Guv appointment held up over DABC audit but DABC director stays

Published: Wednesday, May 18 2011 12:00 p.m. MDT

SALT LAKE CITY — Lawmakers held up Gov. Gary Herbert's appointment to his economic development board Wednesday over a new audit that revealed a privately run liquor package agency lost $300,000 in state funds and inventory.

The Senate's decision not to vote on the governor's appointment of Sam Granato, currently the Department of Alcoholic Beverage Control commission chairman, came just hours after Herbert downplayed the audit.

The lawmaker who ordered the audit, Sen. John Valentine, R-Orem, said the Senate wants to wait for a confirmation hearing to be held to find out what, if anything, Granato knew about the problems at the now-closed package agency.

After hearing the audit Tuesday, members of the Legislative Audit Subcommittee ordered a more extensive examination of all of the state's package agencies to make sure none are in a similar financial situation.

The governor, however, said Wednesday he believes the audit uncovered an isolated case that's already being addressed by the DABC.

"I'm very comfortable that we're going to handle this issue fine. This is not a big problem," Herbert said during the taping of his monthly news conference on KUED Ch. 7.

He said it would be "premature for me to say there's a lack of oversight. There may just have been a unique problem that cropped up in Eden," the Ogden Valley town where the package agency was located.

Package agencies are privately operated, state contracted liquor outlets located in communities too small for a state store, and in resorts and hotels. The Eden location opened after Wolf Creek Resort chose not to renew its contract in 2009.

The Legislative Auditor General, however, found the DABC "exercised poor management" over the Eden package agency, which closed in July 2010 with just under $300,000 of state funds and inventory unaccounted for after a year of operation.

Herbert met with DABC Executive Director Dennis Kellen later Wednesday. Kellen said after the half-hour meeting he did not offer to step down and intends to continue as the head of the DABC.

The governor's spokeswoman, Ally Isom, said the focus of the meeting was the steps the DABC has taken to avoid future problems with package agencies, including heightened oversight by an internal auditor.

"The conversation didn't include any reference to personnel changes," Isom said. "Mr. Kellen did not tender his resignation nor did the governor ask for it."

Asked if the meeting put the issue to rest for the governor, Isom said, "there will be ongoing oversight to make sure the reassurances we've received are indeed in place and doing what needs to occur" at the DABC.

Valentine and several legislative leaders said Herbert should look at making personnel changes at the DABC as a result of the audit.

"I would hate to be Mr. Kellen," House Speaker Becky Lockhart, R-Orem, said Wednesday. She stopped short of calling for the governor to replace him, however. "That's an executive branch decision. I have great concerns about the management of DABC."

Granato had reportedly been approached about taking the DABC executive director's job, but Isom said she was not part of that conversation between the governor and Granato.

"I do know what occurred is the governor had extended the nomination to the Governor's Office of Economic Development" board of business and economic development, Isom said.

As for Wednesday's delay in confirming Granato to the board, Isom said, "I understand the Legislature just wanted to seek reassurances around the DABC issue. I have no concerns. Mr. Granato is a great nominee for the GOED board."

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