Who's watching the hen house?
maryd
---------------------------------------
6/28/99 -- 12:54 AM State serves tax break to Malio's By MICHELLE
PELLEMANS of The Tampa Tribune
---------------------------------------
TALLAHASSEE - Cynthia Henderson says she's been to Malio's restaurant
but had no role in the tax decision.
Malio's Steak House, a popular spot for movers and shakers, had a $184,000
tax debt wiped clean by the Department of Business and Professional
Regulation shortly after Tampa lawyer Cynthia Henderson took over the state
agency.
But the Tampa restaurant's good fortune didn't end there.
Henderson's agency not only cleared the tax debt owed on alcohol sales but
also gave the restaurant a $6,263 refund.
In an interview last week, she said she personally played no role in the
decision to remove the debt and award Malio's the refund.
The action came, however, only after the restaurant appealed directly to
Henderson, soon after Gov. Jeb Bush appointed her head of the regulatory
agency.
The Malio's case raises new questions for a department already grappling
with the appearance of conflicts of interest and favoritism in a growing
number of regulatory decisions.
In April, Henderson flew to the Kentucky Derby aboard a private jet owned
by a company her department regulates. She was the guest of a horse racing
organization seeking state business. And her expenses were paid by her
boyfriend developer, whose business her agency also regulates.
Following her appointment, the department also fired four lawyers and an
investigator who had been probing allegations of shoddy construction by a
company owned by the president of the politically influential Florida Home
Builders Association. The probe of Edwin Henry was subsequently halted and
all disciplinary actions against him dismissed.
The refund issued to Malio's was calculated by a consultant and an
accountant hired by the restaurant and uncontested by the agency.
``Although there are no records to support these figures, our client
believes ... the Division owes them a refund of $6,263,'' a high-powered
consultant hired by Malio's wrote the agency earlier this year.
The consultant, John Harris, formerly headed the agency's Alcohol,
Beverages and Tobacco bureau - the same agency division that audited
Malio's. He did not respond to requests for comment.
In issuing Malio's a refund, the agency set aside an investigation by a
team of its own auditors who concluded the restaurant had failed to pay the
full tax it owed - and a review of that audit by the agency's inspector
general, whose independent finding in March supported the auditors.
The restaurant, however, claimed it overpaid rather than underpaid the
state surcharge tax levied by bars and restaurants on each glass of alcohol
sold.
The restaurant's refund claim rested mostly on claims of large nontaxable
package liquor sales.
Henderson's inspector general determined the agency ``had sufficient
justification to assess Malio's a surcharge tax liability of $104,980.04''
plus penalties. But he also said the agency could choose to dismiss the
audit findings because of a lack of ``evidence to support that Malio's
intentionally misrepresented their package sales.''
The inspector general, however, said if the debt was dismissed and a refund
credit granted the restaurant, the agency should first ``verify the
accuracy'' of refund credit. Records obtained by The Tampa Tribune show the
refund was never verified.
The refund claim ``apparently was taken at face value and paid,'' said Judd
Bagley, a spokesman for Henderson.
Relatively plain-looking on the outside, Malio's at 301 S. Dale Mabry
Highway has counted among its patrons the city's most colorful celebrities.
Patrons have included George Steinbrenner, the late Santo Trafficante Jr.
and Burt Reynolds, who was divorced from actress Loni Anderson not long
after his affair with a Malio's bar manager.
Henderson herself acknowledges being a patron. ``Who hasn't been there?''
she said.
Malio Iavarone, one of the restaurant's owners, said he knows Henderson.
She ``comes here with her boyfriend,'' Tampa developer Charles W. ``Bing''
Kearney, he said.
Iavarone said that before Henderson became head of the regulatory agency,
he had been unsuccessful in contesting the audit findings. He said he could
not convince auditors that much of his alcohol sales were package sales not
subject to the drink tax.
About 40 customers signed handwritten letters stating they made package
purchases from $60 to $4,000 at the restaurant, state records show.
Auditors rejected the letters because they were not notarized and failed to
give details on dates and quantities.
Manuel Junco, Malio's Tampa accountant, said he had even warned state
regulators that the restaurant planned to contest the tax debt ``all the
way on this one.''
But that became unnecessary with Henderson's arrival. ``She's the only one
who had the courtesy of looking at it, because the problem was resolved,''
Junco said.
``High levels were going to take a look and see if they agreed with lower
levels and they did not,'' added Malio's attorney, Jim Ervin.
Henderson said last week that after she received the letter from Malio's
appealing for her help she assigned Bill Woodyard, her top lieutenant and
the agency's chief lawyer, to review the audit.
The state at that point had already taken legal steps to collect the tax
due from the restaurant, records show.
The tax debt was established by a trio of agency auditors who last year
examined Malio's wholesale purchase of alcohol and its retail sales,
comparing the amount of alcohol the business purchased to the amount sold.
The auditors noted that Malio's reported 50 percent of its alcohol sales
were over-the-counter package sales, which are not assessed the per-drink
tax.
The auditors, however, found the restaurant had no records to support that
claim. Further, the volume of package sales claimed was ``excessive'' in
their experience for a restaurant and bar.
They also noted little evidence of package sales. The restaurant lacked a
dedicated package sale area, for instance, although their report noted a
dusty sign announcing package sales was spotted on a bottom shelf behind
some liquor bottles.
The restaurant's owners claimed they personally handled the package sales.
They would typically sell some 235 bottles of booze, beer and wine in an
eight-day period, but only to favored customers, and at no profit, ringing
up the sales on a single cash register set aside for the purpose in a back
room.
The letter to Henderson described the practice as ``goodwill ... to show
appreciation'' for customer patronage and ``was not being done for
profits.''
Because Malio's could not prove it did a high volume of package sales, the
agency estimated how much tax would be due if the alcohol had been sold as
taxable, individual drinks.
According to department spokesman Bagley, Henderson has been personally
involved in only one other restaurant's tax appeal, a ``mom and pop''
business in South Florida.
Bagley said the South Florida restaurant claimed its business had been
affected by road construction and couldn't cover the drink tax it owed.
Henderson asked her staff to work out a repay ment schedule.
Michelle Pellemans covers state government and can be reached at (850)
222-8382 or pell...@nettally.com
http://tampatrib.com/story4fr.htmhttp://tampatrib.com/story4fr.htm