Legal disputes not likely to hurt wine-beer superstore application
Jun. 18, 1997

Who is David Trone?

The Pittsburgh businessman, whose family hopes to open Montgomery County's first beer and wine "superstore," says he is a retailer in the mold of Wal-Mart pioneer Sam Walton. Trone says he brings low prices, wider selection and friendly service to an industry characterized by cramped, dingy stores and surly old-timers.

But lawyers who have battled him and retailers who have competed against him complain that he is a retailing behemoth, intent on squashing small competitors and circumventing state laws governing the retail alcohol business by using legal technicalities.

Whoever is the true David Trone, his company is coming to Gaithersburg.

His wife, June Trone, has applied for a license to open a 14,474-square-foot beer/wine store at the Gaitherstowne Plaza on N. Frederick Ave. The store would be at least three times larger than most of its competitors. The county liquor board will take up her application on Thursday.

Gaithersburg Fine Wines would sell roughly 7,000 different wines and at least 600 brands of beer, June Trone said. It would employ 40 people, 25 full-time. She said she, not her husband, would run the Gaithersburg store.

"I'll be very involved," she said. "An owner has to be involved in a store. No matter how good [the management is], it's your business."

Officially, David Trone would have nothing to do with Gaithersburg Fine Wines. He owns a similar store in Towson outside Baltimore, and it is illegal in Maryland to own more than one retail alcohol store.

But competitors charge that David Trone uses "straw" corporations, headed by members of his family or his close friends, and is actually in full control of the stores.

In 1992, a grand jury in Dauphin County, Pa., indicted him and his wife for owning multiple stores, also prohibited by Pennsylvania law. The charges were subsequently dropped; the record is in the process of being expunged.

The indictment charged that Trone received consulting fees of as much as $330,000 annually even as some of the owners of the stores made $18,000 annually. It also said Trone controlled the bank accounts of the stores "with only a few checks being allocated to each of the respective stores to pay for beer."

Trone's Pittsburgh attorney, Tom McGough, said even if the key charges in the indictment were true, they do not amount to illegal acts, which is why the indictment was dropped.

McGough said if the owner of a beer store in Pennsylvania who makes $18,000 a year wants to pay a consultant several hundred thousand dollars, and if he wants to allow the consultant to control his store's bank accounts, that's his business.

Trone and his lawyer pointed out that Ernie Preate, the Pennsylvania attorney general who brought the indictment, later was sent to prison after pleading guilty to accepting $20,000 in illegal campaign contributions from video poker operators. Preate was sentenced in 1995 to 14 months in prison.

After the Trone indictment was dismissed, a consortium of Pittsburgh-area beer store owners filed suit in federal court making similar allegations. That suit also charges that Trone used his position as head of a chain of beer stores -- only state-owned stores can sell wine and liquor -- to negotiate wholesale prices on beer not available to his competitors. The case is nearing trial.

Attorneys with the Philadelphia law firm Berger & Montague, which is representing the store owners against Trone, declined to comment on the record, citing an admonition from the judge.

McGough said Trone went to the beer distributors as a consultant representing his clients, not as the stores' owner, and he negotiated volume discounts which are perfectly acceptable in every other industry.

William Pitcher, an Annapolis attorney, is representing Laurel-area liquor store owners seeking to block David Trone's brother Robert from opening a store there.

"The Trones have very aggressively built a chain of large discount liquor stores, which has driven small liquor stores crazy from a predatory pricing standpoint," Pitcher said.

But Ron Stoner, chairman of the Alcoholic Beverage Control Commission in Delaware, where Trone owns the state's two largest alcohol stores, said he's been good for business.

"The concern was initially that he was going to put mom-and-pop stores out of business," Stoner said. "But what has really happened is the number of retailers in Delaware has not changed much, but the way business is done in Delaware has changed."

Stoner said most mom-and-pops in his state have survived the same way 7-Eleven stores survive in the shadow of large grocery stores.

"My sense is that the neighborhood stores serve the neighborhood. When the average guy wants a six-pack, he stops at the neighborhood store," just as someone stops at a convenience store for a gallon of milk, he said. "It's a convenience, but you pay a little more for that convenience."

Still, Stoner notes that small retailers fought vehemently against Trone's application to open his stores in Delaware and still insist they have been hurt badly.

"They're very vigilant about Trone's activities," he said.

The retail alcohol business in Maryland, as in the other states, enjoys a lot of legal protections. Charles Ehart, head of the state comptroller's division of alcohol and tobacco tax regulation, said for example the type of volume discounting Trone negotiated in Pennsylvania would likely be considered illegal in Maryland.

Although wholesalers are permitted to offer volume discounts to retailers for beer, those discounts must be "reasonable" and "attainable" for the "average" retailer, Ehart said. And Maryland prohibits volume discounts of any kind on wine.

Recent efforts to allow private business to sell hard liquor in Montgomery County were squashed under the weight of political pressure, in part out of concerns of what those stores would do to existing shops which sell only beer and wine.

And apparently in retaliation of the Trones' plans to expand their Maryland operations with other superstores, lawmakers passed a bill this year making it much harder for a store larger than 10,000 square feet to open. The law, which takes effect Oct. 1, requires local liquor boards to consider the impact of superstores on their neighboring competitors before granting licenses for them. And it requires Ehart's office to review any license granted by local liquor board's for large stores.

June Trone's application is not affected because her application was submitted before the Oct. 1 deadline.

Questions about the Trones' legal headaches and business strategies will not matter in their case before the Montgomery County liquor board, said executive director Dennis Theoharis.

All that matters, he said, is whether June Trone and her local partner -- Stephen Levey, a Rockville resident and an attorney with the Washington law firm representing June Trone -- have followed the rules in the application process; whether there are any criminal convictions in their past; and whether there is a need for another beer/ wine store in the area.

David Trone said only politics stands in the way between Maryland consumers and better service and prices.

"There's nothing wrong with being progressive and trying to emulate what Wal-Mart and Giant Food and other big retailers have done," he said.