"I never thought I would do this so long," Karson says. "But I'm comfortable here. And I'm good at what I do. I'm proud of that." His daughter, Shannon, is following her father's role. She now works full-time at the store.
But while Karson may be good at what he does, and even though the store has been in the family for three generations, his future is by no means guaranteed. By law, anyone who owns a liquor store must be an Oregon Liquor Control Commission (OLCC) agent--a title that financially ties Karson to the state. There are 238 OLCC agents throughout the state of Oregon, all of whom suffer under the thumb of an agency, that, as Karson explains it, "is completely financially out of control."
As small business owners, Karson and his fellow liquor store agents are smothered by a gigantic bureaucracy; although they must follow a schedule of rules set by the OLCC, they do not enjoy the insurance benefits normally associated with employment of the state. Instead, they are allowed to use the same plan, but pay monthly, picking up 100 percent of the cost the state would absorb with an employee. Moreover, Karson's employees have no way of receiving insurance, even if they were able to pay what Karson does every month.
Thanks to the OLCC, the security of Karson's business is severely compromised. Since all liquor in Oregon is technically owned by the state, the Small Business Administration (SBA), part of the Federal Government, refuse to recognize OLCC agents as small businesses owners. So just as he is unable to use his status as an independent business to buy health care plans and other small business benefits, Karson is ineligible for SBA loans.
It is a relationship that directly contradicts the idea of a democratic government; simply taking without giving. At the base of his frustrations, Karson feels he doesn't enjoy the same freedoms other small business owners are allowed.
The last straw came last year, when the OLCC allegedly violated a written contract they had with every agent in the state. Karson was counting on the OLCC renewing his contract. According to Karson it read, "if the agent meets the above requirements, he will be renewed." Without warning, one year before the contract expired, the OLCC informed Karson there would be a small change in all agents' contracts--a change of one little word that made all the difference. Instead of "will," the OLCC substituted "may," essentially giving themselves exclusive the discretionary power not to renew an agent's contract.
With the change, the OLCC was no longer required to provide convincing reasons to deny an agent's contract, even before it was over. The OLCC suddenly had the power to end the relationship for no reason; suddenly, the welfare of Karson's family-owned business was in the hands of the state. Every agent in the state of Oregon stood to lose what little power they had left.
Karson subsequently filed a suit that may serve to bring down the OLCC as we know it. Essentially, the suit threatens to expose a fatal flaw in the structure, meaning, and purpose of the OLCC--a structure that's been established and enjoyed for the past 75 years.
This structure is not unlike the model drug dealers use to manage their goods: The lynchpins don't actually sell anything, because it's too risky. Instead, they employ underlings to do the dirty work, giving them a small cut of what they earn--but it's the Boss who insures that it's not him who stands to lose. Both models rely on the Boss having an enormous amount of power, so much that the underling has no other choice but to keep selling. For drug dealers, it comes from the giant amount of money they earn. For the OLCC, it is the same.
Karson's suit is scheduled for trial in April. If he wins, there are two potential outcomes: The OLCC will be forced to give agents a spot on the Oregon state payroll, or the relationship is ended altogether and the OLCC takes its first step towards dissolving its control over every drop of alcohol in the state. Either outcome would force the OLCC to recognize that the treatment of their agents is both financially and professionally abusive.
A History of Micromanagement
Every year the OLCC brings in nearly $100 million for the state of Oregon--money that comes from selling alcohol to merchants and collecting liquor fines. A major part of the money goes to the state general fund--approximately $53 million. This money is the OLCC's security--it allows them to keep them operating as a flawed organization. "Their charter says that they're supposed to regulate alcohol business," notes Mike Thrasher, owner of the Pine Street Theatre. Even promoters and agents who haven't fought with them directly know of the danger they can bring anyone. "They're supposed to be helping us--not undermining business."
For every tavern, bar, grocery store, and restaurant that serves alcohol, the OLCC is there to govern it. But since you can't see it, it's easy to forget it exists. It is run mostly behind closed doors, by five agents appointed by the governor.
Ken Palke, media liaison for the OLCC, argues that these agents are not allowed free rein. Yet, the OLCC is third to the Department of Revenue and the Department of Consumer and Business Affairs in contributing to the General Fund. Today, there are 218 state employees at the OLCC.
The OLCC was born at a very different time in American history; a different moral climate, one in which the US government likened alcohol to the devil. Shortly after the federal government abolished alcohol in 1919, it became clear that alcohol--or at least public desire--was stronger than the government. Too many people were willing to risk arrest and jail time in order to make, drink, and buy it. With underground alcohol sales spinning out of control and undermining their authority, enforcement agencies, from FBI to local police, were a national joke. At the same time, the country was deep in an economic depression. Free enterprise was viewed with skepticism and the government was stepping in to micromanage the economy of the country.
It's not surprising then, looking at the original plan used to establish the OLCC, that it proposes a model that only loosens a few fingers of the government's grip on alcohol. With the abolishment of the 18th amendment, control over alcohol returned to the state governments. By 1933, alcohol was legal and state governments, rather than federal, had to decide on how to deal with regulating alcohol. William S. Knox, the author of the original plan, explained the reasoning behind his choice to refuse to let merchants in Oregon sell alcohol without state regulations.
"Quite obviously," he wrote, "it [unregulated alcohol sales] opens the door to many of the most flagrant abuses of the liquor traffic as it existed in former days."
Knox goes on to explain his fear of unregulated alcohol, his point being that "the same old evils generally which brought discredit upon the liquor business and led to adoption of the Eighteenth Amendment" might return in full. "To return to such a scheme, which some states are about to do, would be equivalent to a public acknowledgement that we have failed to learn our lesson," he concluded.
Thus, the OLCC was born. Seventy years later, the agency remains achingly similar to its original structure. Oregon has held fast as one of 18 "control states," in the US--states which regulate alcohol so tightly, they are the sole monopolizers of the trade. The other control states are, like Oregon, largely rural--Washington, Idaho, Montana, Ohio, Virginia, Wyoming, and North Carolina, to name a few.
The Return of Protestant Morality
"The whole attitude the OLCC projects in its licensing decisions is an odd kind of Puritan view," says Lou Savage. Savage is an attorney in town who has become somewhat of an expert in suing the OLCC. He has fought several important cases against them in the past five years, most notably the case of James Winters, the owner of the MLK Chevron station, who filed an appeal when the OLCC denied him a license to sell beer and wine at his gas station. Savage and Winters settled with the OLCC out of court this summer.
"When it comes to licensing, there are preconceived notions about what is a good neighborhood and what is a bad one," says Savage, speaking of the OLCC's arbitrary decisions about who gets to sell liquor. Since the OLCC has exclusive decision-making power over who is awarded licenses, they have almost no legal obligations to justify their decisions. If denied a license, people are eligible to take their complaints to one of the several judges who serve all Oregon state agencies. But even the judges can be biased; until a year ago, all complaints were brought in front of a judge who worked exclusively for the OLCC, and the chairman of the liquor commission had the power to overrule these judgements.
The OLCC has a long and ugly history of making decisions with emotions rather than judicial arbitration. These decisions date as far back as 1978, when Charles E. Miller, assistant director of the OLCC, caught his tie in a paper shredder while attempting to destroy evidence. Governor Bob Straub then ordered an investigation into the OLCC for illegal investigation of private citizens.
The stories go on and on, but eventually end up sounding similar, accusing the OLCC of using their power arbitrarily and in the interest of making money. One owner of several clubs around town, (who requested to remain anonymous, for fear the OLCC would punish him) tells one such story. His OLCC agent was angry about an alleged incident that occurred in one of his clubs, four months earlier--someone had been accidentally shot. A serious offense, definitely, except there were no witnesses and no way to find the man.
The club owner suspects the agent was frustrated at his inability to prove anything, so he decided to punish him elsewhere; he ticketed him at another venue, a club he owns in Northeast Portland.
"They showed up one night and issued a totally bogus ticket," he explains. "They've never, ever ticketed me for something like this before. But this guy tripped over a bar-stool and so they got us on serving someone that was intoxicated. The guy had one drink."
Luckily, he didn't have to pay the maximum fee for serving someone who is visibly intoxicated. The OLCC could have fined him up to $15,000 and closed the bar for 30 days. "If that had happened," he explains, "The state would have pulled my lottery, and I would have to pay to have it put in again." Total, he figures he would have had to pay $50,000.
Other examples are more bureaucratic. In September, the city council approved a change to the city's liquor licensing process, one that serves the exclusive interests of the OLCC. The change essentially limited the time it takes to grant or reject a liquor license once it is applied for, cutting out what little input the community and other groups were allowed.
Making Money Through Racism
If Karson wins his suit in April, he'll change the system that the OLCC uses and agents should be better off in the future. But even in this scenario, much of the damage has already been done.
"One of the biggest problems for African American retail merchants is that much of Northeast Portland is within what the city calls the "impact zone," explains Savage. The impact zone is an area the city has deemed high risk--where crimes will most likely be committed. Though the OLCC has technically nothing to do with the impact zone, the city makes a recommendation to the OLCC about whether or not each establishment should obtain its license. "If you're in the impact zone," says Savage, "you can pretty much count on it being extremely difficult to get a liquor license." Though the media liason, Palke, maintains that the OLCC makes informed decisions about each license, critics worry that they swallow the city's recommendations without question. "The city opposes every new application as a matter of policy. So there's one strike against the applicant even before the OLCC makes a decision," says Savage.
Robert Larry, OLCC agent and owner of King Boulevard Liquor Store, agrees that racism runs wild within the OLCC. Earlier this year, the Mercury reported on Larry's three-year battle with the OLCC, in which they accused him of several crimes he says are entirely fabricated. On New Year's Eve of 1999, the OLCC claimed that Larry sold alcohol to an underage woman. When Larry produced videotapes proving the woman was in fact a regular 22-year-old customer, the OLCC's evidence suddenly disappeared.
"They're racist because it's in their financial interest," explains Larry. "The OLCC is the biggest drug dealer in the state and we're [African American merchants] suffering because of it."
Owners and promoters of hip hop clubs and shows consistently repeat Larry's opinion. It's not in the OLCC's financial interest to serve alcohol at hip hop shows, so they strongly discourage people from having them. "They never actually told me not to have hip hop shows," explains one club owner about his experience with promoting rap shows at his clubs. "But they said something like, 'You really want to steer away from the element that likes to bring guns to shows.'"
Not surprisingly, one of the only hip hop clubs in Portland, House of Grooves, has also suffered at the hand of the OLCC. After their first few shows, employees say the place was crawling with police officers and OLCC agents for no reason. "No one called the cops or needed to," explains promoter Sean McGee. "So after that we sat down with them, had a meeting with the gang enforcement officer at the police bureau and the big cheeses at the OLCC. I mean, if we were playing classical music, would that have ever happened?"
But despite agreements made with the OLCC and the police, McGee says the cops were back the next night. "They were arresting people in front, so that when you drove up it looked like there were cops all over the place," McGee explains. "That's horrible for business, and it was totally uncalled for."
What Happens Now?
Karson's is not the only legal battle the OLCC has on their hands right now. In Eugene, Pete Grapel owns a liquor store, a small, independent store much like Karson's. Grapel is also preparing to sue the OLCC. He has reserved the right to file in the next two years.
But his case is slightly different. Grapel is suing over illegal sting operations--the OLCC sending in minors as "test cases," to buy alcohol, one of the methods they use to catch people selling to underage kids. "In our legal research, we discovered that during the last legislative session, the OLCC had a bill written for them that would exempt minors from the normal penalties if they were working for the state," explains Grapel. But that bill failed, preserving the law: It is illegal to send minors into liquor stores under any circumstances.
Nevertheless, Grapel argues, the OLCC continues to use this method to hit liquor stores they don't like. "We have one agent in Portland that has been fined $5000, and we have another clerk in Southern Oregon, that, if he is prosecuted, could serve one year in jail."
Despite the injustices brought against these agents, similar cases have recently lost. In September, a group of 11 agents lost in their suit against the OLCC, in which the agents attempted to change rules in order to find another way of getting alcohol to bars rather than having agents deliver it. In the current system, agents are required to deliver all alcohol to bars they sell to, giving them almost no financial incentive to keep delivering.
Of all the people who spoke about the OLCC, Grapel summed it up best in one sentence.
"This has to stop."