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SALT LAKE CITY — The director of the state's Department of Alcoholic Beverage Control was asked to resign Wednesday, amid allegations of what the governor is calling "serious violations" of state procurement law.
Dennis Kellen, who has worked at the DABC since 1975 and previously announced that he would retire sometime this year, had been asked by the governor to stay on until a replacement director was named. After he was notified Tuesday of the potential violations, Gov. Gary Herbert called for and received Kellen's immediate resignation.
I have lost confidence in DABC leadership.
–- Gov. Gary Herbert
"I have lost confidence in DABC leadership," Herbert said.
The governor also called for a thorough audit of the procurement and financial protocol within the DABC, "in the interest of maintaining public trust and confidence" in state government.
“There is no latitude for ethical indiscrimination in public officers," Herbert said. "Not only do I expect, but more importantly, the public expects that those in public service will be held to the highest standard of accountability, especially when it comes to the use of taxpayer dollars.”
Kellen came under fire of state lawmakers in May when he defended poor management practices of the DABC — specifically those involving a privately run packaging agency in Eden that lost nearly $300,000 in state funds and has since been closed.
Last month, a legislative audit revealed that the DABC continued to supply alcohol to the Ogden Valley store even though it was behind on payments. The location, which contracted with the DABC as the only liquor store in the area, was in debt for 11 out of the 12 months it was in business and was categorized incorrectly.
At the time, Sen. John Valentine, R-Orem, said Kellen should step down.
"We felt like we needed to get to the bottom of it," Valentine said Wednesday. He said there had been "gross mismanagement on the part of the DABC" in the case of the Eden store and others.
"Not only do I expect, but more importantly, the public expects that those in public service will be held to the highest standard of accountability, especially when it comes to the use of taxpayer dollars." Gov. Gary herbert
The DABC was late on performing its own audits of the location and neglected to keep track of the unpaid invoices, and also retroactively increased the independent agent's compensation to keep the store open. Kellen told lawmakers that keeping the store open would prevent patrons from having to make a potentially dangerous trip through the canyon to purchase alcohol in Ogden.
“We have reached a point where it is clear the best judgment and leadership were not exercised in this agency," Herbert said. He is awaiting results of the audit before any further action is taken.
Valentine said the new information points to more serious allegations than what was found involving the Eden story. He said there is pretty strong evidence of illegal and unethical activity in this case.
State records reveal that the DABC has paid more than $6,500 in the past two months to Flexpak, a Woods Cross-based paper and plastic products company owned by Kellen's son, Brian Kellen. Charges are billed as various maintenance services — "laundry and janitorial" or "buildings and grounds" supplies — and at least five transactions are just under the $1,000 threshold that requires an official agency request for competitive bids.
In the 2009 fiscal year, records indicate that more than $18,500 was expensed out to Flexpak from varying accounts within the DABC. The amounts grew to $75,631 the following year and $172,313 in fiscal 2011, which ended June 30. Although details aren't available, transactions were listed as supplies provided or services
Herbert's spokeswoman, Ally Isom, said there was "a pattern of what appeared to be an effort to circumvent procurement protocol." She would not say specifically which contracts raised concerns, and said the governor's office is deferring judgment until audit results are compiled.
Isom told the Associated Press that Dennis Kellen told the governor he wasn't aware of any manipulations.
Dennis Kellen is a member of the National Alcohol Beverage Control Association's Products and Procedures Committee, and the National Alcoholic Beverage Industry's Electronic Commerce Committee. It is unknown how Wednesday's actions will affect those memberships.
Dennis Kellen's wife told the Deseret News that her husband was "at work" Wednesday. He could not be reached at the DABC, where requests for more information were directed to the governor's office.
Dr. Richard Sperry was recently appointed as chairman of the DABC Commission and is helping the agency to cooperate with the governor's recent requests. Herbert has asked Francine Giani, executive director of the state's Department of Commerce, to serve as interim director until a new director for the DABC is named. She will continue her duties at both departments throughout the temporary assignment.
Email:wleonard@ksl.com
