SALT LAKE CITY — Lawmakers held up Gov. Gary Herbert's appointment to his economic development board Wednesday over a new audit that revealed a privately run liquor package agency lost $300,000 in state funds and inventory.
The Senate's decision not to vote on the governor's appointment of Sam Granato, currently the Department of Alcoholic Beverage Control commission chairman, came just hours after Herbert downplayed the audit.
The lawmaker who ordered the audit, Sen. John Valentine, R-Orem, said the Senate wants to wait for a confirmation hearing to be held to find out what, if anything, Granato knew about the problems at the now-closed package agency.
After hearing the audit Tuesday, members of the Legislative Audit Subcommittee ordered a more extensive examination of all of the state's package agencies to make sure none are in a similar financial situation.
The governor, however, said Wednesday he believes the audit uncovered an isolated case that's already being addressed by the DABC.
"I'm very comfortable that we're going to handle this issue fine. This is not a big problem," Herbert said during the taping of his monthly news conference on KUED Ch. 7.
He said it would be "premature for me to say there's a lack of oversight. There may just have been a unique problem that cropped up in Eden," the Ogden Valley town where the package agency was located.
Package agencies are privately operated, state contracted liquor outlets located in communities too small for a state store, and in resorts and hotels. The Eden location opened after Wolf Creek Resort chose not to renew its contract in 2009.
The Legislative Auditor General, however, found the DABC "exercised poor management" over the Eden package agency, which closed in July 2010 with just under $300,000 of state funds and inventory unaccounted for after a year of operation.
Herbert met with DABC Executive Director Dennis Kellen later Wednesday. Kellen said after the half-hour meeting he did not offer to step down and intends to continue as the head of the DABC.
The governor's spokeswoman, Ally Isom, said the focus of the meeting was the steps the DABC has taken to avoid future problems with package agencies, including heightened oversight by an internal auditor.
"The conversation didn't include any reference to personnel changes," Isom said. "Mr. Kellen did not tender his resignation nor did the governor ask for it."
Asked if the meeting put the issue to rest for the governor, Isom said, "there will be ongoing oversight to make sure the reassurances we've received are indeed in place and doing what needs to occur" at the DABC.
Valentine and several legislative leaders said Herbert should look at making personnel changes at the DABC as a result of the audit.
"I would hate to be Mr. Kellen," House Speaker Becky Lockhart, R-Orem, said Wednesday. She stopped short of calling for the governor to replace him, however. "That's an executive branch decision. I have great concerns about the management of DABC."
Granato had reportedly been approached about taking the DABC executive director's job, but Isom said she was not part of that conversation between the governor and Granato.
"I do know what occurred is the governor had extended the nomination to the Governor's Office of Economic Development" board of business and economic development, Isom said.
As for Wednesday's delay in confirming Granato to the board, Isom said, "I understand the Legislature just wanted to seek reassurances around the DABC issue. I have no concerns. Mr. Granato is a great nominee for the GOED board."
Granto said he appreciates the Senate's need to perform its "due diligence" in his pending appointment. He added that he is also concerned about management of DABC and "why we as a commission didn't know what was going on" with Eden outlet.
Herbert is replacing Granato as chairman of the DABC commission and said at the taping he has "great affection" for him and was "not necessarily looking for anybody who does anything differently."
Granato has been outspoken critic of legislative actions on liquor issues, especially recent budget cuts.
Herbert said he's still "wide open" on who will take over for Granato on the DABC commission and expects to have many applicants for the position.
"I want somebody who understands the law as created by our Legislature and, in fact, enforces and enacts the law," the governor said. "I don't want anyone who's activist."
After Thursday's taping, Herbert also said he hopes lawmakers will reconsider some $7 million in cuts made last session that are affecting technical education programs attended by high school students.
He said a special session of the Legislature will likely be needed to appropriate the funds, once a source is found. It's up to the governor to call lawmakers into special session, and to set their agenda.
Lockhart told House Republicans that will likely occur in either June or July, when lawmakers meet in interim session. She said other items the governor may want them to consider are a health insurance bill he vetoed that has now been changed, and a bill dealing with judicial retention elections that failed to pass last session.