Bars dodge liquor fines

By Robbie Dingeman
Advertiser City Hall Writer

The Honolulu Liquor Commission has failed to collect more than $416,000 in fines against bars and other businesses since the early 1990s.

City Managing Director Ben Lee favors businesses posting bond or deposit. Advertiser library photo

Various businesses owe fines ranging from $100 to $16,400, commission records show. Administrator Wallace Weatherwax provided the $416,000 estimate in response to an Advertiser request for information on the agency's collection record.

He said about $400,000 in uncollected fines "is in excess of a year old."

In recent years, Weatherwax said the collection rate exceeded 80 percent of the fines assessed. For example, for the period from July 1, 2001, to June 6, 2002, the commission assessed $204,900 in fines for 285 violations. Of that, the commission collected $185,100.

Weatherwax said "commission collection efforts are appropriately aggressive," but that it cannot collect when a violator goes out of business.

But others questioned whether the commission is doing all it can.

Kobayashi said she would hold budget committee hearings to find out more about why so much money has been left uncollected at a time when the city is hard-pressed to find money for many worthwhile programs.

"My goodness, don't they need the money?" she said. "What's the use of fining someone if you're not going to collect? What kind of message are we sending?"

City Managing Director Ben Lee said he does not have control over the semi-autonomous agency but is concerned about the large amount of unpaid fines.

Lee said Weatherwax told him that most of the fines that remain uncollected stem from companies and individuals that went out of business without paying.

Under the current system, "there's no leverage, there's no hook to get them to pay," Lee said.

Lee said he would favor requiring businesses to post a bond or some kind of refundable deposit.

The commission oversees nearly 1,500 restaurants, bars and other businesses that sell liquor. The agency investigates complaints that range from stores that sell liquor to minors to charges of gambling, prostitution and drug use in the bars and nightclubs.

Weatherwax said the commission does not renew or transfer a license if fines are outstanding, and that it now tries to collect the money itself, then refers it to a collection agency.

He said the commission is informed through the licensing investigative report if a related individual or entity of a license applicant has outstanding fines, "although general business law principles may prohibit the denial of the applications based solely on the existence of the outstanding indebtedness." He also acknowledged that a business can re-open under another name, thwarting the commission's ability to collect a fine.

"Using corporate and limited liability business entities to shield individual responsibility for a business entity's debts is entirely legal," he said.

Lee is puzzled how some people can be fined and apparently continue to do business under a new name. "I don't know why we can't collect those fines," he said.

Lee said the city administration has been working since May to find ways to improve enforcement and identify problems at the agency. He said Weatherwax is part of the working task force.

"Maybe we can look at some kind of penalty or civil fees," Lee said.

Former commission employee Tom Mendonca worked for the city agency for 26 years and retired in April after having spent time as a supervisor of both the enforcement and licensing sections.

Mendonca said Maui County's Liquor Commission requires businesses to put up $1,000. He said the Honolulu rules were last revised in 1998 and that he and other staff members tried to add a requirement that "you put $1,000 down to pay for any outstanding fines."

Mendonca said he and other employees, who declined to be named because they fear reprisal, told commission and city administration officials in January 2001 about their concerns about unpaid fines and other issues, but that nothing changed.

In May, a federal grand jury indicted eight current and retired Liquor Commission inspectors for allegedly taking bribes from hostess bars.

U.S. Attorney Ed Kubo said the scope of the corruption case indicates that the commission's enforcement system is "so corrupt it no longer maintains public trust."

The indictment accused the liquor inspectors of accepting cash bribes on 58 occasions from October 2000 to December 2001 from owners, managers or employees of 45 hostess and strip bars in return for not enforcing liquor laws. The payments ranged from $20 to more than $1,000 and totaled about $11,500, the charges said.