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In Re: Cliff McFarland,
Respondent
STATE ETHICS COMMISSION
FINANC,E BUILDING
613 NORTH STREET, ROOM 309
HARRISBURG, I'A 17120-0400
File Docket:
X-ref-
Date Decided:
Date Mailed:
FACSIMILE 717..787-0806
WEBSITE: V JLhjq,.pa.cW , _W_q.,2 I _ v
21-,017
Order No. 1808
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 Cliff McFarland, a public official/public employee in his capacity as the Director of
Supply Chain for the Pennsylvania Liquor Control Board, 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.
McFarland, 21-017
Page 2
11. FINDINGS:
1. Clifford ("Cliff') McFarland ("McFarland") has been employed by the Pennsylvania
Liquor Control Board ("PLCB") since April 20, 2015.
a. McFarland's first position was with the PLCB's Bureau of Supply Chain.
b. McFarland was promoted to PLCB Director of Planning and Procurement on
October 30, 2016.
C. McFarland was subsequently promoted to PLCB Director of Supply Chain on
March 30, 2018.
2. McFarland has the following duties as the PLCB Director of Supply Chain:
a. Strategic planning, policy development, and management of supply chain functions
of the PLCB;
b. Principal advisor to the Chief Operating Officer regarding the supply chain;
C. Planning and directing the entire operation and management activities of the PLCB
supply chain through development, evaluation, and revision of supply chain
policies involving distribution center, E-commerce and Licensee Service Center
operations, and transportation;
d. Works closely with PLCB Marketing, Store Operations, and Wholesale Operations
groups to improve operational efficiencies;
e. Researches and reviews programs and legislation to develop executive policy
recommendations that enables the PLCB to be a retail industry leader;
f. Evaluates and implements PLCB compliance with homeland security requirements
and collaborates with channel partners such as intermediaries and third -party
service providers; and
g. Prepares budget estimates and monitors budget expenditures and coordinates
financial auditing activities internally as well as with the ComptroIler's Office, the
Pennsylvania Department of Treasury, and the Pennsylvania Auditor General's
Office.
3. As the PLCB Director of Supply Chain, McFarland is a "public employee" as that term is
defined by 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.
McFarland, 21-017
Page 3
a. The PLCB appoints a Chief Executive Officer.
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.
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 a retail seller of wine/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. An alcoholic beverage to be sold in Pennsylvania must first be authorized for sale
by the PLCB.
THE FOLLOWING FINDINGS PERTAIN TO THE PLCB'S LIMITED -RELEASE
LOTTERY OF WINES AND SPIRITS.
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 finewineandgoodspirits.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).
McFarland, 21-017
Page 4
13. The PLCB posts the Limited -Release Lottery terms and conditions on the FW&GS
website.
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;
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.
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.
McFarland, 21-017
Page S
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
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 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 lottery
drawing.
a. Horst made the recommendation based on operational needs and to save money.
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 lottery drawing based on Horst's
recommendation.
C. No official vote was taken by the PLCB to discontinue a second lottery drawing.
d. The Limited -Release Lottery Terms and Conditions were never amended by the
PLCB to include the decision to discontinue a second drawing.
McFarland, 21-017
Page 6
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
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 -battle -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 McFarland, made purchases
outside of the Limited -Release Lottery process.
THE FOLLOWING FINDINGS RELATE TO MCFARLAND'S PARTICIPATION IN
LIMITED -RELEASE LOTTERY DRAWINGS
23. McFarland has entered multiple Limited -Release Lotteries since he began employment
with the PLCB in 2016.
24. The chart below details Limited -Release Lotteries that McFarland entered from calendar
year 2016 through January 2020.
Date/Month
Products
Notes
Aug- 16
BT Ex ., EH Taylor, Four Roses, Willet
Nov-16
Eagle Rare 17 yr, George T. Stagg, Th Handy, W.L.
Dec-16
-Pappy Van Winkle Coll.
Mar-17
Parker's Heritage, Four Roses Single Barrel Select
Oct-17
W.L., Eagle Rare 17 yr, George T. Stagg, Thom Handy,
SazR e, Antiq Set
Nov-17
Pappy Van Winkle Coll,
Feb-18
Four Roses Sm Batch, Parkers Heritage, Elmer T Lee
Jul-18
O han Barrel Entrapment, EH Ta tor, Willett, Weller 12 yr
McFarland, 21-017
Page 7
Oct-18
Eagle Rare 17 yr, Sazerac, Th Handy, George T Stagg, W.L,
Antique Set
Nov-18
Pap X Van Winkle Coll.
Jan-19
Weller 12 Year, Weller Craft, Parker's Heritage, Four Roses
130th Anniv.
Jul-19
Weller 12 Year, BT Ex Coll.
Nov-19
BT Coll, George T Stagg, WL, ThHandy, Eagle Rare 17 yr,
Sazerac R e
*Won 1 bottle George T.
Stagg
Jan-20
Pappy Van Winkle Coll.
a. McFarland entered every Limited -Release Lottery from 2016 through January
2020.
b. McFarland won one bottle of George T. Stagg Bourbon following the December 4,
2019, Limited -Release Lottery.
25. McFarland entered each Limited -Release Lottery for the opportunity to purchase Eagle
Rare 17 Year Bourbon but did not win.
26. The PLCB allocated a total of 93 bottles of Eagle Rare 17 Year Bourbon for individual
customers and 30 bottles of Eagle Rare 17 Year Bourbon for licensees for the December
4, 2019, Limited -Release Lottery.
27, Approximately 10,678 eligible PLCB individual customers, including McFarland, entered
the December 4, 2019, Limited -Release Lottery for an opportunity to purchase one bottle
of Eagle Rare 17 Year Bourbon.
a. Of the 10,678 individual customers who entered, only 93 winners were selected.
28. Approximately 129 eligible licensees entered the December 4, 2019, Limited -Release
Lottery for an opportunity to purchase one bottle of Eagle Rare 17 Year Bourbon.
a. Of the 129 licensees that entered, only 30 winners were selected.
29. Following the December 4, 2019, Limited -Release Lottery, and after the orders of all
Limited -Release Lottery winners were fulfilled or left uncompleted, a small number of
bottles of Eagle Rare 17 Year Bourbon remained in inventory.
30. Following the December 4, 2019, Limited -Release Lottery, at recurring staff meetings,
Horst openly talked about bottles that remained after all Limited -Release Lottery winners
had confirmed receipt of their bottles, informing those at the meetings that they should let
him know if they wanted one of the remaining bottles.
31. On December 11, 2019, Horst mailed McFarland regarding items that would be available
to purchase from the PLCB "third Wednesday release."
McFarland, 21-017
Page 8
a. Horst wrote, "Here are the items that will be in the E-Commerce's Wednesday
release on Dec. 18"'. If you have any interest in any of these items, let me know."
b. The PLCB makes a certain quantity of limited quantity products available for
purchase on the PLCB E-Commerce website to customers on a first -come, first -
served basis.
1. Items made available include limited quantity bourbons.
C. Items available on the "third Wednesday release" are not Limited -Release Lottery
items.
32. The information provided by Horst to McFarland was not available to the general public
or any PLCB licensee.
33. On December 11, 2019, McFarland replied to Horst and inquired if any of the Buffalo
Trace Antique Collection bourbons were available.
a. McFarland wrote;
"Dale if available I'll buy:
2 bottles of the EH Taylor (30724)
2 bottles of the Four Roses (80703)
1 bottle Weller (3985)
And any one of the antiques collections if they are left thanks, Cliff'
b. McFarland's reference to "Antiques Collection" referenced the Buffalo Trace
Antique Collection bourbons that include George T. Stagg Bourbon, Eagle Rare 17
Year Bourbon, Thomas Handy Sazerac Rye, Sazerac Rye 18 Year, and William
Larue Weller Bourbon.
C. The Buffalo Trace Antique Collection is highly sought after and only made
available for purchase through Limited -Release Lotteries.
1. McFarland was aware of the Buffalo Trace Antique Collection as he
entered every Limited -Release Lottery for an opportunity to purchase
Buffalo Trace Antique Collection bourbons.
34. On December 12, 2019, Horst replied to McFarland and informed him that he had all of
the items available for purchase from. the Buffalo Trace Antique Collection.
a. Horst was aware that McFarland had won a bottle of George T. Stagg Bourbon after
entering the December 4, 2019, Limited -Release Lottery.
McFarland, 21-017
Page 9
b. Horst wrote, "On the Antique collection, I see you got a Stagg. Do you have a
preference on any of the others; Eagle Rare, William LaRue, Thomas Handy, or
Sazerac Rye. I should have all of them."
35. McFarland replied to Horst on December 12, 2019, to inform him that he wanted to
purchase the Eagle Rare 17 Year Bourbon.
a. McFarland wrote, "Eagle Rare please."
b. The Eagle Rare 17 Year Bourbon was a listed item for the December 4, 2019,
Limited -Release Lottery and is part of the highly sought-after Buffalo Trace
Antique Collection.
C. McFarland failed to win a bottle of Eagle Rare 17 Year Bourbon during the
December 4, 2019, Limited -Release Lottery.
36. After failing to win a bottle of Eagle Rare 17 Year Bourbon through the Limited -Release
Lottery, McFarland, in his capacity as a public employee, used the confidential information
he obtained due to his position to request that Horst transfer a bottle 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 McFarland had no knowledge of the extent to which
Horst shared information about the availability of the items and of whether or not
Horst shared such information with PLCB individual customers or licensees.
b. A PLCB individual customer or licensee can only wait until the next available
Buffalo Trace Antique Collection Limited -Release Lottery or for the PLCB to
release the items for general sale for an opportunity to purchase an item.
37. On December 17, 2019, four days after Horst transferred the bottle of Eagle Rare 17 Year
Bourbon, McFarland purchased the bottle of Eagle Rare 17 Year Bourbon at the Northwest
Office Building second floor Cost Center register.
a. McFarland used his personal Mastercard credit card to make the purchase.
b. McFarland purchased the Eagle Rare 17 Year Bourbon for $109.99.
C. McFarland paid the same amount for the Eagle Rare 17 Year Bourbon as a Limited -
Release Lottery winner paid to purchase the item.
THE FOLLOWING FINDINGS RELATE TO INVESTIGATIONS COMPLETED BY
THE COMMONWEALTH OFFICE OF THE BUDGET BUREAU OF AUDITS AND THE
PLCB.
McFarland, 21-017
Page 10
38. 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 111 Pamela Richards ("Richards") is responsible for observing each
Limited -Release Lottery to ensure it is conducted in a fair and equitable manner.
C. The BOA provides the PLCB with a report of observations following each Limited -
Release Lottery and identifies irregularities.
39. Richards is responsible for reviewing and reconciling the inventory of Limited -Release
Lottery items post -lottery to ensure the items were correctly distributed.
40. 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.
41. 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.
42. 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.
43. 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:
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
McFarland, 21-017
Page 11
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).
44. 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.
45. PLCB Director of Retail Operations Carl 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.
46. 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.
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, then -Executive Director
Charles Mooney ("Mooney"), of the irregularities noted by Richards.
McFarland, 21-017
Page 12
47. 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.
48. 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.
49. 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.
50. PLCB Chairman Timothy Holden ("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
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.
McFarland, 21-017
Page 13
b. Newsome learned about the sale of Limited -Release Lottery items to PLCB
employees during a June 2020 Audit Committee meeting.
1. 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.
51. 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.
52. 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. Carl Jolly, PLCB Director of Retail Operations;
2. Tom Bowman, PLCB Director of Product Selection;
3. Bryan Kelleher, PLCB Director of Business Development for Wholesale
Operations;
4. McFarland; 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.
III. DISCUSSION:
As the Director of Supply Chain for the Pennsylvania Liquor Control Board ("PLCB")
from March 30, 201 S, to the present, Respondent Cliff McFarland ("McFarland") has been a public
employee subject to the provisions of the Public Official and Employee Ethics Act ("Ethics Act"),
65 Pa. C.S. § 1101 et sue.
McFarland, 21-017
Page 14
The allegation is that McFarland 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
quality 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. § 1102.
Subject to the statutory exclusions to the Ethics Act's definition of the term "conflict" or
"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.
McFarland, 21-017
Page 15
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.
McFarland has been employed with the PLCB since April 20, 2015. McFarland was
promoted to the position of Director of Supply Chain on March 30, 2018.
The PLCB regulates the manufacture, importation, sale, distribution and disposition of
liquor, alcohol, and malt or brewed beverages 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
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.
McFarland, 21-017
Page 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. 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 PLCB Members and PLCB executives to forgo holding a
second drawing for a Limited -Release Lottery. Horst informed the PLCB Members 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 PLCB Members 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.
From August 16, 2019, through July 19, 2019, McFarland entered every Limited -Release
Lottery for an opportunity to purchase a bottle of Eagle Rare 17 Year Bourbon, but he did not win
any of those Limited -Release Lotteries. For the December 4, 2019, Limited -Release Lottery, the
PLCB allocated 93 bottles of Eagle Rare 17 Year Bourbon for individual customers to purchase
through the Limited -Release Lottery. Approximately 10,678 individual customers, including
McFarland, entered the Limited -Release Lottery for an opportunity to purchase a bottle of Eagle
Rare 17 Year Bourbon at the cost of $109.99. McFarland did not win the Limited -Release Lottery.
A small number of bottles of Eagle Rare 17 Year Bourbon remained in inventory after the Limited -
Release Lottery.
Following the December 4, 2019, Limited -Release Lottery, Horst talked openly at staff
meetings about bottles that remained after the Limited -Release Lottery, and he informed those in
attendance that they should let him know if they wanted one of the remaining bottles. On
December 11, 2019, Horst emailed McFarland to see if he had any interest in purchasing certain
limited quantity products, which were not Limited -Release Lottery items, that would be made
available for purchase on the PLCB's E-Commerce website on December 18, 2019. McFarland
replied to Horst by email and inquired whether any bourbons in the Buffalo Trace Antique
Collection, which includes Eagle Rare 17 Year Bourbon, were left over from the Limited -Release
McFarland, 21-017
Page 17
Lottery. When Horst informed McFarland via email that various items, including Eagle Rare 17
Year Bourbon, were available, McFarland requested Eagle Rare 17 Year Bourbon.
On or about December 15, 2019, Horst transferred a bottle of Eagle Rare 17 Year Bourbon
to the PLCB's headquarters at the Northwest Office Building in Harrisburg, Pennsylvania. On
December 19, 2019, McFarland used his personal Mastercard credit card to purchase the bottle of
Eagle Rare 17 Year Bourbon at the second floor Cost Center register in the Northwest Office
Building. McFarland paid the PLCB the same amount that a winner of the Limited -Release Lottery
paid to purchase a bottle of Eagle Rare 17 Year Bourbon (i.e., $10999).
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.
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-
McFarland, 21-017
Page 18
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) McFarland; (2) Carl Jolly, PLCB Director of Retail
Operations; (3) Bryan Kelleher, PLCB Director of Business Development for Wholesale
Operations; (4) Tom Bowman, PLCB Director of Product Selection; 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:
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 McFarland 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. McFarland 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.
McFarland, 21-017
Page 19
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.
Following the December 4, 2019, Limited -Release Lottery, at McFarland's request, the
PLCB Director of Marketing and Merchandising informed McFarland that Eagle Rare 17 Year
Bourbon was left over from the Limited -Release Lottery and available to be purchased. McFarland
received this information, which was not shared with the general public, solely as a result of his
employment as the Director of Supply Chain for the PLCB. Although it is clear that McFarland
was able to purchase a bottle of Eagle Rare 17 Year Bourbon left over from the Limited -Release
Lottery only because of his receipt of information not available to the general public, the Stipulated
Findings reflect that he paid the same price that a Limited -Release Lottery winner would have paid
to purchase the bottle (i.e., $109.99). Because the only way to legally purchase bottles of Eagle
Rare 17 Year Bourbon in the Commonwealth is through Limited -Release Lotteries', McFarland
essentially paid the "market value" of a bottle of Eagle Rare 17 Year Bourbon in the
Commonwealth. There is no basis in the Stipulated Findings for concluding that McFarland
realized a private pecuniary benefit as a result of his purchase of the bottle of Eagle Rare 17 Year
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
McFarland 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.
' 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 a bottle of
Eagle Rare 17 Year 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)).
z Although, based on purchase prices in other states and on the internet, the bottle of Eagle Rare 17 Year Bourbon
may have been valued at significantly more than the price charged by the PLCB to purchase the bottle, the bottle
would not have had any resale value because it is illegal to sell alcohol without a license.
McFarland, 21-017
Page 20
As part of the Consent Agreement, McFarland 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, McFarland 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.
IV. CONCLUSIONS OF LAW:
As the Director of Supply Chain for the Pennsylvania Liquor Control Board from March
30, 2018, to the present, Respondent Cliff McFarland ("McFarland") has been a public
employee subject to the provisions of the Public Official and Employee Ethics Act ("Ethics
Act"), 65 Pa. C.S. § 1101 et seq.
2. No violation of Section 1103(a) of the Ethics Act, 65 Pa.C.S. § 1103(a), occurred when
McFarland 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: Cliff McFarland,
Respondent
File Docket:
21-017
Date Decided:
6/28/22
Date Mailed:
6/29/22
I . No violation of Section 1103(a) of the Public Official and Employee Ethics Act, 65 Pa.C.S.
§ 1103(a), occurred when Cliff McFarland ("McFarland"), as the Director of Supply Chain
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. McFarland 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 COMMISSION,
lir