Southern Glazer's bosses to face trial for bribery scheme

A federal grand jury in Oakland, California yesterday indicted five senior Southern Glazer’s employees, alleging they led an eight-year-long bribery scheme to control what wines made it into retail stores. They are also accused of falsifying records.

Five employees at Southern Glazer’s Wine and Spirits, the largest alcohol distributor in the US, have been charged with conspiracy to commit bribery and falsifying records to obstruct a federal investigation.

Stephen Magliocco, former vice president of chains; Michael Dehdashtian, vice president of chains; Adrian Ruiz, senior vice president for California; Ryan Dow, director of sales; and Loratina Muscara, director of sales, were all indicted yesterday by a Grand Jury in Oakland, California, and are accused of both accepting and making bribes. During proceedings the jury heard of staff at one chain of grocery stores allegedly accepting bribes including luxury golf trips to Monterey County, Maui, Las Vegas and Florida, and lavish hotel stays worth thousands of dollars in exchange for putting certain wines on shelves.

And while the grocery store chain involved in the alleged scheme was not formally named in court, it is identifiable as Albertsons, and its subsidiary Vons stores in Southern California, according to the San Francisco Chronicle. Albertsons is one of the largest food and drug retailers in the US, operating more than 2,200 stores across 34 states and the District of Columbia, with around 270,000 employees. A spokesperson for Albertsons told the Chronicle that the company was cooperating with authorities, saying: “The behaviour in question was wholly inconsistent with our policies, and we do not, and will not, tolerate it.”

A Southern Glazer’s spokesperson shared the following comment with the drinks business today: “We understand that five former employees of Southern Glazer’s have been charged. Southern Glazer’s is committed to full compliance with all applicable laws and industry regulations, and we hold ourselves and our employees to the highest standards of ethics and integrity. We have cooperated with relevant authorities and will continue to do so.”

Why does it matter?

If Southern Glazer’s is found guilty of bribing retailers with ‘sweeteners’ to stock their wines, then the company has ignored the ‘Tied House laws’ that apply in the state of California. Speaking to db, Tom Wark, executive director of the National Association of Wine Retailers, explained: “Generally, Tied House laws prevent any member of the three-tier system, whether that be a producer, retailer, or wholesaler, from giving anything of value to a member of the other tiers.”

While Wark pointed out that the three-tier system governing the sale of alcohol in the US does not in fact apply in California, where the scheme is alleged to have taken place, he added: “Commercial bribery is illegal across industries, not just in the wine industry.”

Continuing he said: “California does not require producers located in the state to sell through wholesalers. They can, if they choose, sell directly to retailers.” He further pointed out that even when the three-tier system is mandated in a state, it does not necessarily ensure healthy competition. “In a strict three-tier system, a producer who can’t find a wholesaler to sell their wines to retailers has no way of getting on the shelf of a retail shop, be it at a grocery store or a small independent retailer. This hardly promotes competition.”

Under the three-tier system in the US, producers, distributors and retailers in some states must operate independently to promote healthy competition and to ensure appropriate taxation. It requires producers (breweries, wineries etc) to sell their products to distributors, who in turn sell them to retailers (bars, stores).

Two-way bribes

According to this week’s indictments, employees of alcohol companies including Deutsch Family Wine and Spirits bribed Southern Glazer’s employees for distribution, while Southern Glazer’s employees bribed an Albertsons employee to secure product placement. Deutsch is the producer behind social media phenomenon Josh Cellars, and launched Australian wine brand Yellow Tail into the US in 2001, as well as being responsible for Marlborough Sauvignon Blanc The Crossings and Bordeaux winemaker Michel Rolland’s Clos de los Siete in the US market. We know the bribes worked both ways because two senior executives at Deutsch last year pleaded guilty to bribing Southern Glazer’s employees to favour their wines.

Despite the above, a web page still live on Southern Glazer’s site states of the three-tier distribution system: “Understanding how it came to be and what happens at each tier is essential knowledge for today’s beverage alcohol professionals.”

A further comment published on the page from Steven Becker, executive vice president and treasurer at Southern Glazer’s, stressed that: “The three-tier system creates a level playing field, so smaller players with fewer resources can still compete fairly in the market.”

Rap sheet

It’s not the first time that the business practices of Southern Glazer’s have been called into question. In June 2024, The Federal Trade Commission (FTC) launched an investigation into the company under the Robinson-Patman Act, which was created to stop suppliers from offering favourable prices to certain retailers. Prior to this, in 2022, agents from the Internal Revenue Service (IRS) and the federal Alcohol and Tobacco Tax and Trade Bureau raided the offices of Southern Glazer’s. Earlier still, in 2017, Southern Glazer’s were fined US$5 million by trade officials over a “pay to play” case in Pennsylvania in which the company was found to have offered incentives to staff of the state’s liquor control board in order to win business.

However, the negative attention has not halted the company’s growth with Southern Glazer’s last year acquiring Anheuser-Busch’s New York City distribution arm, and transforming it into Southern Glazer’s Beverage Company of New York.

Mark Chaplin, president of commercial sales at Southern Glazer’s, said at the time: “Our deep expertise, capabilities, and knowledge of the New York City market will enable us to build on the strong momentum that the Anheuser-Busch distribution team has created and further position our companies for collective growth. Through our new dedicated New York beverage division led by Devyn Dugger, we look forward to distributing these industry leading brands and offering best-in-class service in this critical market.”