When The Blue Loon sold drinks without a valid liquor license for more than a month this year, the state alcohol board didn't shut it down. The agency instead awarded the popular Fairbanks club and concert hall with week after week of low-cost "catering" permits, allowing it to remain in business for another two months.
The move has emboldened critics who say the newly transplanted Alaska Alcoholic Beverage Control Board is too lenient on bar and liquor store owners.
The chief executive officer for the Alaska Mental Health Trust Authority accused the board of ignoring the "clear intent" of the law and failing to live up to earlier assurances that it would stop using temporary catering permits as stopgap licenses for Alaska bars.
"When the board takes shortcuts or fails to follow the proper rules or procedures, it undermines both their authority and their legitimacy," said Jeff Jessee, who testified at a meeting of the liquor board Thursday in Anchorage.
Board chairman Bob Klein acknowledged after the meeting that allowing the bar to remain open and sell alcohol after it failed to renew its license was "an unusual use" of state catering permits.
The temporary, $50 permits are meant to allow liquor sales at one-time events such as conventions, picnics and sporting events. Klein and two other members of the five-person board voted by email to issue the permits for the Blue Loon in April, overriding agency director Shirley Cote, according to an agency memo.
The Blue Loon's liquor license expired Feb. 28. The club remained open through March and closed briefly after troopers discovered on April 2 that the license had lapsed.
Owner Adam Wool asked to open again using catering permits, Cote told the board in a May 2 memo.
"I was sort of incredulous that I would have to close. ... I was worried that I would not be able to serve alcohol for two months," Wool said in an interview.
Cote said no, she said.
"I advised Mr. Wool that the board had decided the catering permits would not be issued in a manner that would circumvent licensing," she wrote in the May memo to board members.
Wool asked if he could call board members to talk about the issue, Cote wrote. He called Klein, which prompted "a polling of the board" by email in early April, according to the memo.
Board members Ethan Billings, Marvin Yoder and Klein voted to allow the permits. Wool was told he could seek a licensee to apply for eight one-week catering permits, which would stack back-to-back until his appearance for a new license Thursday. (State law says caterer's permits are for events held off the permit-holder's licensed premises, requiring the third-party licensee.)
The board later learned the agency director could have instead issued the business a temporary license until the Thursday meeting, Klein said.
Cote said that's how she will handle future liquor license lapses. Prior to the Blue Loon case, however, the ABC Board's policy was to force businesses that failed to renew their liquor license to stop selling drinks, she said.
Under that unwritten policy, businesses had to wait until the next public meeting to get a new license, a process that could take months.
"In the past the board has wanted to send a strong message to licensees that they need to pay attention," Cote said.
Jessee also accused the board Thursday of acting in violation of public meetings laws by making decisions on The Blue Loon permits by email, rather than an at open hearing. Assistant Attorney General Harriet Milks countered that the board director has the authority to issue such permits between meetings, and that asking board members for input does not violate open meetings rules.
The ABC Board is appointed by the governor and confirmed by the Legislature. Klein, the current chairman, also sits on the board of directors for the state liquor lobby group, the Alaska Cabaret, Hotel, Restaurant & Retailer's Association. His is a sales director for Brown Jug liquor stores.
Lawmakers in 2012 voted to move the small state agency, including four investigators and an investigator supervisor, from the Department of Public Safety to the Department of Commerce, Community and Economic Development. The Legislative Budget and Audit Committee, under then-chairman Mike Hawker, R-Anchorage, proposed the bill. It passed despite opposition from public health officials and law enforcement.
With a capacity of 400 people, The Blue Loon is a nightlife fixture in Fairbanks. The venue sells out concerts, serves $10 cheeseburgers and shows movies.
"It's a little like the Bear's Tooth (in Anchorage)," Wool said.
Wool said he did not intend to let the license lapse. He believes he never received renewal or reminder paperwork from the ABC Board, he said.
"Sometimes if you don't get a bill you don't always pay the bill," Wool told the board.
The agency mailed the club a renewal application Sept. 24 and a reminder notice on Jan. 17, Cote told board members. The license was hanging on the wall of the business when troopers saw it had expired, she said.
It is illegal to sell alcohol without a license in Alaska. The law is sometimes used to prosecute villagers for bootlegging in dry communities.
Asked if The Blue Loon faced any penalty for remaining open after its license expired, Cote said the ABC Board is investigating.
"It's an open criminal case. We can't talk about open criminal cases," she said.
Wool said he was not aware of any investigation and couldn't comment on it until he talked to an attorney. He was unaware his license had expired until troopers discovered it April 2, he said.
"I stopped selling alcohol immediately for two or three days, then I got the catering permit," Wool said.
State law says the temporary catering permits are to be used for alcohol sales at "conventions, picnics, social gatherings, sporting events, or similar affairs." The board adopted a policy at a July 2012 meeting that it would "not allow multiple catering permits in the case of a pending liquor license that has not received all approvals for operation," according to meeting minutes.
In The Blue Loon's case, the permits were issued to a third party and enabled the bar to continue selling alcohol in April and May. It would have been "disastrous" to his business to abandon sales for two months, Wool said.
The ABC Board voted Thursday to resurrect the Blue Loon liquor license.
"The motion is carried," Klein told the bar owner as the license was reinstated. "Don't do it again."
Twitter updates: twitter.com/adn_kylehopkins. Call Kyle Hopkins at 257-4334 or email him at khopkins@adn.com.
By KYLE HOPKINS