all Limited -Release Lotteries. a. The BOA observes the Limited -Release Lotteries at the request of the PLCB. b. BOA Auditor III Pamela Richards ("Richards") is responsible for observing each Limited -Release Lottery to ensure it is conducted in a fair and equitable manner. The BOA provides the PLCB with a report of observations following each Limited - Release Lottery and identifies irregularities. 48. Richards is responsible for reviewing and reconciling the inventory of Limited -Release Lottery items post -lottery to ensure the items were correctly distributed. 49. After completing a review of the January 29, 2020, Pappy Van Winkle Limited -Release Lottery, Richards found that inventory counts were not matching the transfer of items designated for the Limited -Release Lottery. 50. Richards discovered that eight units of Pappy Van Winkle bourbon were transferred from the PLCB Fulfillment Center (East Greenville Business Center, 668 Gravel Pike, Suite 500, East Greenville, PA 18041) to the Northwest Office Building second floor Cost Center (2298) on February 21, 2020. a. The transfers were made after the Limited -Release Lottery occurred on January 29, 2020. 51. Richards initiated a review of prior years' Limited -Release Lotteries and found that another twelve Limited -Release Lottery items, including Weller 12 Year Reserve Bourbon, Buffalo Trace 9 Year Bourbon, Eagle Rare 17 Year Bourbon, and George T. Stagg Bourbon, were transferred from the PLCB Fulfillment Center to the Northwest Office Building Cost Center. a. The transfers were made between July 2019 and February 2020. 52. Richards identified the following transfers of Limited -Release Lottery items from the PLCB Fulfillment Center to the Northwest Office Building from July 2019 until February 2020: Jolly, 21-004 Page 12 a. Following the July 10, 2019, Limited -Release Lottery, six bottles of Weller 12 Year Reserve Bourbon, one bottle of Buffalo Trace Experimental Collection 11-48 Month Whiskey, and one bottle of Buffalo Trace Experimental Collection 11-36 Month Whiskey were transferred from the PLCB Fulfillment Center (Store 4650) to the Northwest Office Building (Store 2298). b. Following the December 4, 2019, Limited -Release Lottery, two bottles of George T. Stagg Bourbon and two bottles of Eagle Rare 17 Year Bourbon were transferred from the PLCB Fulfillment Center (Store 4650) to the Northwest Office Building (Store 2298). C. Following the January 29, 2020, Pappy Van Winkle Limited -Release Lottery, one bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon, five bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon, and two bottles of Pappy Van Winkle's Family Reserve 20 Year Bourbon were transferred from the PLCB Fulfillment Center (Store 4650) to the Northwest Office Building (Store 2298). 53. Richards identified a total of twenty Limited -Release Lottery items that were transferred from the PLCB Fulfillment Center to the Northwest Office Building. a. Of the twenty items that were transferred, eighteen were sold at the Northwest Office Building second floor Cost Center register. 1. The PLCB is headquartered at the Northwest Office Building. 2. The second floor Cost Center register is primarily used to process gift cards, specials orders, and celebrity bottle signing purchases for PLCB employees. 3. The second floor Cost Center register is not open to the public to purchase wine and spirits. 4. The second floor Cost Center is set up as an office with cubicles and is not an actual FW&GS store. 54. Jolly was the only PLCB employee who Richards identified as purchasing Limited -Release Lottery items because he provided a driver's license when he completed a return of Pappy Van Winkle bourbon on February 26, 2020. a. The PLCB requires a driver's license to complete a return. 55. On May 1, 2020, and May 11, 2020, BOA Assistant Director Michael Blinn ("Blinn") contacted Horst to discuss irregularities identified by Richards. a. Blinn contacted Horst due to the possible negative public perception the issue could create. Jolly, 21-004 Page 13 b. Specifically, Blinn contacted Horst regarding Limited -Release Lottery items purchased by PLCB employees in violation of the Limited -Release Lottery Terms and Conditions. C. Horst informed Blinn that he would notify his superior, Mooney, of the irregularities noted by Richards. 56. On May 22, 2020, William Canfield ("Canfield"), Director of the BOA, memorialized his agency's PLCB Allocated Lottery Observations regarding the Limited -Release Lottery conducted on January 29, 2020, in a Memorandum to Horst. a. The report states that the drawing itself was fairly conducted. b. The executive summary in the report included "An additional item outside the scope of this engagement was discussed with PLCB management." C. The following was noted in the Conclusion of the Memorandum: 1. "The reconciliation between information received from Marketing and the transactional data at the E-Commerce center revealed two (2) unexplained physical inventory differences which could be indicative of not tracking the units accurately." 2. "An additional item outside the scope of this engagement was discussed with PLCB management." d. The "additional item" mentioned in the BOA Memorandum pertained to the irregularities found by Richards and follow-up discussions with Horst. 57. Horst failed to follow up with the BOA after conversations with Blinn regarding irregularities identified by Richards. a. Horst failed to inform Mooney or the Members of the PLCB about the irregularities found by Richards. 58. The BOA became concerned that Horst and the PLCB were unresponsive to the report of the Limited -Release Lottery observations. a. The BOA was concerned that no control measures were implemented to prevent future sales of Limited -Release Lottery items to PLCB employees and officials. 59. PLCB Chairman Holden was contacted on June 28, 2020, by Pennsylvania Secretary of Administration Michael Newsome ("Newsome"). a. Newsome contacted Holden to inquire if the PLCB had changed policies regarding Jolly, 21-004 Page 14 the sale of Limited -Release Lottery items outside of the Limited -Release Lottery. 1. Newsome served as a Member of the PLCB from April 2016 until January 2019, 2. Newsome was not aware of any changes made regarding permitting the sale of Limited -Release Lottery items to PLCB employees and officials outside of the Limited -Release Lottery. b. Newsome learned about the sale of Limited -Release Lottery items to PLCB employees during a June 2020 Audit Committee meeting. The Audit Committee is an advisory committee of cabinet -level officials that helps to establish the direction of the BOA's efforts. C. BOA Director Canfield addressed concerns before the Audit Committee pertaining to the lack of response from the PLCB and the sale of Limited -Release Lottery items to PLCB employees at the Northwest Office Building. d. Newsome informed Holden that he was aware that a BOA audit had uncovered irregular transactions pertaining to the sale of Limited -Release Lottery items at the Northwest Office Building. 60. After Holden was informed that PLCB executives had purchased Limited -Release Lottery items, he instructed PLCB Assistant Counsel Jason Worley, PLCB Chief Counsel Rodrigo Diaz, and PLCB Executive Director Michael Demko to complete an internal investigation into the matter. 61. The internal investigation identified five PLCB employees who were able to purchase Limited -Release Lottery items only by virtue of their public employment. a. These employees were: 1. Jolly; 2. Tom Bowman, PLCB Director of Product Selection; 3. Bryan Kelleher, PLCB Director of Business Development for Wholesale Operations; 4. Cliff McFarland, PLCB Director of Supply Chain; and 5. Nick Melnick, PLCB Chief Information Officer. b. These PLCB employees used personal credit cards to purchase the Limited -Release Lottery items at the Northwest Office Building second floor Cost Center register. Jolly, 21-004 Page 15 111. DISCUSSION: As the Director of Retail Operations for the Pennsylvania Liquor Control Board ("PLCB") from July 5, 2016, to December 11, 2020, Respondent Carl Jolly ("Jolly") was a public employee subject to the provisions of the Public Official and Employee Ethics Act ("Ethics Act"), 65 Pa.C.S. § 1101 et semc . The allegation is that Jolly violated Section 1103(a) of the Ethics Act when he used the authority of his public position and/or confidential information obtained through his public position for the private pecuniary benefit of himself and/or a member of his immediate family, when he obtained information not obtainable from reviewing a public document or making inquiry to a publicly available source of information as a result of his public position, and used that information to purchase, at a price significantly below market value, alcohol that was limited in quantity and not available to the public when said purchase was made. Pursuant to Section 1103(a) of the Ethics Act, a public official/public employee is prohibited from engaging in conduct that constitutes a conflict of interest: § 1103. Restricted activities (a) Conflict of interest. —No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 Pa.C.S. § 1103(a). The term "conflict of interest" is defined in the Ethics Act as follows: § 1102. Definitions "Conflict" or "conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or a business with which he or a member of his immediate family is associated. The term does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member of his immediate family or a business with which he or a member of his immediate family is associated. 65 Pa.C.S. § 110 Subject to the statutory exclusions to the Ethics Act's definition of the term "conflict" or Jolly, 21-004 Page 16 "conflict of interest," 65 Pa.C.S. § 1102, pursuant to Section 1103(a) of the Ethics Act, a public official/public employee is prohibited from using the authority of public office/employment or confidential information received by holding such a public position for the private pecuniary benefit of the public official/public employee himself, any member of his immediate family, or a business with which he or a member of his immediate family is associated. As noted above, the parties have submitted a Consent Agreement and Stipulation of Findings. The parties' Stipulated Findings are set forth above as the Findings of this Commission. We shall now summarize the relevant facts as contained therein. .lolly began employment with the PLCB on September 8, 1984. Jolly was employed as the Director of Retail Operations for the PLCB from July 5, 2016, until December 11, 2020, when he retired from his Commonwealth employment. The PLCB regulates the manufacture, importation, sale, distribution and disposition of liquor, alcohol, and malt or brewed beverages in the Commonwealth. The PLCB is the only retail seller of spirits in the Commonwealth. The PLCB is statutorily -mandated by the Pennsylvania Legislature to ensure the equitable distribution of alcoholic beverages to consumers and licensed businesses within the Commonwealth. As part of this statutory mandate, the PLCB conducts Limited -Release Lotteries. The purpose of the Limited -Release Lotteries is to fairly and equitably distribute the ability to purchase high -end, limited quantity wines and spirits to both individual customers and licensees within the Commonwealth. Bottles of wines and spirits offered for sale through the Limited - Release Lottery process are highly sought after because they have limited allocation and may only be purchased through the Limited -Release Lottery process. The PLCB has been conducting Limited -Release Lotteries since October 2015. The total number of Limited -Release Lotteries conducted each year varies from year to year. All PLCB customers, including individual customers and licensees, may enter Limited - Release Lotteries for an opportunity to purchase limited quantity products, including highly sought-after bourbons such as the Pappy Van Winkle Collection and the Buffalo Trace Antique Collection. The PLCB has typically conducted one Pappy Van Winkle Collection Limited -Release Lottery and one Buffalo Trace Antique Collection Limited -Release Lottery each year and has made other highly sought-after bourbons available through additional Limited -Release Lotteries. Prior to each Limited -Release Lottery, the PLCB issues press releases that detail the entry period, rules to enter, items available, the cost for each item, and the quantities available for purchase by individual customers and licensees. In order to enter a Limited -Release Lottery, a Commonwealth citizen must register on the PLCB's finewineandgoodspirits.com website ("FW&GS website") and agree to and accept the PLCB Limited -Release Lottery Terms and Conditions for Participation by Individual Customers ("Limited -Release Lottery Terms and Conditions") that are posted on the FW&GS website. The Limited -Release Lottery Terms and Conditions provide, in pertinent part, that: (1) a Limited -Release Lottery must be entered into through the FW&GS website; (2) Limited -Release Lottery winners are selected randomly through Jolly, 21-004 Page 17 a computer algorithm; (3) Limited -Release Lottery winners must be Pennsylvania residents and be twenty-one years of age to enter; and (4) Limited -Release Lottery winners are permitted to purchase no more than one Limited -Release Lottery item per individual customer or household. The PLCB does not prohibit PLCB employees or officials from entering Limited -Release Lotteries or purchasing an item if selected as a Limited -Release Lottery winner. PLCB officials and employees are not exempt from the Limited -Release Lottery Terms and Conditions. A Limited -Release Lottery winner is contacted by email and given the opportunity to purchase the Limited -Release Lottery item through the FW&GS website. The Limited -Release Lottery item is shipped to the winner's address or a designated FW&GS store from the PLCB Fulfillment Center after payment is received for the item. The quantity of items that remain in inventory following a Limited -Release Lottery is not released to the public through press releases or any other method of communication. The Limited - Release Lottery Terms and Conditions, under "Second Drawings and General Sale," reflect that remaining items may be made available through a second drawing to the extent that any eligible entries remain in the applicable drawing pool. The Limited -Release Lottery Terms and Conditions further provide that if a second drawing is not conducted, any remaining items will be released for general sale on the FW&GS website on a first -come, first -served basis or will otherwise be sold by the PLCB in the manner it deems most appropriate based on operational needs. Prior to July 2019, Dale Horst ("Horst"), the PLCB Director of Marketing and Merchandising, recommended to the Members of the PLCB and PLCB executives to forgo holding a second drawing for a Limited -Release Lottery. Horst informed the Members of the PLCB and PLCB executives that due to the cost and time required to conduct a second drawing for a few items, it made the most business sense to discontinue holding a second drawing. Based upon Horst's recommendation, the Members of the PLCB agreed to forgo holding a second drawing. Instead of conducting a second drawing, remaining Limited -Release Lottery items were to be made available on a first -come, first -served basis on the FW&GS website or otherwise sold by the PLCB in the manner it deemed most appropriate based on operational needs. The PLCB did not amend the Limited -Release Lottery Terms and Conditions to reflect the decision to discontinue holding a second drawing. The July 10, 2019, Limited -Release Lottery was the first Limited -Release Lottery where a second drawing was not conducted by the PLCB. Approximately 8,290 individual customers entered this Limited -Release Lottery for an opportunity to purchase a bottle of Weller 12 Year Reserve Bourbon at the cost of $39,99. Four bottles of Weller 12 Year Reserve Bourbon remained after the Limited -Release Lottery as a result of purchases not being completed by winners of the Limited -Release Lottery. Following the July 10, 2019, Limited -Release Lottery, Horst informed Jolly that bottles of Weller 12 Year Reserve Bourbon were left over from the Limited -Release Lottery and available to be purchased. This information was not disseminated to the public. Jolly, 21-004 Page 18 At Jolly's request, Horst transferred a bottle of Weller 12 Year Reserve Bourbon from the PLCB Fulfillment Center to the PLCB's headquarters at the Northwest Office Building in Harrisburg, Pennsylvania, for Jolly to purchase. On July 29, 2019, Jolly used his personal Visa credit card to purchase the bottle of Weller 12 Year Reserve Bourbon at the second floor Cost Center register in the Northwest Office Building. Jolly paid the PLCB the same amount that a Limited -Release Lottery winner paid to purchase a bottle of Weller 12 Year Reserve Bourbon (i.e., $3999). For the January 29, 2020, Pappy Van Winkle Collection Limited -Release Lottery, the PLCB allocated various types of Pappy Van Winkle bourbon, including at least 999 bottles of Pappy Van Winkle Special Reserve 12 Year Bourbon and 145 bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon, for individual customers to purchase through the Limited - Release Lottery. Approximately 17,876 individual customers entered the Limited -Release Lottery for an opportunity to purchase a bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon at the cost of $99.99. Approximately 18,768 individual customers entered the Limited -Release Lottery for an opportunity to purchase a bottle of Pappy Van Winkle's Family Reserve 15 Year Bourbon at the cost of $149.99. Additional bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon were allocated for licensees to purchase. Twenty-four bottles of Pappy Van Winkle Special Reserve 12 Year Bourbon and five bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon remained after the Limited -Release Lottery as a result of purchases not being completed by winners of the Limited -Release Lottery. In February 2020, Horst came to Jolly's office and told him that bottles of various types of Pappy Van Winkle bourbon were left over from the January 29, 2020, Pappy Van Winkle Collection Limited -Release Lottery. When Jolly informed Horst of his interest in purchasing Pappy Van Winkle bourbon, Horst provided Jolly with options to choose from. After Jolly informed Horst of his selections, Horst transferred one bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon and two bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon to the Northwest Office Building for Jolly to purchase. On February 24, 2020, Jolly purchased the three bottles of Pappy Van Winkle bourbon at the second floor Cost Center register in the Northwest Office Building. Jolly mistakenly received a $40.00 licensee discount on the purchase. After Jolly realized that he had mistakenly received the discount, he completed a return of the bottles of Pappy Van Winkle bourbon at the second floor Cost Center register and repurchased the bottles without the discount. Jolly ultimately paid the PLCB the same amounts that Limited -Release Lottery winners paid to purchase bottles of Pappy Van Winkle bourbon (i.e., $99.99 for the bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon and $14999 for each bottle of Pappy Van Winkle's Family Reserve 15 Year Bourbon). At the request of the PLCB, the Commonwealth Office of the Budget Bureau of Audits ("BOA") acts as an independent observer for all Limited -Release Lotteries. Pamela Richards ("Richards"), who is employed as an Auditor III for the BOA, is responsible for observing each Limited -Release Lottery to ensure that it is conducted in a fair and equitable manner. Richards is also responsible for reviewing and reconciling the inventory of Limited -Release Lottery items post -lottery to ensure that the items were correctly distributed. Jolly, 21-004 Page 19 After completing a review of the January 29, 2020, Pappy Van Winkle Collection Limited - Release Lottery, Richards found that inventory counts were not matching the transfer of items designated for that Limited -Release Lottery. Richards discovered that eight units of Pappy Van Winkle bourbon were transferred from: the PLCB Fulfillment Center to the Northwest Office Building on February 21, 2020. Richards initiated a review of prior Limited -Release Lotteries, and she found that between July 2019 and February 2020, another twelve Limited -Release Lottery items, including bottles of Weller 12 Year Reserve Bourbon, Buffalo Trace 9 Year Bourbon, Eagle Rare 17 Year Bourbon, and George T. Stagg Bourbon, were transferred from the PLCB Fulfillment Center to the Northwest Office Building. Eighteen of the twenty items that were transferred to the Northwest Office Building were sold at the second floor Cost Center register. On May 1, 2020, and May 11, 2020, BOA Assistant Director Michael Blinn ("Blinn") contacted Horst to discuss the irregularities identified by Richards. Horst informed Blinn that he would notify his superior, then-PLCB Executive Director Charles Mooney ("Mooney"), of the irregularities noted by Richards. Horst failed to follow up with the BOA after the conversations with Blinn, and he failed to inform Mooney or the Members of the PLCB about the irregularities found by Richards. Pennsylvania Secretary of Administration Michael Newsome ("Newsome") served as a Member of the PLCB from April 2016 until January 2019. During a June 2020 meeting of the Audit Committee, an advisory committee of cabinet -level officials that helps to establish the direction of the BOA's efforts, Newsome learned about the BOA's concerns regarding the sale of Limited -Release Lottery items to PLCB employees at the Northwest Office Building and the PLCB's lack of response to the BOA's concerns. On June 28, 2020, Newsome contacted PLCB Chairman Timothy Holden ("Holden") to inquire whether the PLCB had changed policies regarding the sale of Limited -Release Lottery items outside of the Limited -Release Lottery process. Newsome informed Holden that he was aware that a BOA audit had uncovered irregular transactions pertaining to the sale of Limited - Release Lottery items at the Northwest Office Building. After Holden was informed that PLCB executives had purchased Limited -Release Lottery items, he instructed PLCB Assistant Counsel Jason Worley, PLCB Chief Counsel Rodrigo Diaz, and PLCB Executive Director Michael Demko to complete an internal investigation into the matter. The internal investigation identified the following five PLCB employees who were able to purchase Limited -Release Lottery items only by virtue of their public employment: (1) Jolly; (2) Tom Bowman, PLCB Director of Product Selection; (3) Bryan Kelleher, PLCB Director of Business Development for Wholesale Operations; (4) Cliff McFarland, PLCB Director of Supply Chain; and (5) Nick Melnick, PLCB Chief Information Officer. These PLCB employees used personal credit cards to purchase the Limited -Release Lottery items at the Northwest Office Building second floor Cost Center register. Having highlighted the Stipulated Findings and issues before us, we shall now apply the Ethics Act to determine the proper disposition of this case. The parties' Consent Agreement sets forth a proposed resolution of the allegations as follows: Jolly, 21-004 Page 20 3, The Investigative Division will recommend the following in relation to the above allegations: a. That no violation of Section 1103(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1103(a), occurred when Jolly used the authority of his public position to obtain information not available to the general public, and used that information to purchase alcohol that was limited in quantity and unavailable for purchase by the general public, due to insufficient clear and convincing evidence of a pecuniary benefit. 4. As there is insufficient evidence to support a violation, there is no penalty. 5. Jolly agrees to not purchase any items offered by the Pennsylvania Liquor Control Board (PLCB) outside of the process by which a Commonwealth resident may purchase. 6. The Investigative Division will recommend that the State Ethics Commission take no further action in this matter; and make no specific recommendations to any law enforcement or other authority to take action in this matter. Such, however, does not prohibit the Commission from initiating appropriate enforcement actions in the event of Respondent's failure to comply with this agreement or the Commission's order or cooperating with any other authority who may so choose to review this matter further. a. The Respondent has been advised that as a matter of course, all orders from the Commission are provided to the Attorney General, albeit without any specific recommendations pursuant to paragraph 6 above. b. The Respondent has been advised that all orders become public records and may be acted upon by law enforcement as they deem appropriate. C. The non. -referral language contained in this paragraph is considered an essential part of the negotiated consent agreement. Consent Agreement, at 1-2. In considering the Consent Agreement, we accept the recommendation of the parties for a finding of no violation as to the Section 1103(a) allegation. Jolly, 21-004 Page 21 Following the July 10, 2019, and January 29, 2020, Limited -Release Lotteries, Jolly was informed by the PLCB Director of Marketing and Merchandising that items were left over from the Limited -Release Lotteries and available to be purchased. Jolly received this information, which was not shared with the general public, solely as a result of his employment as the Director of Retail Operations for the PLCB. Although it is clear that Jolly was able to purchase a bottle of Weller 12 Year Reserve Bourbon and three bottles of Pappy Van Winkle bourbon left over from the Limited -Release Lotteries only because of his receipt of information not available to the general public, the Stipulated Findings reflect that he paid the same prices that Limited -Release Lottery winners would have paid to purchase the bottles (i.e,, $39.99 for the bottle of Weller 12 Year Reserve Bourbon, $99.99 for the bottle of Pappy Van Winkle Special Reserve 12 Year Bourbon, and $149.99 for each of the two bottles of Pappy Van Winkle's Family Reserve 15 Year Bourbon). Because the only way to legally purchase bottles of Weller 12 Year Reserve Bourbon and Pappy Van Winkle bourbon in the Commonwealth is through Limited -Release Lotteries', Bowman essentially paid the "market value" of those bottles in the Commonwealth. There is no basis in the Stipulated Findings for concluding that Jolly realized a private pecuniary benefit as a result of his purchase of the bottles of Weller 12 Year Reserve Bourbon and Pappy Van Winkle bourbon left over from the Limited -Release Lottery process.2 Accordingly, based upon the parties' Stipulation of Findings and Consent Agreement, we hold that no violation of Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), occurred when Jolly used the authority of his public position to obtain information not available to the general public, and used that information to purchase alcohol that was limited in quantity and unavailable for purchase by the general public, due to insufficient clear and convincing evidence of a pecuniary benefit. As part of the Consent Agreement, Jolly has agreed to not purchase any items offered by the PLCB outside of the process by which a Commonwealth resident may purchase such items. We determine that the Consent Agreement submitted by the parties sets forth a proper disposition for this case, based upon our review as reflected in the above analysis and the totality of the facts and circumstances. Accordingly, per the Consent Agreement of the parties, Jolly is ordered to fulfill his agreement to not purchase any items offered by the PLCB outside of the process by which a Commonwealth resident may purchase such items. Compliance with the foregoing will result in the closing of this case with no further action by this Commission. Noncompliance will result in the institution of an order enforcement action. 1 Out-of-state distilleries and retailers cannot legally ship liquor directly to individual customers in the Commonwealth see, 47 P.S. §§ 4-415, 4-488, 4-491(2), 5-505.2, 5-505.4). It would also generally be illegal to purchase bottles of Weller 12 Year Reserve Bourbon and Pappy Van. Winkle bourbon in another state for consumption in the Commonwealth because with certain limited exceptions, it is illegal to bring any liquor purchased in another state into the Commonwealth see, 47 P.S. §§ 4-491(8), (11)). 2 Although, based on purchase prices in other states and on the internet, the bottles of Weller 12 Year Reserve Bourbon and Pappy Van Winkle bourbon may have been valued at significantly more than the prices charged by the PLCB to purchase the bottles, the bottles would have had no resale value because it is illegal to sell alcohol without a license. Jolly, 21-004 Page 22 IV. CONCLUSIONS OF LAW: As the Director of Retail Operations for the Pennsylvania Liquor Control Board from July 5, 2016, to December 11, 2020, Respondent Carl Jolly ("Jolly") was a public employee subject to the provisions of the Public Official and Employee Ethics Act ("Ethics Act"), 65 Pa.C.S. § 1101 et M. 2. No violation of Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), occurred when Jolly used the authority of his public position to obtain information not available to the general public, and used that information to purchase alcohol that was limited in quantity and unavailable for purchase by the general public, due to insufficient clear and convincing evidence of a pecuniary benefit. In Re: Carl Jolly, File Docket: 21-004 Respondent Date Decided: 6/28/22 Date Mailed: 6/29/22 ORDER NO. 1804 No violation of Section 1103(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S. § 1103(a), occurred when Carl Jolly ("Jolly"), as the Director of Retail Operations for the Pennsylvania Liquor Control Board, used the authority of his public position to obtain information not available to the general public, and used that information to purchase alcohol that was limited in quantity and unavailable for purchase by the general public, due to insufficient clear and convincing evidence of a pecuniary benefit. 2. Jolly is ordered to fulfill his agreement to not purchase any items offered by the Pennsylvania Liquor Control Board outside of the process by which a Commonwealth resident may purchase such items. 3. Compliance with paragraph 2 of this Order will result in the closing of this case with no further action by this Commission. a. Non-compliance will result in the institution of an order enforcement action. BY THE ON, Acting Chair