David R. Henderson  

Without Government Regulation Who Would Hassle Liquor Retailers?

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I grew up watching Perry Mason. Almost invariably, the person on the stand with under 5 minutes to go in the show was the one who was guilty and, again, almost invariably confessed while on the stand. It didn't take more than an 11-year old's brain to surmise that that's not how the vast majority of real-world courtroom dramas unfold.

When I was involved in a legal case as an expert once, one of the lawyers and I exchanged our stories about the closest we had ever seen to a Perry Mason moment in a real trial. I told her mine, which I had seen in the Bush v. Gore trial under Florida judge Sanders Sauls. (Except for bathroom breaks, I watched the thing from start to finish.) She told me hers, which occurred when she was a young assisting lawyer in a civil case where her boss, who couldn't legally mention that the guy suing them had a prison record, figured out a way of getting the jurors to understand that the guy had, indeed, been in prison.

But neither of those cases comes close to this one (although mine comes closer than hers.) It was a case involving the Texas Alcohol Beverage Commission going after a large liquor retailer named Spec's.

Here's the setting, as told by Jay Root in "Texas liquor agency rebuked after investigation of Spec's," The Texas Tribune, June 30, 2017:

Leaders at the Texas Capitol love to bash what they call out-of-control bureaucrats at city halls and in Washington, D.C., but a recent case pitting the Texas Alcoholic Beverage Commission against Spec's Wines, Spirits & Finer Foods looks like state regulatory overreach on steroids.

After an investigation of the state's largest liquor retailer, the TABC sought to yank permits for all 164 of the company's stores -- which would effectively shut it down -- or hit Spec's with fines of up to $713 million, according to court documents filed last week. The agency also put the company's expansion plans on ice by freezing Spec's new permit applications during the three-year probe, records show.


The whole thing, which Root tells very well, is worth reading. Here's the close-to-Perry-Mason moment:
"She [Houston-based auditor Kathy Anderson] agreed that there was no evidence Spec's accepted the terms," the judges noted in tossing the allegation. "She also admitted that there was no documentary evidence that Spec's actually purchased any of the products."

Even more damaging to TABC was Anderson's claim that one of Spec's wholesalers, United Wine & Spirits, had "admitted" to violations that implicated Spec's in a scheme to skirt liquor laws designed to keep alcohol manufacturers, wholesalers and retailers all in separate lanes. The supposed proof: an agreed-to "waiver order" -- basically an acceptance of punishment -- that United Wine & Spirits signed. That order was cited like a King's X over and over in TABC's case against Spec's.

A long string of allegations relying on that document collapsed when Van Huff asked Anderson if she had read the settlement agreement attached to the waiver order -- which stated that United agreed to pay a fine to "resolve the contested allegations" but did not admit guilt. She said she was not aware of that stipulation.

This was the gotcha moment of the trial.

Van Huff asked Anderson: "We now see that the TABC agreed ... that this wouldn't be construed as an admission by United, correct?"

Anderson: "Correct."

Van Huff: "So each and every time you refer to the waiver order and say it was United Wines & Spirits' admission of wrongdoing that reflects poorly on Spec's, that was all incorrect, wasn't it?

Anderson: "It appears so."

Van Huff: "Thank you. We'll take that as a yes, right?

Anderson: "Yes."


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COMMENTS (13 to date)
Greg G writes:

A number of years ago there was a 60 Minutes segment by Mike Wallace where Mike meticulously showed that a state legislator who owned a liquor store had shamelessly lobbied for legislation that gave special breaks to liquor store owners. As he completed his case Mike triumphantly asked the legislator "Isn't this a conflict of interest sir?"

In one of my favorite moments in all of television the legislator replied in a puzzled way, "Well no, I don't see how this conflicts with my interest at all Mike."

John Papola writes:

What's the difference between the state and the Mafia? The former's racketeering is legal.

Trevor H writes:

I had a moment like this as well about 10 years ago. I was cited for a housing code violation in a sweep where the city had sent its inspectors throughout every neighborhood looking for offenses for which they could extract fines.

During my jury trial under cross-examination, I carefully led the inspector on the stand to agree to fact 'A' about my property. I then had her read section E of the relevant ordinance that made a specific exception for fact 'A' and followed by asking if she now agreed that writing my citation was a mistake. She said yes, it was.

I felt very flush and elated and paused a few seconds because I was seriously expecting the judge to bang the gavel and dismiss the case, just like on TV. We actually spent about 10 minutes from there finishing all the procedures and rested our cases. I think I made about a two sentence closing argument. The judge then took a recess and came back after about 5 minutes to declare that the prosecution had dismissed the case.

When I had the resources to do it a couple years later, I moved to the next suburb over.

David R. Henderson writes:

@Trevor H,
Great story! Thanks.
Greg G,
Great story also.

The Original CC writes:
I told her mine, which I had seen in the Bush v. Gore trial under Florida judge Sol Sanders. (Except for bathroom breaks, I watched the thing from start to finish.) She told me hers, which occurred when she was a young assisting lawyer in a civil case where her boss, who couldn't legally mention that the guy suing them had a prison record, figured out a way of getting the jurors to understand that the guy had, indeed, been in prison.
Can you elaborate on these two instances? They sound interesting.
J Mann writes:

My guess is that the Bush v Gore anecdote is Gore's statistical expert, Nicolas Hengartner. I haven't found a transcript, but accounts of the cross-examination make it sound devastating - Hengartner agreed that pick-up rates of undercounted votes were proving to be roughly proportional to the counted votes, which meant that the recount was likely to swing to Bush as the recount moved out of the Democrat-heavy counties where Gore had started the recount, and agreed that his previously filed affidavit was mistaken on some basic facts as a result of relying on the Gore legal team rather than reviewing the ballots for himself.

http://www.hoover.org/sites/default/files/uploads/documents/0817928820_103.pdf

J Mann writes:

Found it! Hengartner's cross starts on page 192 of the trial transcript, which you can read here.

http://election2000.law.stanford.edu/wp-content/uploads/2013/04/CV-00-2808-33.pdf

http://election2000.law.stanford.edu/florida/gore-v-harris-et-al/

David R. Henderson writes:

@The Original CC,
Can you elaborate on these two instances? They sound interesting.
Thank you. J Mann has kindly done so above. Go to this link and focus on pages 226-229. It doesn’t come across as powerfully in the transcript, so let me tell you what happened.
The statistician whom the Gore team hired, Nicholas Hengartner, based his undercount claim on the way the 1998 ballot was organized. Why 1998 instead of 2000? Because the 1998 election was used by the Gore team to show that there was a systematic undercount due to the difficulty of displacing chads when you voted. For the argument to make sense, it had to be the case that the various races were in columns. So a race for Governor would receive fewer votes than a race for Senator because Governor was in column 1. So Phil Beck put up a big piece of paper in which he drew that and got Hengartner to admit that that was why the undervote on Column 1. Beck then asked Hengartner if he had ever seen that ballot. Under oath, he admitted that he had not and had just taken the Gore team’s word for it. Kiss of death. Then Beck introduced the actual 1998 ballot and showed that the races were arrayed in rows, not columns. So the value of the evidence from 1998 that the Gore team introduced fell to zero (or maybe even negative because it showed that there could be other reasons for undervoting other than problems with the machines.) Also, Hengartner’s credibility fell to zero.
By the way, the judge was Sanders Sauls, not Sol Sanders. I will correct it shortly.
Re the other legal case, yes, it does involve economics so I will post on it soon.

David R. Henderson writes:

@The Original CC,
P.S. His “rat” comment on page 214 didn’t go over well. He laughed at his own joke, which might have been enjoyed at a Gore rally, but there was total silence in the courtroom.

The Original CC writes:

Thanks for explaining all this!!

I got the "rat" reference; it was a reference to a commercial during the 2000 election. I can see how it wasn't too funny though!

David R. Henderson writes:

@The Original CC,
You’re welcome.
Re the rat reference, that went right by me and I paid a lot of attention to that election, although, truth to be told, I was in Europe for the first half of that October. Could you elaborate on the “rat” reference? BTW, I have no way of knowing this, but I would bet dollars to dog biscuits that most of the people in the court room, including, most important, the judge, didn’t get the rat reference either but simply thought the statistics prof was making a nasty comment about Bush. Or maybe that was the rat reference?

The Original CC writes:

@DH: Bush ran an ad in 2000 in which he was criticizing Gore and they had the word BUREAUCRATS flash/scroll/appear on the screen. If you freeze-framed it and the right time, you just saw RATS written across the screen:
https://youtu.be/JmZNJnTh2c0

Bush was asked about this by the press at a moment when (I believe) he was pretty tired, and he denied that there were any "subliminable" messages. And I think he even used that "word" twice. So now there were two reasons (rats & subliminable) to pick on him.

I don't mean to defend the guy, but this was pretty representative of the level of debate back then. :)

David R. Henderson writes:

Thanks, CC. I had no idea.

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