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TN distillery bill raises ethics queries

11:11 AM, May 12, 2013   |    comments
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By: Nate Rau, The Tennessean

Gov. Bill Haslam will probably pass into law a bill that would aid a personal business associate and overrule the city of Gatlinburg's efforts to regulate moonshine distilleries.

City leaders were trying to preserve the family-friendly vibe of the mountain tourist town by limiting the number of moonshine distilleries and controlling where they could locate.

But now their regulations probably will be trumped by a new state law that would remove those local limits and, in doing so, also directly help East Tennessee developer Ned Vickers, who has worked with the governor on multiple private real estate deals, including at least one in Gatlinburg.

Vickers' plan to open Sugarlands Distillery on the city's main tourist drag had been denied by the Gatlinburg City Commission because it would share a property line with Ole Smoky Moonshine Distillery, violating its distance requirement.

But in a remarkable power play in the state legislature that turned Gatlinburg's own lobbyist against the city and involved two prominent Republican lawmakers, Vickers managed to push a bill to overturn Gatlinburg's ordinance and limit other local governments that want to regulate the burgeoning industry.

Critics say Haslam should have disclosed his ties to Vickers during the fiery debate in the legislature, and that his continued secrecy about his business investments stretches the limit on state ethics requirements for public officials.

But Haslam said he didn't even know that Vickers was the co-owner of the proposed distillery until he was contacted by The Tennessean. Haslam said through a spokesman that his investment ties to Vickers are managed by a blind trust.

The bill, which Haslam has until May 16 to veto, sign or let become law without his signature, would allow hard-alcohol distilleries to sell their products on premises in any county that allows liquor by the drink.

It specifically takes aim at Gatlinburg and would exempt distilleries from any local government's distance requirements between liquor stores, as well as any limits on the number of retail licenses to sell packaged liquor.

Gatlinburg had wanted to prevent a concentration of stores selling liquor through its distance laws, city officials said.

"We worked so hard to upgrade our product as far as Gatlinburg. We were named one of the top 10 prettiest towns by Forbes," Gatlinburg Mayor Mike Werner said. "There was a direction and a brand. We wanted Gatlinburg to be a bit better from what we've been known as in the past. We were just trying to elevate our image."
Haslam, Vickers have long history

Haslam has numerous ties to Vickers through a real estate firm called Holrob. On six different ethics disclosure statements dating back to his time as mayor of Knoxville, Haslam listed his stake in Holrob companies 49 times. On the 2011 form, Haslam listed 18 different Holrob-affilated investments, such as Holrob Gatlinburg and Holrob-HH Partnership.

Though his ethics statements do not disclose the magnitude of his investment in Holrob, Haslam told The Tennessean in 2011 that when he guaranteed a $5.5 million loan to a Knoxville developer, it was handled through Holrob.

Vickers said he was a developer at Holrob for more than 10 years. He said Holrob functions as a real estate investment fund for proposals brought to the company by individual developers.

"Holrob was an umbrella of a lot of different business entities," Vickers said. "The way that we worked, the developers would bring deals to the company and the company would decide whether to invest in them or not."

Vickers said Haslam does not have a financial stake in the proposed distillery, though the governor remains invested in at least two of his developments through Holrob - Holrob Gatlinburg and Holrob Henderson Chapel.

Vickers said he also sold his stake in a Gatlinburg Walgreens, located two doors down from the proposed moonshine distillery, to Haslam. He also purchased a property - across the street from the distillery - that he had co-owned with Holrob.

Vickers said he doesn't see it as a conflict if the governor signs the legislation clearing the way for his distillery because their co-investments are through the blind trust that has managed Haslam's investments since he took office in 2011. Vickers said he hasn't spoken to the governor since a charity event in 2011.

"(Haslam) is an owner of a couple entities through a blind trust ... that are still part-owners, or minority owners, in a couple of real estate entitites that I own," Vickers said, adding that he deals with the trustee of Haslam's blind trust and not the governor. "I have absolutely no contact with the governor."
Ethics disclosures have drawn fire

State Rep. Mike Stewart, D-Nashville, said he was troubled by the connection between Haslam and Vickers. Stewart said the distillery bill was the most intensely lobbied and debated legislation in the House this session.

"At the very least, the governor should have told us that an associate of his stood to profit from the legislation," Stewart said.

This isn't the first time Haslam has been criticized for his ethics disclosures. His first executive order after taking office in 2011 rolled back disclosure requirements related to the financial interests of Haslam and his cabinet.

Haslam has said his financial interests are largely managed by a blind trust, though he has shifted the way he reveals individual investments to the public. In 2010, Haslam itemized 250 investments in addition to his blind trust. On his most recent disclosure, filed on April 5 of this year, Haslam listed just 11 investments, including the trust.

"Gov. Haslam began his administration by rolling back ethical standards for disclosure requirements and by not releasing his own tax returns," Stewart said. "This all raises further questions about this administration and its commitment to avoiding conflicts of interest, and looking out for the people and not special interests."

Law would usurp local government

Vickers said he initially got positive feedback from Gatlinburg officials to open Sugarlands Distillery at 805 Parkway, which is the main commercial road in the East Tennessee tourist town. But after the City Commission voted against them, he and his partners decided to push for the state legislation.

The City Commission had cited its ordinance requiring that such distilleries be at least 1,000 feet apart. The city also had a law limiting the number of licenses to six, though that cap would not have come into play under Vickers' proposal.

The bill ultimately passed the House and the Senate, though it received opposition in both chambers from lawmakers who questioned the bill's necessity and others who traditionally have opposed expansion of liquor sales.

The bill was sponsored in the House by state Rep. Joe Carr, R-Lascassas, who is raising money for a run against U.S. Rep. Scott DesJarlais next year, and in the Senate by Sen. Bill Ketron, R-Murfreesboro, a longtime champion of wine sales in grocery stores.

David McMahan, a prominent lobbyist for the state liquor store association, which opposes the wine-in-grocery-stores effort, helped raise support for the distillery bill. McMahan had been the city of Gatlinburg's lobbyist but became an investor in the distillery and began to work on the opposite side.

McMahan said his concern was that Gatlinburg was trying to box out competition for the city's existing distillery, Ole Smoky's.

"At the time, we had no idea we would need any legislation passed," Vickers said. "At that time, (Gatlinburg) was saying yes. And so we did include David in the project and, obviously, that's turned out to be a very fortuitous thing."

Werner, Gatlinburg's mayor, said he's not really sure now how deregulating distilleries will play out.

"I just hope it's not a negative effect on our community," Werner said.

Contact Nate Rau at 615-259-8094 or nrau@tennessean.com. Follow him on Twitter
@tnnaterau.

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