Auditor general says N.L. liquor corp misspent millions on high-end Bordeaux wine

Auditor general says N.L. liquor corp misspent millions on high-end Bordeaux wine

ST. JOHN’S, N.L. — Newfoundland and Labrador’s auditor general has slammed the province’s liquor board for a misguided program that permitted the purchase of millions of dollars worth of high-end wine, benefiting a relative of the agency’s CEO at the time.

Auditor General Julia Mullaley’s report, published Thursday, said the wine purchases far exceeded demand and had to be sold at a discount. She concluded there was no business case developed for the “Bordeaux Futures” program.

Mullaley said a “close family member” of Steve Winter, the CEO of the Crown corporation at the time, was the largest single agent for sellers of Bordeaux wines to the liquor agency.

As of April 2019, Mullaley’s report says, the inventory of Bordeaux wine at the Newfoundland and Labrador Liquor Corporation was valued at $5.4 million.

That figure included 42,000 bottles of 1,200 different types of wine with an average cost of $128 per bottle. Nearly 40 per cent of those were among 75 varieties that cost between $511 and $3,400 a bottle.

“Decisions regarding these acquisitions rested solely with the former chief executive officer, were not documented and did not follow the standard process for other product lines,” Mullaley said in a statement. “These wines were purchased throughout the period in quantities that far exceeded customer demand and resulted in significant excess inventory of specialty wine.”

Mullaley said the period during which the corporation made questionable purchases of wine extended from 2007 to 2018, when the Bordeaux program was discontinued. Even with inventory levels as high as $10 million in 2015, the Crown corporation continued to buy inventory disproportionate to customer demand.

Her investigation also found examples where the liquor corporation contravened federal and provincial laws by selling and shipping or facilitating shipment of speciality wines to customers in other provinces.

Finance Minister Tom Osborne told reporters Thursday the information outlined in Mullaley’s report is one of the reasons Winter was removed as CEO of the agency in 2018. He said the former CEO was also reticent to cut costs and to help with the province’s roll-out of cannabis products.

Osborne said he didn’t know how much taxpayer money was wasted in the Bordeaux program.

“The concerns that were raised were around very expensive wines,” he told reporters. “Large inventories of those wines, sometimes being sold at a loss but orders continuing to be made for those products. And the nepotism and conflict of interest.”

He said he’ll be seeking advice from the Justice Department before his government takes further steps. “I need to seek legal advice on the interprovincial sales of alcohol products, which is a contravention of interprovincial trade, and it may have legal consequences on the province and the NLC.”

Osborne said the Justice Department was conducting a government-wide review of conflict of interest policies, adding he expected the department to release updated rules “in the very near future.”

In a statement to CBC, Winter said the Bordeaux Futures represented less than three per cent of the NLC’s overall business. He called it “off base” to refer to nepotism.

“This is about taking a run at my son’s business …. I didn’t break any rules, and if the legislation is no good that’s not my fault,” he said.

He said he “always tried to do what was best for the NLC” during his 13-year tenure.

This report by The Canadian Press was first published Feb. 13, 2020.

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