Wagner plans audit after LCB closes wine kiosks

HARRISBURG - Auditor General Jack Wagner on Wednesday said he would audit the Liquor Control Board's wine kiosks, which were abruptly shut down Tuesday night because of persistent mechanical problems.

In a statement, Wagner said his audit would center on whether the kiosks - essentially wine-vending machines in 30 supermarkets - are truly the consumer-friendly cash-cows the LCB boasted they would be when it hired Simple Brands L.L.C. of Conshohocken to develop them.

"The kiosks' breakdown during the height of the holiday shopping season has left customers high and dry, and we want to know why," said Wagner.

The LCB launched the kiosk program this summer as part of an initiative to shed its image as an unfriendly and lumbering bureaucracy.

Under the contract with Simple Brands, the LCB did not pay for the machines. But it does pay Simple Brands a fee - officials could not say exactly how much Wednesday - for special displays, advertisements or public service announcements on screens where customers place their orders.

Customers pay $1 on every transaction, and that money goes directly to Simple Brands.

LCB officials in August said the kiosks - which require customers to scan their driver's license and pass a Breathalyzer test - were working well.

LCB spokeswoman Stacey Witalec said Wednesday that the board had made more than $330,000 in sales from kiosks, and sold 32,000 bottles.

But in announcing that they would be temporarily shuttering the kiosks Tuesday, liquor board officials acknowledged mechanical problems, chief among them that the kiosk would not dispense the wine.

Jim Lesser, founder and chief executive officer of Simple Brands, said problems occurred with one in 150 to 175 transactions and were caused by faulty resistors. Too much power was surging through the resistors, keeping the doors on the kiosks from opening.

"Any new technology is prone to some initial glitches in the early stages," he said. "Our goal is to work day and night in order to make sure the remedy is put in place."

Since the machines are still under warranty, the company that manufactured them, Flextronics International, will fix them at no cost, Lesser said, adding they should be repaired within two weeks.

"We're 99 percent confident that once the resistors are replaced, they will work as they should," he said.

Problems with the kiosks began about a month ago. A customer would pay for wine, then go to open the door but find it stuck.

"We didn't have to shut them down. This is a decision we thought was best to make so the kiosks would work long-term," said Lesser.

As for Wagner's audit, Lesser said, "I welcome any investigation. I think the data speaks for itself."

He added: "The vast majority of people who use these kiosks love them. I'm sure what he will realize is the same as we realize - that it's exceedingly profitable for the commonwealth, more profitable than selling a bottle of wine at a brick-and-mortar store."

The LCB's contract with Simple Brands has come under fire because the company was the only bidder, and several of its investors have close ties and contributed heavily to Gov. Rendell's campaigns over the last decade.

Rendell, through a spokesman, has said that the campaign contributions did not influence the awarding of the contract and that the decision to enter into a contract was made by the Liquor Control Board, not him.