At the end of a successful legislative year that saw a hefty raise for Oregon’s liquor store operators, one longtime proprietor who lobbied for the increase sent a short message to the manager of the state’s liquor supply.

“Please also note that I had promised several legislators during the session, including Betsy, access to Pappy when available,” Saleem Noorani wrote in the Dec. 3, 2021, note. “Please allocate to my Albany store.”

Only one “Betsy” served in the Legislature at the time: Sen. Betsy Johnson, D-Scappoose. The powerful legislator co-chaired the Joint Committee on Ways and Means and had signed off on the budget for the Oregon Liquor and Cannabis Commission.

And “Pappy,” of course, was Pappy Van Winkle, the storied and scarce whiskey at the center of a scandal that has touched off investigations by the Oregon Department of Justice into misusing access to liquor for personal gain by top OLCC officials, including the now-fired supply manager.

The email obtained by The Oregonian/OregonLive suggests the highly sought after Pappy Van Winkle may have been offered as political currency to benefit liquor store operators and help lock in the state’s nearly century-old liquor monopoly for decades to come.

The Legislature that year not only approved the big pay raise for store owners but backed a budget for the OLCC that included $90.7 million in bonding authority to build and outfit a new headquarters and warehouse and modernize its information technology systems.

The email seeking the Pappy Van Winkle included seven attachments: all letters opposing privatization of liquor sales in Oregon.

Noorani didn’t name any other legislator in his email. He didn’t say how many bottles he wanted.

In an interview Thursday, Noorani said he could not recall the names of the other lawmakers he had promised to source a bottle of top-shelf bourbon during the 2021 session.

He said he identified Johnson in the email because she was “one of the key people” in the Legislature who was “trying to do something to help us out.”

“That was the intent there,” he said.

He initially told The Oregonian/OregonLive that he could not remember how many bottles he sought and that the OLCC manager did not respond to his email. The following day, when asked again about the request, he said he remembered that the OLCC did send him three extra bottles of Pappy Van Winkle.

He said he received a 12-, 15- and 23-year Pappy Van Winkle. He said he did not sell or give them to any lawmaker and instead gave them away to a local charity.

Johnson left the Legislature to run for governor around the same time as Noorani sent the email.

She did not respond to emails or phone messages left with her home and office seeking comment.

A liquor ‘facilitator’

Noorani sent his request to Chris Mayton, then the distilled spirits program manager for the OLCC.

Last summer, Mayton told a human resources investigator that he routinely fulfilled requests not only for employees but also lawmakers.

It was unclear from the interview whether he sought limited-release bourbon like Pappy Van Winkle on lawmakers’ behalf or less-coveted liquor.

“As a facilitator for others, I have done that hundreds of times in the four years I have been here, for customers, for licensees, employees, legislators, as a facilitator to find products and send them to a store so that they could make a purchase,” Mayton said in the taped interview. “I have done that more than 100 times.”

Mayton “does not have a specific recollection” of Noorani’s request in December 2021, his lawyer, Michelle Kerin, said by email this week.

“Consistent with his duties, however, throughout his employment with the OLCC, Mr. Mayton fielded requests from members of the public and liquor store agents like Mr. Noorani, for specific bottles of liquor, including Pappy Van Winkle products,” she said.

She said attempting to fulfill such requests “if able” was and remains common at the OLCC.

The agency finds itself amid twin high-profile crises: a criminal investigation led by the Oregon Department of Justice into the diversion of Kentucky bourbon by six top managers and an ethics scandal that brought down Oregon Secretary of State Shemia Fagan this week over her financial ties to a troubled cannabis company regulated by the agency.

An internal investigation last year at OLCC found Mayton and five other agency officials had set aside sought-after bourbon to buy for themselves or as gifts. A supervisor in the agency officially reprimanded each of them for using their positions for personal gain.

The bourbon scandal ensnared the OLCC’s longtime executive director, Steve Marks, and his deputy, Will Higlin.

Marks had already planned to step down at Gov. Tina Kotek’s request when the investigation was made public; the agency fired three others, including Mayton. Two remain employed with the OLCC.

State investigators looking into the bourbon diversion have focused on whether lawmakers benefitted from the arrangement.

The Oregon Liquor and Cannabis Commission and the Oregon Department of Justice have declined to release records related to any lawmaker requests or answer questions about such requests, citing the ongoing investigation.

The Oregonian/OregonLive polled 66 lawmakers who were in office last year when the OLCC discontinued the practice of setting aside liquor for people.

Every Oregon senator said they had not received or sought a bottle of liquor from the OLCC. Every House Democrat and one House Republican said they, too, had not received or sought a bottle. Five House Republicans declined to say whether they had, saying it would be “improper” given the criminal investigation and seven House Republicans ignored the news organization’s inquiry.

Kotek, then House speaker, said she never asked for or received a bottle of liquor from the OLCC.

‘Symbiotic relationship’

Noorani’s order of sought-after bourbon underscores the cozy ties liquor merchants enjoy with state regulators — a relationship Noorani has described as “symbiotic” — and the potential for exploitation that may come with it.

In a meeting of liquor and cannabis commissioners in 2021, Noorani highlighted the dynamic between retailers and the OLCC, saying “both parties have to be successful in order for all of us to be successful.”

Noorani runs two liquor stores, one in Albany and another in Corvallis, and leads the Associated Liquor Stores of Oregon. He frequently appears before the Legislature.

Though his email makes clear Noorani said he had promised bourbon to lawmakers, in an interview with the news organization he said he did not offer lawmakers bourbon and neither did they ask for it.

“I was trying to see if we can get a couple of extra bottles that then I can see if they would like,” he said. “But … that didn’t happen.”

Noorani said he hoped to provide lawmakers with liquor to thank them for their support. He said the bottles remained in his inventory until this year, when he donated them to a charity that he did not identify.

He declined to answer any additional questions.

Pappy Van Winkle bourbons are produced by the Buffalo Trace Distillery in Frankfort, Kentucky, and come out once a year in limited quantities, adding to their cult status. In recent years, the bourbon’s Oregon distributor, Sazerac, has shipped the liquor between New Year’s Day and the end of February.

The Pappy Van Winkle lineup comes in 10-, 12-, 15-, 20- and 23-year bottles. In Oregon, the state sets the price of liquor; those bourbons — if you can find one on a store shelf — sell for between $79.95 for the 10-year and $329.95 for the 23-year. A bottle that sells for about $80 here might go for up to $1,000 on the secondary market.

The Oregonian/OregonLive’s analysis of state liquor records shows Noorani’s stores received 12 bottles of Pappy Van Winkle in 2022. At the time, Noorani also owned a third store in Springfield.

Five of the bottles went to his Albany shop and included a 10-, 15 and 23-year and two 12-years.

Threat of privatization

Noorani’s email illustrates the goal liquor merchants and OLCC officials appear to share: protect Oregon’s lucrative liquor monopoly.

He included seven attachments detailing opposition to a push from grocery stores to sell distilled spirits.

Among them were letters to the Secretary of State’s Office from the Oregon Distillers Guild; Hood River Distillers; the law firm Stoll Berne on behalf of Danelle Romaine, who serves as executive director of the Oregon Beer and Wine Distributors Association; the Oregon Brewers Guild; Oregon AFSCME Council 75, which represents OLCC employees; the Oregon Education Association; and Noorani’s group, which represents most of the state’s liquor merchants. Oregon has about 280 retailers.

“FYI,” Noorani wrote in the email.

It was a pivotal year for liquor store operators like Noorani and the OLCC. Grocers had begun to lay the groundwork for a ballot measure that would allow them to sell liquor, adding urgency to the session that year for the liquor commission.

OLCC officials lined up the budget request, which included the bonding authority and compensation boost for agents, in advance. Then-Gov. Kate Brown was on board and included it in her proposed budget — a key signal in the biennial wrangling over state dollars and bonding authority allocated to agencies.

The OLCC is a money-generating juggernaut for state coffers even as public health data shows Oregonians struggling with high rates of alcohol dependence. Oregon ranks fifth in the country in the percentage of teens and adults with alcohol use disorder, according to a 2021 report by the National Survey on Drug Use and Health.

Born out of the 1930s-era Oregon Liquor Control Act, which prioritized temperance and public health, the agency today remains laser focused on generating money for the state, expanding the number of state-regulated stores and selling pricier booze.

The calculus is simple: Expensive products translate into revenue, the OLCC director told lawmakers in 2021.

“Most of the profits since I’ve been there are not just selling volumes of liquor,” Marks told lawmakers. “It’s people are buying up in brands.”

Oregon has become deeply reliant on alcohol and cannabis sales. At one point during the session that year, Marks reminded members of a Ways and Means subcommittee that revenue from both represents the third largest source of funding for the general fund and the second largest source for many cities and counties behind property taxes.

The OLCC estimated $1.74 billion in gross tax revenues for its regulatory staples from beer and wine to liquor and marijuana in the current budget cycle – 91% of it from the state’s markup on distilled liquor sales. After costs, the agency estimated that alcohol sales would generate $635 million in distributions to the state, cities and counties in the following two years. Cannabis sales are expected to generate another $315 million this biennium.

Marks wasn’t the OLCC’s only advocate during the session.

Mayton testified, too, telling lawmakers that the agency’s new warehouse and information technology investments were critical to preserve the future revenue stream from distilled spirits.

Without them, he warned, the state risked missing out on $1.5 billion in additional liquor sales during the next decade, and $586.9 million in distributions to state coffers.

It’s not clear that’s true. The privatization proposal that eventually emerged the following year would have enabled the state to tax liquor sales at effectively the same rate it does today, and deliver the same revenues, according to one economic study paid for by a group representing the grocers.

Amanda Dalton, a lobbyist and president and CEO of the Northwest Grocery Association, said 2021 was “unprecedented year of political clout for liquor agents and the OLCC.”

She said the two forces helped kill the grocers’ attempt to allow them to sell ready-to-drink cocktails and liquor.

The timing of Noorani’s email, she said, is “very concerning given the political and policy ramifications” and called for an “independent audit of the agency and its contractors.”

The grocers, citing the pandemic and legal deadlines as significant challenges, abandoned the effort last year.

It was the grocers’ third failed attempt to put a measure on the ballot allowing its members to sell booze.

BONANZA FOR SOME

The OLCC’s budget package in 2021 included another big ask for an important audience: liquor merchants.

Mayton told lawmakers he had been tasked to work with liquor retailers to update a compensation formula that had remained relatively unchanged since 1986.

The largest part of that compensation package is the fixed commission that store operators earn on distilled liquor sales – 8.38% for consumer sales and 6.54% for sales to bars and restaurants. Supplementing that is a fixed-base compensation rate based on a store’s sales volume.

The deal Mayton brokered with liquor agents increased the base compensation rate, then added “escalators” that take into account a liquor store’s two biggest costs – wages and retail space.

“All agents would see an increase,” he told lawmakers. “There are no agents with a negative impact. … The average change in compensation for agents, using the 2019 sales, would be approximately $2,000 a month.”

In fact, the proposal represented a much larger windfall for operators with high sales volumes — up to a 243% boost in their base compensation for the largest stores, according to an analysis of the package by The Oregonian/OregonLive.

Noorani told one legislative committee that liquor operators’ compensation had not been updated in 30 years, despite increases in minimum wage and other costs of doing business. The merchants are responsible for their rent, labor and liability insurance, among other costs.

“Profit, if any, is whatever is left over after the expenses,” he told the House Committee on General Government in a Jan. 26 hearing. “We have no guaranteed compensation rate in our contracts with the OLCC.”

Noorani’s group has in recent years stepped up its spending on lobbying, government records show. In 2021, the association spent $38,161 on a lobbyist, more than the $20,000 to about $30,000 in each of the previous five years, according to the Oregon Government Ethics Commission. Last year, commission records show it spent $42,450.

The association’s lobbyist, Marshall Coba, told lawmakers at the time he felt “almost giddy” about their support for the compensation proposal, referring to the state’s liquor monopoly as “the golden goose” for the Oregon treasury.

The proposal’s chief champion in the Legislature was Rep. Gary Lief, R-Roseburg, who died in 2021, after the session.

The League of Oregon Cities pushed back on the proposal, arguing that more money for liquor store operators meant less for local governments, plus they did not appear to need it.

In a Feb. 17 hearing that year, Mark Gharst, then a lobbyist for the organization, pointed to the increase in liquor sales during the pandemic. Sales statewide in March 2020, for example, saw a 20% jump compared with the same month the previous year.

“Whenever the OLCC issues a new license,” he said, “there is a long line of people who would like to open up that new liquor store and so we’re just not convinced that we have a problem.”

The increase sailed through the Legislature.

MILLIONS MORE FOR WAREHOUSE

Mayton’s tenure in state government was short and followed a career managing retail automotive stores. Yet he served a key role in 2021 and the year that followed in cementing the state’s control over liquor distribution and sales.

The warehouse project, it turns out, will be far more costly than originally projected.

Last year, the OLCC went back to lawmakers seeking nearly $84 million more in bonding authority for the project, saying its original estimates were outdated, the supply of land had tightened and inflation had driven up labor and other costs.

A controversial land deal Mayton and other state officials brokered during the pivotal 2021 session also contributed to the project’s price tag.

The OLCC entered into a $40.7 million deal for a 33-acre parcel in Canby for the project, far exceeding the appraisal paid for by the state, which put the price around $22 million.

Lawmakers approved the increase.Mark Friesen contributed to this report

— Noelle Crombie; ncrombie@oregonian.com; 503-276-7184; @noellecrombie

—Ted Sickinger; tsickinger@oregonian.com; 503-221-8505; @tedsickinger

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