Haunted by Spirits

John McCain derived his wealth from his marriage to Cindy Hensley McCain, whose father started his road to riches as a bootlegger. As a politician, the senator has remained beholden to the liquor industry and the family business

Some liquor industry observers say Hensley was given the Budweiser distributorship by his old business associate Kemper Marley, but a search of public records has not confirmed this theory. What the records do show is five decades of steady growth for Hensley's enterprise under the lax supervision of the Arizona Department of Liquor Licenses and Control.

James Hensley has given conflicting information to the department concerning the early days of his business. Efforts to search liquor department files are hampered because the agency destroyed all records more than 30 years old -- and many more recent. The lack of historical state documents on the state's largest beer wholesaler makes it impossible to determine when and under what circumstances James Hensley was granted his first wholesale liquor license.

One can only speculate how a convicted felon who falsified federal liquor records managed to obtain a state and federal wholesale liquor license within a few years of his 1949 conviction and 1953 indictment. But apparently, Hensley did.

McCain has used the flag  --  in the form of his POW 
status and expertise on foreign affairs  --  to deflect 
attention from such matters as his family's beer 
interests.
Ilkka Uimonen
McCain has used the flag -- in the form of his POW status and expertise on foreign affairs -- to deflect attention from such matters as his family's beer interests.

Bureau of Alcohol, Tobacco and Firearms spokesman Larry Bettendorf says federal liquor licenses are allocated under a provision of a 1935 law passed soon after Prohibition ended. Wholesalers such as Hensley must receive a "basic permit" from the federal government as well as state licenses.

The federal permit was designed to keep people such as Hensley out of the liquor business.

"The big concern after Prohibition was having bootleggers or other organized criminals entering into the business by using a front man," Bettendorf says.

There was also concern about applicants fronting for the real owners of a business -- something the Hensleys had done in New Mexico at the racetrack.

"They tried to do everything they could to weed out where the money was coming from to make sure the person applying for it was the actual owner and operator. These laws had not changed that much since 1935," Bettendorf says.

Current provisions of the law do not allow anyone convicted of a felony to even apply for a "basic permit" liquor license for five years. Bettendorf did not know whether the five-year provision was in effect in the 1950s.

He said a person -- such as James Hensley -- who had been convicted of a felony related to bootlegging should have been scrutinized by federal regulators before obtaining a permit.

"They would have looked at someone very heavily if they had been convicted of bootlegging. Absolutely," Bettendorf says.

Once the federal government issues a "basic permit," it can stay in effect for decades.

It is uncertain how convicted bootlegger James Hensley obtained a federal basic permit. However, it is extremely unlikely that a person with a similar conviction today would get a federal liquor license, says Allison Stevens, ATF Phoenix Area supervisor.

Hensley's oldest state liquor license application on file dates to 1971. In that application, he disclosed his felony conviction but failed to state that he had been an owner and employee at Ruidoso Downs as the secretary of the corporation. At the time, the problems at Ruidoso were widely publicized in New Mexico newspapers and his brother was in prison for tax evasion and skimming funds from the track.

State records show James Hensley applied for another liquor license in 1988. This time, Hensley did not disclose his federal conviction when asked specifically on the form whether he had ever been convicted of a felony. James Hensley signed the sworn and notarized statement that warned false information "could result in criminal prosecution."

State liquor department director Howard Adams refused to discuss Hensley's distributorship.

"I don't want to talk about any wholesalers," Adams said.

The liquor department is overseen by a seven-member state liquor board. Board chairman Bill Snyder did not return a message seeking comment.

Just as Hensley gave incomplete and conflicting information concerning his previous employment and felony convictions, the two license applications give different dates for when he started his wholesale beer business.

In the 1971 application for a liquor license, Hensley said he had served as president and general manager of Hensley & Company Distributors and Hensley & Company Wholesale since January 1959. But in the 1988 liquor license application, Hensley stated he had been the head of Hensley & Company Wholesale since January 1955 and makes no mention of Hensley & Company Distributors.

State Corporation Commission records show the first reference to Hensley & Company Distributors in 1959, when a liquor and grocery distribution company called Ritter-Walker Distributing changed its name to Hensley & Company Distributors. James Hensley was listed as president of the company, and Marguerite Hensley as secretary, on the 1959 annual disclosure report. The company reported total assets of $143,000.

Corporation Commission records state that Hensley & Company Wholesale was not incorporated until 1966.

The confusing maze of companies continued for more than four decades as James Hensley created a series of wholesale beer companies -- operating as many as three different entities in the Phoenix area at one time. He consolidated the operations in 1993 under the present banner Hensley & Company. The company reported $48 million in assets in December 1996, the last year the Corporation Commission required detailed financial disclosure.

Hensley & Company is reported to be the 12th largest privately owned company in Arizona, with nearly 500 employees and a sales and delivery fleet of more than 300 vehicles, according to a September 1999 article in the trade journal Beverage World.

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