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Thursday, May 20, 2010

LCBO Strings Attached

LCBO Strings Attached [reprinted]
Written by Rob Cornforth, Ottawa Life Magazine
LCBO MonopolyLCBO requests Letter to Editor be published "with no strings attached".
In the January 2010 issue of Ottawa Life Magazine, (OLM) we published a feature article by wine writer, Michael Pinkus, (www.ontariowinereview. com). Pinkus reported that the LCBO handed out over 6 million dollars in bonuses during the economic downturn of 2008. The feature was read by thousands of readers both in print and online at www.ottawalife. com and readers' opinions were all similar, ranging from anger to complete disgust.
On January 25, 2010, Chris Layton, LCBO, Corporate Communications, contacted OLM. He suggested the writer had a personal bias against the LCBO, cited what he claimed were inaccuracies in Pinkus's article, and said that the LCBO had not been contacted by Pinkus to inform the story. When OLM immediately responded that our Editor would be pleased to interview the CEO of the LCBO whenever it was convenient, we were advised that an interview would not be possible. The magazine was also told that the communications shop at the LCBO would "consider" answering questions about the operation only after OLM published, in full and with no edits, a letter the LCBO had prepared refuting Pinkus's "inaccuracies."
Our questions to the LCBO management team would first be screened by LCBO communications staff to ensure they were appropriate for management.
In an email to OLM, LCBO spokesperson Layton replied that the LCBO would not agree to an interview saying, "When we have responded to articles in other publications with letters to clarify incorrect or misleading information, those letters have been published.
Mr. Layton's boss, a Mr. Williams, then contacted OLM (and we are
not making this up!) to inform us that Mr. Pinkus and other writers like him from media groups such as the Toronto Star, held grudges against the LCBO. Williams continued to refer to the Pinkus article in a derogatory manner while avoiding many of the numerous key issues it raised. When asked about the LCBO's response, Pinkus replied, "the LCBO can get mad but there is nothing untrue in my article. As you can see for yourself, they have no interest in disclosure or in anyone questioning them, period. They even refused the requests of the Publisher and Editor of OLM to interview them after the story of their bonuses and other questionable conduct was raised. They see the best form of communication as no communication but they pretend otherwise." Williams and Layton outright refused OLM's request to do an interview with the LCBO President and CEO Bob Peter. Layton then added tersely, "should OLM choose not to publish the letter in response to the Pinkus article, the LCBO will have to consider other options to publicly correct the misinformation in Mr. Pinkus' opinion piece." (This was taken as a veiled threat of legal action against the magazine).We reminded Mr. Williams that we do not report to him. Ironically, Williams' and Layton's boorish attitude and response mirror the very bad behaviour and presumption of entitlement described by Pinkus in his article, LCBO Monopoly.
OLM continues to have a growing response to the January 2010 feature story LCBO Monopoly. Conservative Party Leader and Official Opposition Leader Tim Hudak told OLM that he sees concerns with the LCBO monopoly as symptoms of a greater flaw. He cites the LCBO as a perfect example of this reckless spending and refers to the six million dollars in bonuses that were awarded to LCBO management in 2008. "During these challenging economic times, where we've seen unprecedented job losses and a massive deficit, six million in bonuses to LCBO management is wrong," Hudak says. "We have always maintained that public sector contracts need to reflect private sector realities. Right now we're saddled with a $25 billion deficit, more than all the other provinces and territories combined- thanks to the reckless spending of this Liberal government. Ontario taxpayers should never pay for Dalton McGuinty's waste, mismanagement, and pay-outs to Liberal friends and insiders." The Ontario PC Leader points out that LCBO doling out bonuses is just one of many examples of taxpayer money being mismanaged by McGuinty's government.

"Whether it's a $750,000 pay-out to the former CEO at OLG, a $114,000 bonus to the eHealth CEO after just 4 months on the job, followed by a $317,000 pay-out when she was fired, or the channelling of excessive salaries through hospital budgets for Ontario bureaucrats, it is apparent that Dalton McGuinty is using public agencies as his own slush fund for Liberal friends and insiders." NDP Leader Andrea Horwath echoed Hudak's comments about the LCBO adding, "This is a problem that is endemic to this Liberal government. You just need to look at the scandal in eHealth and the things that we're uncovering in all kinds of agencies, boards and commissions, including even the hospital sector where we see all kinds of outrageous salaries and bonuses and these kinds of in appropriate payments. I don't think

it's just the LCBO. I think it's actually a culture of entitlement that's been fostered by this Liberal government and that has spread through all kinds of organizations and agencies. So the issue is more: how do we control that? How do we make sure that culture, if you will, is nixed? We need get to an understanding that these agencies are serving a greater purpose: to provide value for the taxpayer, the people of the province. Horwath is on to something there.
The LCBO is not a private sector company. It is a government agency, which, at the end of the day, is accountable to Ontarians. As such, its affairs are of public interest. Premier McGuinty himself has indicated he expects a much higher level of accountability and transparency from Ontario agencies. OLM decided to publish the LCBO letter in the interests of transparency. In the interest of accuracy and LCBO shareholders, we added some facts (in bold) that they left out in their rebuttal. If the LCBO President and CEO Bob Peter and his management team are confident in the way they are running things, then they should have no problem with an open and transparent interview process.
The letter from the LCBO speaks for itself. Be sure to check out the next issue of OLM for the full interview with PC Party Leader Tim Hudak and NDP Leader Andrea Horwath. n
January 25, 2010
Dear Mr. Cornforth:
Michael Pinkus' January opinion piece, LCBO Monopoly, is contradictory. He has positive things to say about the LCBO. He quotes a wine agent saying privately-owned stores can't offer the LCBO's selection or its one-stop shopping experience throughout Ontario. He recognizes the LCBO delivered a $1.4 billion dividend to the government last year.
But then he regurgitates old and largely unfounded allegations against the LCBO. We have responded publicly to these allegations, but none of our responses appear in his piece. Nor did he contact us for comment.      
His piece is also misleading and inaccurate. Here are the true facts:
   1. LCBO investment in new and upgraded stores provides a solid return on investment, helping LCBO increase annual dividends to government. (LCBO has no competition in Ontario and is widely disliked by Ontario wineries.)
   2. Off-site winery stores are regulated by the Alcohol and Gaming Commission of Ontario, not LCBO. (The LCBO has been criticized for years for not buying Ontario wines and for not promoting the Ontario domestic wine industry with its own purchasing power and marketing dollars. For example, the LCBO buys hundreds of thousands of bottles of Australian wines and sells them at their Food and Wine Shows in Ontario but local wine producers from Ontario are not allowed to sell their wines at these same shows unless they are approved by the LCBO. The LCBO was at the centre of a dis-information scandal last year regarding the selling of wines with the title "Cellared in Canada". Consumers thought they were buying Canadian wines, but did not read the small print on the bottles. The grapes were from abroad and mixed with some Canadian grapes. The LCBO sold these as "Canadian wines" until they were forced to publicly admit they were not Canadian, but a mixed blend.)
   3. LCBO "executives" didn't receive $6.2 million in salary bonuses in 2007-08. That total was spread among 900 employees, most of whom were not managers, let alone senior managers or executives.

(LCBO refuses to disclose the breakdown of the amounts of the $6 million in bonuses, the salaries for its executive team and its Board Members or their expenses.)
   1. LCBO proudly supports Ontario wineries. Ontario VQA wine sales at LCBO rose by more than 16 per cent last year, driven in large part by LCBO initiatives. (The volume of purchases of Ontario wines is dismal compared to the volume of wines LCBO buys abroad. Notice the LCBO does not say 16 per cent of what. That is because the number is so small compared to their other purchases.)
   2. LCBO promotes social responsibility beyond TV commercials by marketing its products with food, refusing to serve minors and intoxicated adults and providing responsible hosting tips and solutions. (The majority of LCBO's promotions relate to consumption, primarily of foreign wines and spirits.)
   3. LCBO is profitable. It has delivered 15 straight record dividends to the Ontario government. Those dividends increased from $680 million in 1996-97 to $1.4 billion in 2008-09, despite few increases to taxes or LCBO markups. (It is easy to be profitable when you are a monopoly. The 2005 Beverage Alcohol System Review Panel chaired by John Lacey submitted its report to the McGuinty Government in 2005 which declared: "We have found that the current system falls considerably short of generating the maximum return for taxpayers. In recommending LCBO privatization, the report stated: "We conservatively estimate that, …this plan {privatization} would produce at least $200 million more government revenue than the government currently receives from the beverage alcohol system.")

Most disappointingly, Mr. Pinkus, whom we respect as a wine writer, questions the integrity of hard working LCBO retail employees who help consumers better appreciate beverage alcohol, much like he does. That's something he should applaud. (The LCBO wrote this in a letter but in several documented emails and phone calls to OLM, LCBO "communications" staff said they did not like Mr. Pinkus, that he was biased like many other writers at the Toronto Star and elsewhere and they would never meet with him and he would not be allowed to meet with LCBO officials.)

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