Phoenix City Councilman Michael Johnson's raucous nightclub on South Seventh Avenue quietly won an unusual reprieve last month from the state liquor board.
An administrative law judge's recommended one-year suspension of the club's liquor license was overturned by a vote of the full board.
A first-term councilman and retired Phoenix detective, Johnson also serves as the "Exalted Ruler" of Elks Lodge #477. The lodge was cited on March 27 by state liquor department investigators for unlawful gambling.
It was the second time the club was cited for illegal gambling since Johnson became its leader in January 1996. Johnson signed a consent agreement in February 1997 pledging to keep all illegal gambling machines out of the black fraternal club.
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The second gambling violation led liquor department director Myron Musfeldt to request revocation of the Elks Club's liquor license last summer. The Elks Club appealed Musfeldt's decision to an administrative hearing officer, who in June ordered a one-year suspension of the club's liquor license.
The Elks Club then filed an appeal with the state liquor board -- a seven-person appointed board -- which, on November 7, voted to set aside the one-year suspension.
"I think a year is too long to eliminate liquor," board member Burton Kruglick said during the hearing.
Kruglick is a longtime Republican party power broker. Johnson, who was elected in November 2001 to the city council, is also a Republican.
Despite the strong whiff of political favoritism, Musfeldt says he doesn't believe the board cut the Elks Club a break because of Johnson's political power. Instead, Musfeldt says the liquor board made its determination after a narrow review of the facts in the latest gambling case -- which point to a relatively minor violation. The board, he says, did not take into account the Elks Club's long and notorious past.
Musfeldt says he recommended revocation of the club's liquor license because the March 27 gambling citation was the latest in a series of serious liquor violations at the Elks Club -- including a July 2001 undercover investigation that led to a three-count citation for illegal alcohol sales after hours ("Exalted Ruler," John Dougherty, March 28).
The undercover operation was triggered after the department received complaints about after-hours sales at the club, located at 1007 South Seventh Avenue. The Elks Club quietly settled the case, signing a consent decree and mailing a $1,000 fine in August 2001, just weeks before Johnson's city council primary election.
Liquor department records reveal that the Elks Club has a long and persistent history of serving alcohol after hours, dating back to at least 1983.
But the Elks Club's history never became an issue during the liquor board hearing, despite a question raised by board member Kate Kenyon.
"I don't remember seeing that, in our records, that they have had any violations other than this. Is that correct?" Kenyon asked board chairman Bill Snyder.
"I think that's what the record indicates; that's correct," Snyder replied.
Snyder, however, was wrong. Each board member had been provided a list of the club's past liquor violations prior to the hearing, says liquor department attorney Dan Christl.
The whitewashing of the club's checkered past cleared the way for the board to issue a mild rebuke for the latest gambling violation over Christl's vigorous protests.
"The penalty has to be appropriate," Christl said. "They have already been warned once, and they didn't do it."
Christl warned that letting the Elks Club slide on a second gambling violation will send out the wrong signal to liquor establishments across the state.
"That's why this is such an important penalty issue," he said. "It has statewide ramifications."
The liquor board ignored Christl's warning and voted unanimously to stay the suspension. The board also took the unusual step of allowing the Elks Club to sign a consent decree rather than simply issuing an order.
The decree calls for the Elks Club to remove all video gaming machines for the next five years and to commit no further violations of state gaming statutes. If a violation does occur, the one-year liquor license suspension would automatically be invoked.
However, the board rejected legal advice from its attorney, Victoria Mangiapane, that the suspension be invoked immediately upon the issuance of a gaming citation by state liquor board inspectors.
Instead, the board says the suspension would come into effect only after the Elks Club had exhausted all its appeals of possible future citations -- including a subsequent appearance before the liquor board.
Liquor inspectors cited the club after they discovered a sign attached to a video game located on the bar stating: "You Can't Win If You Don't Play!"
The sign also stated that the person with the highest score each week would win 10 lottery tickets. The club split the proceeds from the video machine with the owner of the machine.
Administrative law judge Sondra J. Vanella determined that, while the machine itself was not illegal, the club's offer to award lottery tickets to the high scorer each week constituted illegal gambling. Since it was the second time the club had been cited for illegal gambling, the judge ordered a one-year suspension of its liquor license.
Johnson -- who was joined by more than 20 Elks Club members at the liquor board hearing -- told the board that the video machine was identical to machines found in many establishments.
"We have no intention, no desire to do any type of gambling in there," Johnson said in testimony before the liquor board.
But earlier testimony before the administrative law judge revealed that, for at least two years, the club had been offering the free lottery tickets as an enticement to patrons to use the machine.
Proceeds from the video machine were used to pay the club's lease of a jukebox. The club kept no formal accounting of how much money was generated from the video machine, nor where it was spent.
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