As beer-industry bombshells go, a pretty substantial one was dropped during a hearing last Wednesday involving Anheuser-Busch, distributors in Illinois and the Illinois Liquor Control Commission.
We told you about the hearing last week, but to quickly recap, it was held to discuss A-B’s 30% stake in City Beverage, which is made up for four distributors (Chicago, Markham, Arlington Heights and Bloomington). At the heart of the debate was whether A-B can still have a hand in a distributor now that there is a new law on the books seemingly preventing a brewer from also owning a distribution outlet.
For the record, A-B doesn’t actually have the 30% stake in City Beverage. WEDCO, or Wholesaler Equity Deveopment Corporation, a wholly owned subsidiary of A-B is actually on record as having the 30% stake in City Beverage. But here’s the aforementioned bombshell, and the thing that reportedly raised some serious eyebrows at the ILCC hearing:
There is NO record of WEDCO being registered in Illinois.
None. Zero. It is not a business licensed to do business in the Land of Lincoln.
To do our due diligence, we took the time to search four different terms in the “Corp/LLC Certificate of Good Standing” database provided online by the Secretary of State’s Office and found no evidence of WEDCO, Wholesaler Equity Development, Wholesaler Equity Development Corp or Wholesaler Equity Development Corporation. We provided screencaps of each search for you skeptics:
WEDCO did produce results, but not any companies owned by A-B
Normally, an investor in a company wouldn’t have to be registered with the state BUT the Illinois Liquor Control Act requires an investor do so, according to Sue Hofer, spokesperson for the Illinois Liquor Control Commission. “The Liquor Control Act requires all owners and officers of a licensed corporation to qualify in the same way that the licensee corporation qualifies. Thus, WEDCO will likely have to become authorized to do business in Illinois because the licensee in which they are an investor is required to be an Illinois corporation,” said Hofer.
WEDCO – for those of you who are wondering – is based in Delaware and has been since the mid 80’s (view screenshot), according to a search of the Delaware Secretary of State’s Office Division of Corporations.
A-B, however, claims they don’t need to be registered with the state, according to Vice President and General Counsel for North American Gary Rutledge. “There is no requirement of law that WEDCO be registered with the Illinois Secretary of State’s Office,” said Rutledge. “WEDCO does not transact business in Illinois and its minority interest in City Beverage does not constitute ‘transacting business’ in the state. The allegation that WEDCO should be registered is nothing more than an effort to distract the Illinois Liquor Control Commission from the issue at hand.”
After reaching out to the Secretary of State’s Office Friday, spokesman Dave Druker told us they will be contacting Anheuser-Busch today and, “asking some questions related to WEDCO.” Ultimately it will be up to the Secretary of State’s Office to determine if A-B, in fact, did break the law by not registering WEDCO in Illinois and what penalties they may face – which include fees, fines and late payments with interest.
That brings us to what has an amounted to an unanswerable question but needs to be posed; because WEDCO is not registered to do business in Illinois, does that also mean they haven’t paid taxes? We reached out to the spokesperson for the Illinois Department of Revenue but she couldn’t answer that question citing the confidentiality of tax information.
All of this adds a new twist, or really, a hard right turn in A-B’s quest to retain its 30% stake in City Beverage. If the Secretary of State’s Office determines WEDCO did break the law and has operated under the table in Illinois for the last six years, then that would likely carry a great deal of weight with the Illinois Liquor Control Commission and its decision to allow A-B – through WEDCO – to hold on to its stake of City Beverage.
Everyone involved in last week’s hearing before the ILCC has til the first week of January to submit rebuttals to the testimony. There is no time line on when commissioners will decide if A-B and WEDCO can remain in the distribution game in Illinois.