TheTimesTribune.com, Corbin, KY

December 27, 2013

Ernie's Spirits Awarded Licenses

Corbin’s third package liquor store expected to open mid-to-late January


The Times-Tribune

CORBIN — By Jeff Noble / Staff Writer

The owner of a Corbin liquor store plans to open next month after the state Alcoholic Beverage Control (ABC) Board voted to grant the licenses.

In a unanimous vote last Thursday in Frankfort, the three-member board agreed Ernie’s Spirits, LLC should be awarded both a retail package liquor license and a retail package beer license for the store.

The store is located at 25 RJV Drive, off Cumberland Falls highway behind Applebee’s Restaurant, and across the street from the new Speedway convenience store.

While the building was completed last spring, the store has never opened.

Brent Caldwell of Frankfort, the lawyer for Ernie’s Spirits owner Kevin Durham, said the favorable decision ends a long period of legal obstacles.

“I’m very, very pleased and very happy for my client. He’s worked a long time and invested a lot of money to get to this point, and now, he’s got the licenses. He’s looking forward to opening the store as soon as possible. He’s got to get inventory stocked up and get employees hired. All that will take a little time. I’d anticipate he’ll open the store in mid-to-late January,” Caldwell said.

The board of the Kentucky Department of Alcoholic Beverage Control is made up of ABC Commissioner Frederick Higdon, Distilled Spirits Administrator Tony Dehner and Malt Beverage Administrator Stephanie Stumbo.

The final decision came almost a month after the special hearing officer on the Ernie’s Spirits case — Susan Durant with the Administrative Hearings Branch of the state Attorney General’s Office — ruled the store’s retail liquor package license was properly granted, and shouldn’t be revoked.

During that ruling on Nov. 20, Durant also recommended Ernie’s Spirits be granted a retail beer license.

Her ruling came after three administrative hearings on the case were held in Frankfort during August and September.

During those hearings, sides argued if whether the ABC should revoke the retail package liquor license issued to Ernie’s Spirits, and if the store should be refused a retail beer license for false material statements made during the store’s license application.

According to the ruling made by Durant last month, court records said the Board’s established practices and procedures in the licensing process were “immaterial until the issuance of the actual license. The Malt Beverage Administrator followed the lead of the Distilled Spirits Administrator,” and found the retail liquor package valid, and that Ernie’s Spirits should also be issued a retail beer license.

It was indicated by court records that the application for Ernie’s Sprits, LLC (doing business at Ernie’s Spirits) was signed by Kevin Durham as manager, with the Articles of Organization filed on May 5, 2012. At the time, Kevin Durham owned 70 percent of the corporation, with his father Ernie Durham owning 30 percent. Due to his father’s death, Kevin was the sole owner when the hearings were held. The application also showed the location’s address was at 25 RJV Drive, with RJV Properties being the owner of the property. The property was purchased for $417,000 with a good faith deposit of $4,000 paid, and contingent mainly upon Durham’s getting a package liquor license. The lease accompanying the application was between Matuse Property Holdings, LLC and Ernie’s Spirits, LLC, and signed by Kevin Durham for Ernie’s Spirits as tenant on May 8, 2012, and by Kevin Durham as landlord.

The application and lease were received by the ABC Board on May 9, 2012.

Court records indicated Durham was sent an email by Janet L. Williams, the assistant director of Distilled Sprits on May 22, 2012. She pointed out three problems in the lease, saying “the lease says that the premises were for use as a private residence; it did not list the date the lease commenced; and it automatically renewed on a month-to-month basis.” Williams added the lease didn’t have to be corrected at the time, but that the ABC would require a corrected lease before a license could be issued, if Ernie’s Sprits was selected.

Williams continued as Durham’s main contact with the ABC Board throughout the licensing process until she retired in February, according to court documents.

In the hearings, she testified the ABC Board can accept an application without a lease, but that the board must have a proper lease by the time the ABC grants a final license.

In his testimony, then-Distilled Spirits Commissioner Danny Reed — who was Williams’ supervisor at the time — testified that “a lease was not important until the find license was granted. Reed stated it was ‘very rare’ for an applicant to have everything in place at the time of the application,” according to court records.

It was noted by court records that Durham updated Williams on the status of Ernie’s Spirits on a regular basis, after getting conditional approval of the license.

A copy of the revised lease between Matuse and Ernie’s Spirits was sent by Durham to Williams on Sept. 25, 2012. It showed Matuse Property Holdings LLC was organized on Aug. 17, 2012, with the Articles of Organization filed with the Kentucky Secretary of State’s office on Aug. 20, 2012. Records indicated the revised lease superseded the lease that was given during the application process to be one of the three Corbin stores picked, with the commencement date of the lease being Dec. 1, 2012.

Court records indicated Durham requested to Reed Oct. 2, 2012 for a six-month extension of the original Oct. 31, 2012 store opening date. Reed granted an extension that same day to April 30 of this year.

Around Nov. 29, 2012, court records showed the owner/operator of Liquor World stores in Richmond and Manchester, Clinton Wesley Morgan, and one of the unsuccessful Corbin license applicants, gave the Board a report from an investigation he had conducted in regards to Ernie’s Spirits. The independent investigation was conducted by John Ray Roberts, who worked with the ABC for more than 14 years, and was dated March 28 of this year. Roberts’ report said at the time the Matuse lease was submitted as part of the application of Ernie’s Sprits on May 8, 2012 that “Matuse did not exist as a corporation and diid not have a possessory interest in 25 RJV Drive. Further, Matuse did not own the property on Sept. 25, 2012, when the new/revised lease was submitted. Matuse did not obtain the deed to 25 RJV Drive until Oct. 4, 2012.”

Ernie’s Spirits was issued a package liquor license on April 4 of this year by Tony Dehner, who succeeded Reed as Distilled Spirits Commissioner after Reed’s term ended.

Dehner also sent a letter explaining there were circumstances on why the license was issued. He said the ABC Board considered the leases between Matuse and Ernie’s on May 1 and Sept. 25, 2012 to be “false and fraudulent. However, because ‘The issuance conditions specified in his (Reed’s) Oct. 2, 2012 extended letter of intent were satisfied. For those reasons the law requires me to issue the previously approved LP (Liquor Packge) license.” But Dehner mentioned, “The issuance of this license does not waive any violations by you relating to the false application statements and fraudulent deeds referenced above. KRS 243.500 (2) provides that a license may be revoked for any false material statement made in the license application. …The Department has initiated an administrative action seeking to revoke your license.”

On the same date, the ABC Board issued an Administrative Complaint and Order Scheduling Hearing, seeking to revoke Ernie’s Spirits’ alcoholic beverage license.

Four days later, on April 8, Ernie’s Spirits was refused a retail beer license by state Malt Beverage Administrator Stephanie Stumbo. Court records indicated the refusal was for the same reasons the board sought to revoke the retail package license that had just been issued to the store.

The Frankfort hearings began on Aug. 2, and continued on Aug. 7 and Sept. 25.

Out of a field of 12 applicants, Ernie’s Spirits, Liquor King and Tri County Liquor of Corbin (now Liquor Mart of Corbin) were chosen as the winning applicants for the three retail package liquor licenses allocated to the city of Corbin by the ABC.

That action came in July 2012.

Voters approved package alcohol sales in Corbin in February 2012.

Prior to that, only the sale of beer, wine and liquor by the drink was permitted in larger restaurants in Corbin. That measure passed in 2006.