Posted on 02/24/2004 7:09:05 PM PST by metesky
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By A. Jay Higgins, Of the NEWS Staff e-mail A. Jay
Liquor deal could cost state $75M if challenged
AUGUSTA - Six teams of lawyers squared off over the administrative appeal of a lucrative state liquor distribution contract Monday while the winning bidder warned that Maine could forget about receiving any money in the event a court challenge delays the deal. The state has awarded the contract to Martignetti Companies of Norwood, Mass., which has put up a loan guarantee of $125 million from Fleet Bank to secure an exclusive 10-year lease for statewide liquor warehousing and distribution. During what is expected to stretch into three days of hearings, unsuccessful bidders argued Monday for the Martignetti award to be set aside while their claims of flaws in the bidding process are investigated. The state appeals board may render its decision next week, setting the stage for a full-blown Superior Court challenge that could ultimately lead to an appeal to the Maine Supreme Judicial Court.
Kay Rand, a spokeswoman for the Martignetti team, said her client had secured its bid request with a $5 million down payment on the contract, $75 million of which must be in the state's hand by June 30 in order to balance the first year of the current two-year budget cycle. The contract's $50 million balance is due July 1. If the company is forced to defend its claim to the contract in a protracted court proceeding extending into June or later, Rand predicted all bets with the state would be off.
"Certainly, Martignetti is not going to write a check to the state of Maine without an executed contract," Rand said.
While the outcome of the ongoing contract dispute is anything but certain, lawyers involved in the case agreed there was "significant potential" for their arguments against the state to move ahead to court in the event parties are dissatisfied with the appeals board's decision. Martignetti's ensuing inclination to freeze $75 million in already budgeted funds would create a major emergency for Gov. John Baldacci. The administration is currently trying to identify nearly $150 million in new revenues and spending cuts to balance a deficit in the next budget cycle that begins July 1.
Baldacci was attending the National Governor's Conference in Washington, D.C., on Monday. When asked whether the governor had made any contingency plans for a $75 million shortfall in the event of a court challenge on the liquor contract, administration spokesman Lee Umphrey said, "I don't know."
Cool and composed after a morning-long grilling by lawyers at the appeals hearing, state finance chief Rebecca Wyke disputed allegations she had ignored provisions of state law requiring legislative participation in the bid evaluation process leading up to the Martignetti award Jan. 15.
An absence of legislative involvement in the contract awards is central to appeals lodged by Maine Liquors of Augusta and MaineCentric of Auburn, the two losing bidders who allege that irregularities in the state's request for proposals process gave Martignetti an unfair advantage. In addition to not establishing rules for the contract award process, the appellants also allege the state allowed Martignetti to amend its proposal in violation of state rules and awarded the contract fully aware that Martignetti had allegedly failed to meet all of the state's requirements.
Besides the losing bidders, liquor distillers M.S. Walker of Somerville, Mass., White Rock of Lewiston and the Distilled Spirits Council of the United States were represented at the appeal hearing as intervenors, claiming Martignetti could use its distribution agreements with distillers in other states to undercut sales of their products in Maine.
When the appeals panel reconvenes today, witnesses could include Rep. Joe Clark, D-Millinocket, the House chairman of the Legal and Veterans Affairs Committee. He is expected to tell the board he was not consulted by Wyke, the commissioner of the Department of Administrative and Financial Services, during the bid award process. In response to questions from Maine Liquors attorney Jonathan Piper, Wyke said she felt a "separation of powers" prevented her from including Clark on the bid review team since it was her conclusion that only the governor's office was charged with awarding the contract. She added Clark was invited to a series of request for proposals hearings that were open to all members of the public. She said the legislator was not told about the Martignetti award until the decision was made Jan. 15.
According to state statute, Wyke was supposed to include Clark in meetings "regarding developing a request for proposal to transfer the wholesale liquor business, reviewing bids received and awarding the contract."
"I don't know whether or not there is a 'separation of powers' issue, but you don't just ignore this statute because you think that there is," Piper said. "She should have gotten an opinion from the attorney general or the Superior Court to decide the constitutional issue. There's a lot of statutes I don't like, but I just can't ignore them."
The special appeals board members reviewing the contract award are Nancy Christensen of the Department of Behavioral and Developmental Services, Jane Gilbert of the Department of Labor, and Willard Harris of the Department of Conservation. Assistant Attorney General Pamela Waite has been designated as the panel's presiding officer.
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