Ralph at Tuthilltown

This link takes you to a piece from BLOOMBERG which ran A YEAR AGO. It is very enlightening on the background of the COVER OVER program and the maneuvering going on over our tax dollars. Turns out it goes alot deeper than simply footloose and fancy free spending of our Excise Tax rebates. Read on: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=amp5wXx35fkc And just so you don't think it's just me shining this light, more from the WASHINGTON EXAMINER: http://www.washingtonexaminer.com/politics/Subsidies-on-trial-in-Caribbean-rum-rumble-8546430-70300937.html

Please read this letter to Senator Gillibrand's office from LAKE PLACID SPIRITS. It is a good example how to format your letters to your own Federal Legislators on the two issues noted in Mike's letter to Mr. Cardinal. NOW IS THE TIME, CONTACT YOUR FEDERAL LEGISLATORS: From: Mike at Lake Placid Spirits [mailto:info@lakeplacidspirits.com] Sent: Tuesday, September 14, 2010 2:40 PM To: Cardinal, Jon (Gillibrand) Cc: Ralph Erenzo; annsoleary@msn.com Subject: International Trade opportunity from small distillery producers Dear Jon We were given your contact details by Mr. Ralph Erenzo of Tuthilltown Spirits who is leading an effort to gain input for small craft distillers across the country. In view of President’s Obama’s stated future goal of new and incremental US Exports, Lake Placid Spirits, LLC would like to comment on the following issues: a) International Trade enhancements through review and simplification for small craft producers Reduced excise tax for startup and small producers Lake Placid Spirits is located in the middle of the Adirondack Park where manufacturing is non-existent and Essex County NY has the highest rate of business failure in NY State. Around the globe, distilleries utilizing local agricultural produce equal jobs. As local distillery brands develop into regional and national brands a direct result is new tax revenue and the possibility of export sales. Go back 90 years and prior to the advent of Prohibition over 1000 distilleries operated in New York State alone. Lots of jobs now up in Canada making best-selling whiskey’s drinking by Americans customers. 50,000 pounds of local Tucker Farms potato’s, located on the North Slope of the Sentinel Range, in Gabriels, NY were grown for Lake Placid Spirits to use in a potato vodka. As a hands on craft producer our goal is to use traditional, local agricultural produce. The purchase of feedstock’s for distillation and manufacturing by small producers adds value to the efforts of the agricultural sector. In Northern New York State we are losing family farms at an alarming rate. Over time, as we grow our product offering, production expertise and volume we will be able to support elements of NNY agriculture with sustainable annual purchases. Incremental tax revenue is generated by small producers and legislation should be designed to assist local small producers and startups who, if successful, “graduate” to a higher industry standard tax category. As a ‘thought-starter’ consider: This legislation and regulatory update should be considered as self-liquidating as it opens US products to new markets and only creates win-win possibilities. End markets for local agriculture, local brands, local jobs, tourism possibilities and the possibility of increased exports. Thanks for your time and attention to this message. Sincerely, Ann Stillman O’Leary President Lake Placid Spirits, LLC Mike McGlynn Manager Lake Placid Spirits, LLC

Met yesterday in DC with two Legislative Assistants for Senator Gillibrand at the Russell Senate building to discuss reduced excise tax for micro producers. They agreed the issue was appropriate and the proposal reasonable and agreed they will work with Congressman Hinchey's office to propose a bill to give micro spirits producers quid pro quo with the micro brewers and wineries who pay 20% the rate of excise tax the big producers pay. At this point we have open correspondence and agreement in principle with the offices of Gillibrand and Hinchey, and have opened a dialog with Chuck Schumer's office as well. Hinchey's office has prepared a summary description of the bill they may introduce. It mirrors the wording and intent of the proposal developed by Melkon (thanks Melkon for that great supporting documentation). In fact, both Senatorial offices agreed the precedent is in place already with beer and wine discounts and both agreed it was appropriate to expand that discount to include micro spirits producers. They understand the barriers ot entry and the enormous costs for the entrepreneurial distiller starting up and trying to get product through the Federal and State mazes and into the marketplace. They agreed we as an emerging industry need help in the form of Excise Tax relief to encourage the growth of the industry. Want to help reduce your Federal Excise Tax rate by 80%? Contact your Fed Congressman/woman and Senators and get them on board. Again, remind them this is NOT about alcohol, it is about: Fairness in the marketplace (parity with wine and beer micro producers): Economic Development in rural and agricultural regions; Expansion of Agricultural opportunity for America's small and medium farm operations; Tourism opportunities; Jobs, Jobs, Jobs!!! (this particular point was raised more than once as a priority issue); Re-Establishment of a traditional American Craft industry and its relationship to American agriculture. This work is being consider NOW. Contact your Legislators NOW. R

It appears BACARDI is not to happy about the DIAGEO/VI deal either. The following report is from UK's TELEGRAPH: Diageo and Bacardi at war over rum distillery Diageo launched a scathing attack on rival Bacardi as the two drinks groups went to war over rum supremacy in America and a $2.7bn (£1.75bn) tax rebate from the US Virgin Islands. By Helia Ebrahimi, Senior City Correspondent The FTSE 100 spirits group published a 13-page missive accusing privately-owned Bacardi of using clandestine and selfish tactics to block its main US rival’s expansion in America. Guy Smith, executive vice-president at Diageo and author of the emotive statement, claimed Bacardi’s move was a “hidden campaign to drive a rum competitor out of the US and destroy the economy of the US Virgin Islands”. The dispute centres on Diageo’s decision to quit Bacardi’s home turf of Puerto Rico – where a third party makes the UK drinks company’s popular Captain Morgan rum – and build its own $170m distillery in the US Virgin Islands. The new distillery, located on the island of St Croix and a launchpad for Diageo’s expansion in America,is being built with bond money backed by future rum “cover-over revenues”. These are essentially American tax refunds – from the excise duties levied on the spirit – awarded to US territories. In a quirk of the archaic law, local authorities can sign over such cash to the distillers themselves via such things as local tax breaks and advertising subsidies. According to Bacardi, Diageo stands to rake in $2.7bn of US taxpayer funds over the next 30 years from its pact with the island territory. But the Puerto Rican government has reacted to the plans with fury. It has attempted to get Congress to change the rules and cap payments, which would make Diageo’s agreement untenable. Puerto Rico, which currently gets about $450m a year from the programme, will lose $150m a year from Captain Morgan’s relocation while for the Virgin Islands, currently the recipient of $90m, it will be a huge boon. Mr Smith said Diageo’s deal was “a historic and innovative public-private initiative… that would lift the US Virgin Islands’ economy out of crisis”. Should the agreement collapse, he said, Diageo may be forced to move outside the US to the huge benefit of Bacardi and Puerto Rico. Mr Smith said the Virgin Islands were “under attack by the entrenched corporate interests of a wealthy family seeking to maintain their decades-long grip on rum subsidies”. Bacardi said: “This isn’t about where Diageo receives a free distillery, but about the proper use of federal tax dollars. Diageo has some explaining to do to the US Congress and American people.” *****END OF ARTICLE**** The big boys can slug it out all they want but the issue facing American Micro Spirits Producers is stated the last paragraph, the bit about "the proper use of federal tax dollars". The original intent of the "cover over revenues" program was support of economic development and infrastructure in the rum producing territories which are typically in dire need of this kind of help. The terms of the Diageo deal is a complete perversion of the intent of this program, in favor of corporate profit. Adding insult to injury is Diageo's Chief Executive's threat "Should the agreement collapse, he said, Diageo may be forced to move outside the US to the huge benefit of Bacardi and Puerto Rico." What the Virgin Islands and Puerto Rican development and government organizations claim one way or another is not the issue. The only issue is the subversion of the bill which would have limited payments such as is proposed from the VI to Diageo to 10% of the revenue paid the governments from excise taxes collected by the US on rum made in its territories. That bill (HR 2122) was delayed and eventually kept from debate, stalled in Charlie Rangel's Ways and Means Committee, never to see the light of day. That bill never reached the floor of the House. The promised creation of 32 jobs for locals in the VI in the name of "Economic Development" included in this deal is a cynical response to the concept of Economic Development. And the windfall profits to be made by Diageo on the backs of American taxpayers is outrageous considering Diageo is the largest alcohol conglomerate in the world, which just gave its CEO a nearly 80% salary increase. Imagine that this kind of support was available to economically disadvantaged States (I think we could identify a few of those) from the Fed the same as it is available to Territories. I would be thrilled if the Fed rebated 50% of the Excise tax New York distillers pay on spirits production to New York State on the condition that the State build TUTHILLTOWN SPIRITS a nice (let's not be greedy here) $2.5 million distillery and pay us back a portion of that rebated tax so we wouldn't have to suffer economic disadvantage as we start up our brand new FREE distillery. Oh, well perhaps "free" is misleading. It would not be free to American taxpayers would it? And it wouldn't be "free" to the other New York distillers who don't get a fine new distillery like we would get, since it would be their excise taxes paying for the distillery. But hey, in the name of Economic Development we'll promise to hire a local worker. And damnit if my proposal isn't ratified and we don't get our free distillery, we're moving to New Jersey, or better yet the Virgin Islands!* *[size=2 ](Kidding of course, but you get the drift, and frankly under these conditions perhaps American micro distillers would rethink where they might locate their second facility if they are successful with their first. Diageo's research and lobbying efforts could be viewed in another light, as saving all us little guys the hard work and preparing fertile ground for expansion of our Micro operations off-shore, thus avoiding onerous taxes and regulation on the Continental US and in our individual States, and putting them in the queue for a Federal handout.)[/size] Contact your Federal Representatives and make noise. The intent of the "cover over" program is good for developing US Territories. It should be continued. But the Congress must investigate the history and nature of this deal. And HR 2122 should be reintroduced and include the VI/Diageo deal. R

It appears BACARDI is not to happy about the DIAGEO/VI deal either. The following report is from UK's TELEGRAPH this morning: The FTSE 100 spirits group published a 13-page missive accusing privately-owned Bacardi of using clandestine and selfish tactics to block its main US rival’s expansion in America. Guy Smith, executive vice-president at Diageo and author of the emotive statement, claimed Bacardi’s move was a “hidden campaign to drive a rum competitor out of the US and destroy the economy of the US Virgin Islands”. Diageo and Bacardi at war over rum distillery Diageo launched a scathing attack on rival Bacardi as the two drinks groups went to war over rum supremacy in America and a $2.7bn (£1.75bn) tax rebate from the US Virgin Islands. By Helia Ebrahimi, Senior City Correspondent Published: 10:34PM GMT 25 Feb 2010 The dispute centres on Diageo’s decision to quit Bacardi’s home turf of Puerto Rico – where a third party makes the UK drinks company’s popular Captain Morgan rum – and build its own $170m distillery in the US Virgin Islands. The new distillery, located on the island of St Croix and a launchpad for Diageo’s expansion in America, is being built with bond money backed by future rum “cover-over revenues”. These are essentially American tax refunds – from the excise duties levied on the spirit – awarded to US territories. In a quirk of the archaic law, local authorities can sign over such cash to the distillers themselves via such things as local tax breaks and advertising subsidies. According to Bacardi, Diageo stands to rake in $2.7bn of US taxpayer funds over the next 30 years from its pact with the island territory. But the Puerto Rican government has reacted to the plans with fury. It has attempted to get Congress to change the rules and cap payments, which would make Diageo’s agreement untenable. Puerto Rico, which currently gets about $450m a year from the programme, will lose $150m a year from Captain Morgan’s relocation while for the Virgin Islands, currently the recipient of $90m, it will be a huge boon. Mr Smith said Diageo’s deal was “a historic and innovative public-private initiative… that would lift the US Virgin Islands’ economy out of crisis”. Should the agreement collapse, he said, Diageo may be forced to move outside the US to the huge benefit of Bacardi and Puerto Rico. Mr Smith said the Virgin Islands were “under attack by the entrenched corporate interests of a wealthy family seeking to maintain their decades-long grip on rum subsidies”. Bacardi said: “This isn’t about where Diageo receives a free distillery, but about the proper use of federal tax dollars. Diageo has some explaining to do to the US Congress and American people.” *****END OF ARTICLE**** The big boys can slug it out all they want but the issue facing American Micro Spirits Producers is stated the last paragraph, the bit about "the proper use of federal tax dollars". The original intent of the "cover over revenues" program was support of economic and infrastructure in the rum producing territories which are typically in dire need of this kind of help. The terms of the Diageo deal is a complete perversion of the intent of this program, in favor of corporate profit. What the Virgin Islands and Puerto Rican development and government organizations claim one way or another is not the issue. The only issue is the subversion of the bill which would have limited payments such as is proposed from the VI to Diageo to 10% of the revenue paid the governments from excise taxes collected by the US on rum made in its territories. The promised creation of 32 jobs for locals in the VI by included in this deal is a cynical response to the concept of Economic Development. And the windfall profits to be made by Diageo on the backs of American taxpayers is outrageous considering Diageo is the largest alcohol conglomerate in the world. Imagine that this kind of support was available to economically disadvantaged States (I think we could identify a few of those) from the Fed the same as it is available to Territories. I would be thrilled if the Fed rebated 50% of the Excise tax New York distillers pay on spirits production to the State so we could get the State to build us a nice (let's not be greedy here) $2.5 million distillery and pay us back a portion of that rebated tax so we wouldn't have to suffer economic disadvantage as we start up our brand new FREE distillery. Oh, well perhaps "free" is misleading. It would be free to American taxpayers would it? And it wouldn't be "free" to the other New York distillers who don't get a fine new distillery like we would get, since it would be their excise taxes paying for the distillery. Write your Federal Representatives and make noise. The "cover over" program is good for developing US Territories. It should be continued. But the Congress must investigate the history and nature of this deal. R

Thursday, 16 September 2010 Today during a press conference staged at the NATIONAL PRESS CLUB in Washington DC, the President of the NATIONAL PUERTO RICAN COALITION Rafael Fantauzzi called for a Federal level investigation of what he characterized as a "sweetheart deal" between the Virgin Islands (a US territory) and DIAGEO, the worlds largest liquor conglomerate. "Clearly, Governor DeJongh (VI), his advisors Congresswoman Donna Christensen, and the legislature of the Virgin Islands gave away the store and, in essence, more than 6 billion dollars of federal funds to a foreign company in return for just 40 jobs," said Fantauzzi. "The subsidy to Diageo is worth about twice the cost of its rum production." The deal also included a $250million "state of the art" distillery paid for by the Virgin Islands and to be given free of charge to Diageo and 50% payment of the Excise Tax collected by the US government for rum produced BACK to Diageo. The overall deal puts roughly $6 BILLION of American tax funding which was intended for "Economic and Infrastructure improvements" directly into the corporate coffers of the world's largest liquor conglomerate; whose CEO by the way just got a 72% raise in his salary. DIAGEO will receive $6.38 in direct payment for every proof gallon of rum they make in the VI, which cost them $3.07 to produce. Added to that is the gift of a $250Million facility and subsidies on molasses, freezing the cost to DIAGEO of molasses at $.15 per gallon (it sells now on open market for $1.50 a gallon) for the next thirty (30) years, renewable at DIAGEO's discretion for another thirty years. No matter where the price of molasses goes for the next 60 years, DIAGEO will still pay just fifteen cents per gallon. I addressed the speakers when comments were invited and expressed our (small distillers) profound disappointment at this completely inappropriate use of US tax dollars. Pointing out that there are about 200 American craft and artisan distillers with second mortgages, working for no salary, employing locally, buying locally produced raw materials and struggling to meet the cost of doing business, no small part of which is the full board Excise Tax we pay on our goods. On behalf of all the small distillers in the US, I took the liberty of supporting the NPRC call for investigation of the details of this deal, which was lobbied strongly by Charlie Rangel and Congresswoman Donna Christensen. Rangel is accused of keeping the bill from coming to debate which would have limited the amounts the Virgin Islands or Puerto Rico would be permitted to pay out as incentives to 10%. In this case the payment by VI to DIAGEO will be 50% of the rebated taxes paid by the US to VI for "economic development". LATER THAT MORNING: Met with two Legislative Assistants for Senator Gillibrand at the Russell Senate building to discuss reduced excise tax for micro producers. They agreed it was appropriate and will work with Congressman Hinchey's office to propose a bill to give micro spirits producers quid pro quo with the brewers and wineries who pay 20% the rate of excise tax the big producers pay. They are also addressing the issue of the EU prohibition on legal American Whiskeys less than three (3) years in oak. This issue has also been taken up by the Offices of the United States Trade Representative, which is facing the same question with the Israeli proposal to take up the EU standards for labeling, and Australia, and Canada; thereby redefining American Bourbon and Rye Whiskeys. Turns out that DISCUS is supporting this move since many of its members' products would be excluded or need to be reformulated to meet the EU regulations for "whiskey". Busy day in DC.

Just out of a meeting with the Senior Director of Technical Barriers to Trade Office in DC. The USTR is in the process of addressing certain trade barriers about to be taken up by Australia, Israel an some Asian countries which relate directly to this issue. Israel is about to adopt EU labeling standards, Australia has just adopted the EU labeling standard, which means many international brands will be excluded from Australia and Israel. DISCUS has weighed in with the USTR objecting to Israel's adoption of the EU standards since it would mean many American brands controlled by DISCUS members would be excluded since some of those brands are blended with GNS. This may be a case where DISCUS interests align with those of the small distillers for reasons unrelated to introduction of new American whiskey abroad. Meetings are scheduled to address this issue. I was told the USTR had no idea the size of the micro community and its impact on the job market, agriculture and exported goods. Position papers are being developed to argue the point that American Whiskey is defined by the US Government and quid pro quo with Scotch whiskey as far as regulation and export/import is what is appropriate. I raised the issue: "Single Malt Scotch Whisky" does not meet US labeling regulations since it is not aged in a NEW barrel and therefore is not a "Type" under US law. But the Scotch Whisky producers are allowed to sell it in the US as a "Type" because it is made under Scottish rules and we recognize that. The good news is that now the USTR is aware of the issue at the highest level and at the next "rules" meeting in Geneva the topic will be addressed,and especially so now that the same issue is being addressed with regard to Israel with the blessing of DISCUS and the TTB. The precedent is set. The bad news is the EU rules making is slow and difficult. We'll have to wait, be patient and persistent and see. R

Thanks to Mark Brown at Buffalo Trace for monitoring the DIAGEO deal news. Here's the latest: Tuesday September 14, 2010, 11:38 am EDT The National Puerto Rican Coalition (NPRC) will hold a press conference on Thursday, September 16, at the National Press Club to discuss the organization's requests to the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to investigate a deal between Diageo, a UK-based liquor conglomerate, and the U.S. Virgin Islands. "Diageo has structured an unusual and highly suspect agreement with the government of the U.S. Virgin Islands," said NPRC Chairman Miguel Lausell. "Through this 'deal' more than $6 billion in U.S. tax funds will be assigned directly to Diageo over the next 60 years to assist in the creation of 40 jobs. When you take into account the 350 jobs in Puerto Rico that were lost as a result of this deal, Diageo in effect will be pocketing $19 million for every job killed in Puerto Rico. What's most troubling about this sour deal is that the Federal and State officials involved in negotiating and/or sanctioning it have close family ties." "How can a publicly-traded company secure a deal so sweet that it is guaranteed profits that exceed 100 percent annually for up to 60 years?" Lausell added, "Or give credible indications of revenue inflows to its shareholders when the 'rebates' are based on a discretionary federal program that Congress may alter or eliminate in any given year?" Copies of the requests to the U.S. Department of Justice and the Securities and Exchange Commission will be available. DETAILS: Thursday, September 16, 2010 10:00 AM National Press Club, Zenger Room - 13th floor 529 14th Street NW, Washington, DC For more information on the press release, contact Naomi Lopez at 318-422-0446 In the past 32 years, the National Puerto Rican Coalition, a non-profit organization, has emerged as one of the most respected and effective organizations advocating for the concerns of the Puerto Rican community. NPRC's mission is to systematically strengthen and enhance the social, political, and economic well-being of Puerto Ricans throughout the United States and in Puerto Rico with a special focus on the most vulnerable.

You may NOT sell whiskey in oak, unless under bond to a license holder with a bonded premises and transferred in bonded carrier. Read the regs. Spirits can only leave the plant in sealed glass containers with approved label and Fed taxes already paid. You may ship goods in oak overseas, as export, to a licensed recipient. It is a question of both tax and the reliability of the information on the label upon which the consumer makes his decision to buy. There is no way to get a full accurate measurement of alcohol content on goods in oak. They must be proofed accurately in order for you to pay taxes on the alcohol you made. The porous nature of the wood does not make for stable alcohol content. It would change in transit, and the consumer, the buyer, would not be assured that what they paid for they actually got. You could bottle up a single barrel and then sell the customer all the bottles from that individual cask then also include the cask itself as part of the deal. R

The HUFFINGTON POST takes note: Huffington Post Yesterday In 2008, the Democratic Party Platform criticized the previous eight years of Republican failures: "These are not just policy failures. They are failures of a broken politics -- a politics that rewards self-interest over the common interest and the short-term over the long-term, that puts our government at the service of the powerful. A politics that creates a state-of-the-art system for doling out favors and shuts out the voice of the American people." Sadly, a mere two years later, we Democrats are already guilty of the same failures. Despite numerous appeals to Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi and then-Chairman of the Ways and Means Committee, Charlie Rangel, lawmakers allowed a British liquor conglomerate to abscond with $6 billion of tax revenue that was intended for the general welfare of the U.S. Virgin Islands. The party leadership's failure on this issue is epic. Rather than protect about 350 union jobs, Democratic lawmakers have allowed British-owned Diageo to move to the U.S. Virgin Islands where they will take about half of the Federal tax subsidy on rum, in order to provide the U.S. Virgin Islands 40 jobs in exchange for a $6 billion gift from US taxpayers. Not only are these jobs non-union, Diageo is guaranteeing that only 32 of the jobs will be filled with locals from the U.S. Virgin Islands. American taxpayers are paying more than $3 million per year for each of these non-union jobs for locals. Government is in the service of Diageo -- it appears to be actively promoting the company with tax dollars that were intended to support the general welfare of our citizens in the U.S. territories. Diageo is receiving an average of $100 million per year in corporate tax breaks, sugar subsidies and direct payments. That is enough money for every child in the U.S. Virgin Islands to receive over $3,000 per year for their current or future educational expenses. This money could more than double what the territory currently spends for its combined Health and Human Services and Department of Health budgets. Instead, these funds will be lining the pockets of British corporate executives and their shareholders. While this may sound like a Republican corporate welfare scheme, this happened on Democrats' watch -- and with our complicity. Legislation (HR 2122) was introduced before Congress to set a ten percent cap on the amount of Cover Over revenue that can be paid directly to a rum producing company. As then-Chairman of the U.S. House Ways and Means Committee, Charlie Rangel was able to block this legislation imposing corporate kickback limits from leaving his Committee. By keeping the legislation from seeing the light of day, Rangel denied American taxpayers the opportunity to learn about and publicly debate the appropriate use of federal tax revenues and financial support for our nation's territories. As a result, lawmakers shut out the voice of the American people before we had a chance to speak. For example, Puerto Rico uses 94 percent of this federal tax rebate to support investments in infrastructure, health, education, and environmental preservation. The additional six percent is being spent to promote the territory's rum industry. Local law limits to ten percent the amount that can be used for this purpose. Why should we allow a highly profitable, union-busting British company take a $6 billion gift from the US treasury at a time when our local economy needs that money reinvested in our soil. Another result of Congress' stalling the bill in committee is that Diageo will now receive subsidies worth more than twice their production costs. Basically, they will make substantial profit -- while workers receive less than a pittance in return. Any which way you look at this sweetheart deal, you realize it was designed only to benefit the British company. From the initial gifts of the state-of-the-art distillery, to the $50 million "start-up" funding, to the 50% of the tax subsidy, to all additional local tax incentives, to the unbelievable subsidy on molasses, this deal is a major gift to a very wealthy foreign company at the expense of U.S. taxpayers. Should we be worried about another corruption scandal here? It is very strange that with so much money at stake here there has been absolutely no debate in Congress over this deal. When Republicans controlled government, Democrats promised a new era of ethics and responsibility. Handing $6 billion to a profitable British liquor conglomerate is exactly the kind of unethical policy that Democrats promised to end. Allowing funds intended for the general welfare to be diverted to corporate pockets sounds like an exaggeration from the pen of Charles Dickens. The union workers who lost their jobs and the American people who put us in control of government in the last election are owed -- at a minimum -- an apology. Instead of putting a stop to this outrageous corporate thievery, lawmakers were complicit in this betrayal of workers. Lawmakers should immediately allow this legislation to move forward -- allowing the public to debate the appropriate use of tax dollars in supporting corporations. In fact, they should go a step further and oppose any attempt to directly pay corporations a dime. After all, if this program is going to be used to allocate $6 billion for just 40 jobs, we should strongly consider eliminating this tax subsidy altogether. If this is the kind of "change" that we Democrats are willing to deliver to the American people, then we do not deserve to lead. Now isn't this just the kind of thing makes you want to go to your window, throw it open, stick your head out and yell "I'M MAD AS HELL AND I'M NOT GONNA TAKE IT ANY MORE." R

MORE FALLOUT FROM DIAGEO DEAL: WASHINGTON, Sept. 8 /PRNewswire/ -- The U.S. Virgin Islands (USVI), aided and abetted by Congressman Charlie Rangel, has awarded the wealthy British liquor conglomerate, Diageo, a $6 billion deal to produce rum in their territory. This is one of the most outrageous gifts to a foreign company at the expense of US taxpayers. "This sweetheart deal is nothing more than a 'kick-back' program that gives Diageo a huge financial payday in exchange for being required to only hire only 40 employees," said Robert Deposada, President of Latinos for Reform. "This deal pays this British conglomerate two times the cost of producing the rum! That means that they could sell the rum for one cent plus the excise tax and still make a lot of money!" Deposada added. American manufacturers of bourbon and whiskey do not enjoy the same sweetheart tax breaks and ingredients subsidies and, in fact, would be undermined if USVI rum producers decided to engage in a liquor price war. The House Committee on Standards of Official Conduct and the U.S. Department of Justice need to investigate the possible corruption and abuse in this deal. First, the House Committee should ask Charlie Rangel and his close ally Rep. Donna Christensen (USVI), under oath, if they will be receiving benefits from this sweetheart deal in the years to come. Also, the U.S. Department of Justice investigate whether key players behind this sweetheart deal, from the corrupt USVI Governor all the way to Congressman Rangel and his allies, will receive golden parachutes after all components of this deal are in full effect? Second, why is Wall Street giddy over the bond deal to raise the initial $250 million to build the distillery for Diageo, when the Virgin Islands makes California look fiscally responsible? Why would the financial analysts believe that there are almost no chances for the Cover Over tax subsidy to be limited or capped in this Congress? The fact is that legislation (H.R. 2122) was introduced before Congress to limit the amount of the tax subsidy revenue that can be paid directly to a rum producing company. The only way analysts would come to that conclusion is if they received private assurances directly from the House Ways and Means Committee then-Chairman Charlie Rangel that no legislation that could affect this subsidy would see the light of day in his committee. "Considering the initial gifts of the $250 million state-of-the-art distillery, the $50 million 'start-up' funding, the 50 percent Cover Over tax subsidy kick-back, all additional local tax incentives, and the unbelievable subsidy on molasses, one can only conclude that this $6 billion largesse was designed to only benefit the British liquor conglomerate -- at the expense of U.S. taxpayers," Deposada concluded.

Ethics Comm. Ignores Rangel's Most Corrupt Act Judicial Watch 08/13/2010 While the focus of Charles Rangel's ethics charges center on doing legislative favors for donors and failing to pay taxes, his most troubling lapse - enriching a foreign liquor company with billions of U.S. tax dollars - continues to be largely ignored. The House Ethics Committee's recent charges against the veteran Democratic congressman from Harlem fail to mention his most serious transgression, one that will end up costing U.S. taxpayers about $6 billion. A hard-hitting piece in a conservative news website offers the gory details of Rangel's dirty little deal to enrich a British rum company and raises a logical question; what's in it for him? Rangel helped mastermind a shady deal that gives London-based conglomerate Diageo billions of tax dollars to relocate from one unincorporated American territory (Puerto Rico) in the Caribbean to another (Virgin Islands) for no apparent reason. Uncle Sam will give the European booze maker nearly $3 billion in tax credits and benefits, help it build a new $165 million state-of-the-art rum distillery, allow it to take half of the Virgin Islands' rum-tax money, a 90 percent income-tax break and a property tax exemption. The move will drastically boost Diageo's already lucrative profits - and cheat the U.S. government out of much-needed tax revenue - because it will slash in half the amount of taxes the liquor company currently pays for each gallon of rum. For years the rum has been produced in Puerto Rico, where a law caps the amount of tax rebate that can be kicked back to manufacturers. The Virgin Islands have no such rule, making it a far more profitable place to do business. When lawmakers got wind of Diageo's new accord, many led an effort to pass legislation limiting the amount of rum tax money that can go to corporations since the funds go back into the community to pay for things like schools and environmental preservation. Rangel, who at the time chaired the tax-writing House Ways and Means Committee, blocked the measure to preserve the unscrupulous Diageo deal. Essentially, Rangel diverted money from schools into tax breaks for a liquor conglomerate, according to an in-depth story published by an investigative news organization earlier this year. Incidentally, the Virgin Islands governor who helped broker the deal is also facing a litany of ethics charges for misappropriating federal funds. This is not to say that Rangel's other corrupt acts aren't relevant. After all, the 20-term congressman is under investigation for tax evasion, using his office to raise money from corporations with business before him, illegally accepting multiple rent control apartments in his New York district and hiding more than $1 million in assets. His corrupt antics, which President Obama recently called "very troubling," got him booted as Ways and Means committee chair and inspired the commander-in-chief to hint at resignation for the sake of leaving public office with "dignity."

FROM DIAGEO'S SPIN MASTERS: Statement With the Intent to Clarify From Diageo re: the 30-Year Public-Private Initiative Between the Government of the USVI and Diageo Source: Trading Markets / Diageo Wed, 08 Sep 2010 12:18:00 EDT The 30-year public-private initiative between Diageo and the government of the US Virgin Islands is a local agreement. No member of the United States Congress played a role in negotiating or approving it. The agreement was created and executed in a fully transparent manner and was debated and voted on by elected representatives in the legislature of the US Virgin Islands. Any assertion or implication to the contrary is inaccurate and erroneous. The landmark agreement will generate new local revenue for public needs, benefitting the economy and the people of the territory for at least the next 30 years. Considering the amount of attention the earlier reports of this deal generated, this "explanation" is thin. The fact is, though it was a US Virgin Islands and Diageo initiative, the MONEY trading hands is American tax revenue; YOUR tax dollars, you are paying for it. If the Federal Government of the US elects to aid the Virgin Islands' economy certainly there are better and cleaner methods to make the direct contribution without the Virgin Island Legislature and the largest alcohol consortium in the world making the decision how US tax dollars are spent. The deal is nothing more than a vaguely disguised pass-through (yes it walks like a duck, and squawks like a duck). The deal as Diageo claims perhaps did not need US Legislative approvals. However, the US Legislature has the power to control the purse-strings and perhaps should reconsider the allocation of US tax dollars to the Virgin Islands to take into account the injection of cash the VI will be receiving from Diageo, just to balance the scales a bit. Not to mention the fact the arrangement has all the earmarks of a back-room deal. It doesn't matter how "transparent" an activity is if it is not held up for inspection during the process from the start. R

SAMPLING AND SELLING OFF PREMISES EVENTS The recent change in the NYS Farm Winery law extends the permission to sample and sell New York State spirits at Farm Markets and State Fairs and any other off premises event. A Farm Distillery or A-1 distiller may apply for a Farm Winery permit. Once you have the Farm Winery permit and you have also a wholesale permit, you may apply to the SLA under MISC PERMITS in the "fast form find" section on the SLA site and apply for the "SUPPLIER PERMIT" under MISCELLANEOUS PERMITs, Form 1013. This is the application for a permit to pour and sell at off premises events. You will need to include your WHOLESALE permit (copy). There is a second page to this permit with the INSTRUCTIONS for filing. Read it carefully to understand exactly which questions to answer. In a discussion with the SLA Licensing office, the agent explained this is also the application for the Annual Permit. This is a major step forward to Farm Distilleries in New York. Never before have distilleries had the ability to sample and sell off site alongside their winery and brewery cousins. It's a pain to get the Farm Winery permit since the SLA will require the applicant to complete the entire application as though starting from scratch, regardless if you have all the info on file already; don't try to make sense of that, it's easier to just file the paperwork and keep it uncomplicated (though that may seem to be a contradictory comment). R

New York is similar in that the STATE LIQUOR AUTHORITY takes the same view, if it isn't explicitly permitted in the statute it is not permitted. And we've been successful introducing various changes that helped. But there are, not so much "loopholes" but different paths to take. For instance in NY a Farm Winery and a Winery, as well as a Farm Distillery may apply for and receive a license for on premises consumption if there is a restaurant on or operating adjacent to the licensed facility. And we are permitted (one of the changes we were successful pushing through) permit holders may hold more than one permit so a Distillery can also be a Farm Winery, which is what we did. It is possibly the most successful gambit in New York so far, turning the topic from "alcohol" to "agriculture" and "economic development for rural areas" and "TAX REVENUE" as we argue for changes in law. It softens the focus on alcohol and reminds the legislature that craft scale distilling high end spirits is to the "liquor industry" what a neighborhood artisan baker is to the Wonder Bread factory. R

This is helpful news. Thank you. It is rumored that Colorado is a very distillery friendly State. Do you feel your State liquor control agency serves the public and industry well? Are they responsive and knowledgeable? My little informal survey. Ralph

I think it's actually a Federal violation for a producer or wholesaler to own a bar. That's not to say it is insurmountable. And the fact is that wineries with tasting rooms and/or restaurants or breweries with brewpubs and serving food already contradict the Federal Code. (When asked how this is so, representatives of both the State of NY and the Fed sitting at the same table simply smiled and shrugged their shoulders.) The laws contradict, that's just the way it is and the States are given latitude on certain matters the Fed chooses not to confront, for better or worse. There's a bill on The Hill now, HR 5034, that proposes to further expand States' right to make laws which contradict Federal law as they apply to those States; and limits the Fed's ability to challenge those laws as un-Constitutional. It is supported by the wholesalers and opposed by nearly every other segment of the industry. It's an example why you should be carrying on this discussion also with your local State and Federal Representatives, pushing for a voice in how the law is (right now as we correspond) being rewritten. At the State level the Alcohol Beverage Control Law is being revised bottom to top by the State Liquor Authority Legal offices. And while I don't doubt the good will and skills of SLA attorneys, for me the question is one of that old bugaboo "separation of powers". We don't have our Highway Legislation written for the Legislature by the State Troopers. Sorry to take to the soapbox but this is happening NOW. Also not trying to be alarmist. It is possible to reshape Draft legislation through the Public Hearing process, but is redrafting something already conceived and executed in writing; rather than broadening the conception overall from the bottom up with more input from the "regulated". At the Federal level there are half dozen categories that affect your business: legislative, taxation, export, EU law, access to markets, arcane and inapplicable laws; and that's just the short list. Don't get me started..... So find adjoining spaces; buildings with no residences in them. Form two companies to hold the licenses separately from one another, build a solid glass wall between the two and get to work. The SLA may balk, but this is not a novel idea, it is being considered by many prospective distillery pub owners. It will mean new interpretation not new law. But look what the wineries and breweries did once they became activists for their own micro-industrial businesses. For your particular vision and in a City, it will be difficult without a savvy attorney who knows NY liquor law. It will be made more easy with the help of the offices of your State Legislators but they are often measures of last resort. Think before you sic a Legislative Assistant on any official or Agency; that Legislative Assistant will move on and up, the administrators of the System remain and you must deal with them. This is not a good place to emulate Cortez; don't burn the boats, at least not till you've gotten your roots in and have money and comfort and can afford to fight. Jeesch, I just realized you posted this months ago. Sorry for taking so long to respond. R

I'm conducting a very informal survey about States' regulation of alcohol. Love to hear from anyone with experience dealing with their State Legislature and/or regulators. If you are so inclined, please give your opinions on the following questions: In your opinion, do you believe your State agency can be effective at regulating the production and distribution of alcohol in its current form (the "agency" form that is, whatever the form)? How is your State Alcohol Control agency funded? (General fund, self-funded, etc.,?) Do you believe individual States serve the public and promote alcohol safety effectively? Is it properly funded and staffed sufficiently to meet the needs of the consumer and the industry in a timely fashion? Are State agency personnel knowledgeable and helpful? And in that regard, are they consistent in their decisions and administration? Are your State laws clear and current? ("Current" meaning current to 20th or 21st standard business, practices and the markets?) Are the State laws consistent with Federal laws where the two overlap? Can you identify any instances where States' laws would better serve the consumer and the industry if the States yielded, or relied upon Federal Standards rather than the variety of "standards" set by individual States? (For instance: All States basing their tax and reporting on a single agreed method such as all amounts of distilled spirits measured either as percentage of alcohol or as "Proof Gallons", or Liters, or Wine Gallons, etc.) Not looking for lengthy answers. This is mainly to get a handle on your opinions of those who regulate your business and how their work, or lack thereof, meets the mandates set out by different States. I have limited experience with individual State agencies other than New York, and the experiences of those on the front lines dealing with the States in which they are attempting or have successfully opened and are marketing their spirits. Ralph

Well I have to say that while I agree on the elect-better-Representation part, I must respectfully disagree with the comment nothing will change till then; which contradicts the first thing Phoenix wrote which is that this is the way Congress works. If we wait for the "right" people to be elected, our great grandchildren will still be bitching about the law. Without influencing any election, working with officials in office and law cemented and then patched over and over again into NY Statutes, we managed to change New York State Alcohol Beverage Control Law three times over the last seven years; alone, without an attorney or legislators in our pocket. For better or worse, the creation of Law IS Political by nature and driven by many factors, one of which is greed but it is not the only motivating factor in the process. If we want a better climate for our industry the law must be changed and that is achievable no matter who is in office. What it takes is Homework, Action and Followup; not the election of new legislators who may or may not act on their own or Corporate interests. It takes action by voters and taxpayers (sometimes not the same thing). Organization and Lobbying for reasonable, definable, PRACTICAL solutions works. It just takes reasonable proposals with justifications, time, patience and a willingness to go the distance. Ralph

We have had the experience on more than one occasion that a label is approved, then we submit another label for a different product in the same category, with the exact same label art and use of wording and it comes back denied. When the inconsistency is pointed out, the response is that it was a mistake the first time and we need to redesign and reprint ALL our labels because they were all approved incorrectly. We gained some consideration in that they allowed us to use up the labels we'd already printed but had to resubmit ALL our whiskey labels for reapproval. Once finished, we submitted another version with simple copy changes and were then told there was a second error on our labels in the size and use and placement of a particular phrase (which had not changed since we started with our first "approved" labels). We raised an objection and the agency relented since the problem was not substantive. The earlier comment in one of the above posts is accurate. The examiners have discretion and so things are not always interpreted the same from one submission to the next. It helps to do some homework and have examples of previously approved labels to bolster your side of the appeal; as we did with our Single Malt label as I described in my earlier post. We are currently having a discussion on the use of second barrel aging of whiskey. The TTB informed our compliance person that we could not put our bourbon whiskey into a second barrel, for instance maybe a sherry cask, and call it Bourbon Whiskey. Prichards Double Barrel Bourbon is an example of a Bourbon that contradicts that determination. The key is homework and polite persistence. R

Diageo Profit Trails Analysts' Estimates on Slowing Sales in U.S., Europe Source: Bloomberg By Clementine Fletcher Aug 26, 2010 3:42 AM ET Diageo Plc, the world's largest liquor maker, reported annual profit growth that missed analysts' estimates on weak sales in the U.S. and Europe. Net income climbed to 1.63 billion pounds ($2.54 billion), or 65.4 pence a share, the maker of Smirnoff vodka said today. That compared with the 1.65 billion-pound average estimate of 15 analysts compiled by Bloomberg. Diageo's shares fell as much as 2.3 percent to the lowest in almost two months. Diageo gets about two-thirds of profit from Europe and North America, where consumers are cutting back and choosing cheaper brands. Operating profit dropped 1 percent in Europe, the company said, while North American earnings were unchanged. The London-based distiller's international unit, including Latin America and the Caribbean, increased profit by 25 percent. "Europe and North America we're being a little bit cautious about, because while we see some good signs we also see signs that don't tell us growth is here and consumer confidence is back in spades," Chief Financial Officer Nick Rose said today on a conference call. "Cautious is probably a fair description, not downbeat and pessimistic." Diageo was down 14 pence, or 1.3 percent, to 1,052 pence at 8:21 a.m. in London trading, the second-biggest decline in the U.K. benchmark FTSE 100 Index. Operating Profit The maker of Captain Morgan rum and Johnnie Walker whiskey said its operating profit, excluding acquisitions and disposals, rose 2 percent, missing the 2.3 percent median estimate of four analysts surveyed by Bloomberg News. The company had forecast "low single-digit" growth for the year. "The global diversity of our business, together with the strength and range of our brands and the agility we have demonstrated gives us confidence that in fiscal 2011 we will be able to improve on the organic operating profit growth we have delivered this year," Chief Executive Officer Paul Walsh said in the statement. Net sales rose 5 percent to 9.78 billion pounds. Excluding the effect of acquisitions, sales gained 2 percent, missing the 2.3 percent median estimate as a 3 percent decline in Diageo's ready-to-drink category offset growth in beer and spirits. Diageo raised the dividend for the year by 6 percent to 38.1 pence a share and said it expects to "at least" maintain that rate of growth in the current fiscal year. *** Just so it is not overlooked, $6,000,000,000 of that dividend came from American taxpayers thanks to Mr. Rangel and his friends on the hill who failed to quash the sweetheart deal described in the report above in the EXAMINER.

Sorry for the duplicate post. Perhaps too early in the day to be political.

Ag and Markets may well be ill equipped at this time to simply assume that responsibility for the Production side of micro spirits, beer and wine. However neither is the SLA. And at the least Ag and Markets understands agriculture and what farms need and protects the interests of New York farmers. And since the majority of products made in NY (that are not vodka from GNS) are made with agricultural raw materials no less than milk or juice, it is the logical agency to oversee Production licensing and enforcement. Falling into the realm of Ag and Markets also protects the small producer to a large extent from DEC misunderstanding of the nature of the small producer. The DEC originally classified our distillery as an Industrial Use, our products as industrially produced and our waste stream as "hazardous industrial waste" with all the accompanying problems that come with that designation. It was not till we acquired a verification from Ag and Markets that the DEC backed off and recognized our Farm status, our products as Farm products and our waste stream as "Food Waste" which falls under a completely different set of regulations. There is currently no agency in New York that fully comprehends the movement and its implications. It is my opinion that the appropriate agency to regulate Production is Ag and Markets; which by the way made this same proposal and agrees that (notwithstanding the financial implications for the management of their assumption of the regulatory role) the scale and methods utilized by wineries, breweries and distillers operating on the scale we are suggesting, are agricultural in nature. R

Anyone interested in "home distilling" should take a look at the "DOWN AND DIRTY" section on this ADI website. Here is someone who did it right, spent his own money and accomplished his goal of a small distillation operation at home (though not in the house). And the price tag is not prohibitive (he posted his expenses). So anyone who claims that doing this the proper way, getting a license and establishing a small operation at home is too hard, too expensive, to much trouble is simply not determined enough, or lazy, or simply taking the "rebel" posture to avoid responsibility for following the same rules everyone else must follow. Congrats to the bold new distiller who built this small distillery the right way.

CONTACT YOUR NEW YORK STATE LEGISLATORS AND DEMAND A VOICE IN THE ABC REVISION. Delaware Phoenix is 100% correct that it's a joke we are required to acquire FIVE licenses to sell our goods: A-1, DD, Wholesale Distributor, Farm winery and now an Ag and Markets permit to use the farm raw materials WE ARE GROWING as part of our own Farm Operation (the Agency considers us a "middleman" since we process the goods, though they are own own ag raw materials). The law is being rewritten NOW! Contact your Legislator and ask them why we are all not being included in the rewrite or even permitted to see the draft till the Public Hearing. Squawk!!