SEATTLE - The State of Washington runs its own liquor business and has just one massive distribution center for shipping thousands of cases of alcohol a day to hundreds of stores from Vancouver to Spokane to Bellingham. So when something goes wrong at the distribution center in South Seattle, it can wreak havoc.
There were so many equipment malfunctions when the center opened nearly a decade ago that the state had to set up a temporary facility in Auburn just to fill orders. They also hired a consultant to help troubleshoot problems, which have persisted for years.
Last summer, a computer glitch during a $1.3 million upgrade created a statewide liquor shortage during the busy tourist season. And now we’ve learned of another problem that directly affects how much the state pays to get all of that liquor delivered.
Trucking companies are paid according to the number of miles driven and the weight of each shipment. It’s pretty simple as long as you know how many cases are going onto the trucks and how much each case weighs. But for the past six months, and perhaps longer, the Distribution Center has been calculating those weights incorrectly. They’ve been too high, meaning some carriers were getting overpaid.
We can’t tell you how much it’s cost taxpayers or even how long it’s been going on, because even the people running the Distribution Center don’t seem to know.
At first, Pat McLaughlin, the Director for Business Enterprise for the Washington State Liquor Control Board told us: “It was literally a day or two in the month of September.”
And McLaughlin says the problem was fixed right away.
“Corrective measures were put in place immediately and continue to work very effectively,” he said.
But the KING 5 Investigators obtained a draft document titled: BOL and Packing list Discrepancies Analysis Report, which indicates the inaccuracies go at least as far back as June/July.
The report is dated March 12, 2010 and says “Many divisions within the agency have been negatively affected by problems with the Bill of Lading and Packing lists that are sent to stores, and then used by the carriers to create an invoice. The problem extends to budget reporting, the purchasing of liquor based upon weights, the ability for carriers to perform their jobs safely, and especially the overpayment (or underpayment) to the carriers…”
Internal e-mails obtained by the KING 5 Investigators paint a picture of employees scrambling to sort out the problems. In November: “All of the weights are calculating high. The programming people are working on putting in a patch to correct weights,” reads one. Just last month, an accounting supervisor asked “Are we over paying the carriers due to faulty weights?”
A special task force was created to assess the damage and find a fix.
McLaughlin confirms that the Liquor Control Board is currently reviewing six months worth of invoices.
“We are questioning the period of September to February for possible payment discrepancies," he said. "And at this stage, again, I don’t have any information to suggest that we are only talking about over payments, there could be underpayments too.”
A high level source in the Distribution Center, tells KING 5 that the state may have been overpaying carriers for years, and it could add up to millions of dollars.
Case weights vary tremendously because over the past eight years, the Distribution Center has expanded its inventory to some 3,000 different types of liquor. Depending on how big the bottles are, and whether they're plastic or glass, a case can weigh as little as 12 pounds or as much as 55 pounds.
An internal report titled “Product Weights at the DC (Distribution Center)” found that during a random test, “91.5 percent of the items had inaccurate weights in the system.”
“It’s unacceptable,” says Democratic Senator Tim Sheldon, who is a longtime critic of the state’s liquor monopoly and its management of the Distribution Center.
"If the weights aren't accurate how do you know your trucks are going out in an efficient manner? If it's underweight it's inefficient, if it's overweight it's illegal," Sheldon says. "It is a big deal. It just shows another example of another inefficient operation and these are state dollars. These are taxpayer dollars."
Earlier this month, state workers at the Distribution Center started weighing cases of liquor in order to get the warehouse system corrected, but that could take months.
Meantime, trucking companies are being paid based on a formula using an average weight of 37 pounds per case, no matter what they’re hauling.
Last Friday, Sen. Sheldon introduced legislation to sell the Distribution Center. That comes on the heels of a recent state audit which projects a revenue boost of nearly $300 million over five years if private enterprise took over the liquor business in Washington.
