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Cindy McCain and Sen. John McCain

Wife's Beer Company could cause Headaches for McCain

 

PHOENIX (By Ralph Vartabedian, LATimes) June 22, 2008 ― Hensley & Co., one of the nation's major beer wholesalers, has brought the family of Cindy McCain wealth, prestige and influence in Phoenix, but it could also create conflicts for her husband, Sen. John McCain, if he is elected president in November.

Hensley, founded by Cindy McCain's late father, holds federal and state licenses to distribute beer and lobbies regulatory agencies on controversial alcohol issues that involve public health and safety.

 

The company has argued against such groups as Mothers Against Drunk Driving in fighting proposed federal rules that would require alcohol content information on every package of beer, wine and liquor.

Its executives, including McCain's son Andrew, have written at least 10 letters in recent years to the U.S. Treasury Department, have contributed tens of thousands of dollars to a beer industry political action committee and hold a seat on the board of the politically powerful National Beer Wholesalers Assn.

The company has also run afoul of health advocacy groups that have tried to rein in appeals to young drinkers. Hensley, for example, distributes caffeinated alcohol drinks that public health groups say put young and underage consumers at risk by disguising the effects of intoxication.

The involvement of his wife and children in federal regulatory issues could create a conflict of interest for a future McCain administration, according to advocacy groups and political analysts. McCain has recused himself for many years on alcohol issues in the Senate, recognizing the potential conflict. As president, however, McCain would face far more difficulty distancing himself from an issue with such broad scope.

Cindy McCain holds the title of chairwoman in the company and controls about 68% of the privately held company stock with her children and the senator's son, according to records at the Arizona Department of Liquor Licenses and Control. Cindy and John McCain keep their finances separate, and he has no interest or role in Hensley.

In an interview in May, she said she "knows everything that is going on," communicating with her executive team every day. She added that she does not need to be physically at the company headquarters to be in charge. So far, she has given no hint of what changes, if any, she envisions in the future.

"That's very premature," she said.

If her husband is elected president and she retains her current role at Hensley, she would set a precedent for outside corporate activity by a first lady.

The McCain campaign Friday issued a statement about the issue saying that "any decisions going forward will be made when John McCain wins the election and takes office, and not before." Hensley executives declined to comment on the matter. Political analysts said they are astounded that the presumptive Republican nominee has not already addressed the issue.

"You can't run a beer company out of the White House," said Samuel Popkin, a political science professor at UC San Diego. "You can't run any company from the White House. McCain is leaving a live hand grenade on the table, a major embarrassment."

Public interest groups that lobby on alcohol issues say it would be clearly inappropriate for the McCain family to continue running or owning the company if McCain is elected.

"In a lot of government agencies, there is a concern about undue influence played by a regulated industry," said Chris Waldrop, director of the food policy institute at the Consumer Federation of America. "But it has not been to the point that the president's wife owns a majority share of a company that is lobbying an agency."

Indeed, apart from its potential to create a conflict of interest, the mere ownership of the beer distributorship could turn off some social conservatives and those who object to alcohol use.

About a third of Americans abstain from drinking any alcohol, and half either abstain or consume one or less drink per month, according to the National Institute on Alcoholism and Alcohol Abuse.

For some, abstinence ― and a disdain for the industry ― is taught by their religion. Leaders of the Southern Baptist Convention, which has more than 16 million members, expressed "a total opposition to the manufacturing, advertising, distributing and consuming of alcoholic beverages," according to the church's most recent resolution on the matter.

"I am sure for some individual Southern Baptists, the McCain family's involvement in the beer business would be a concern," said Roger Oldham, vice president of Southern Baptist Convention relations.

A close look at Hensley shows that the company has opposed reforms that beer industry critics say were intended to help Americans drink responsibly.

Hensley's lobbying activities have put the company at the center of a battle that has raged between the beer and liquor industries since Prohibition ended. Under federal law, liquor is taxed more heavily than beer and must contain a label that discloses alcohol content by percentage or proof. Beer and wine containers have no such disclosure requirement, despite wide variances in their alcohol content.

Public interest groups have petitioned the Treasury Department in recent years to require every container of beer, wine or liquor to carry a label telling exactly how much alcohol is contained in one standard serving.

The Center for Science in the Public Interest, the Marin Institute, the Consumer Federation of America and Mothers Against Drunk Driving, among others, assert that such information would help Americans drink responsibly and avoid drunk driving. The label would also contain information about calories and other nutrition.

But the beer industry has argued that it would confuse consumers. With backing from Hensley and others, it has persuaded the Treasury Department to withdraw the alcohol content disclosure from any future label requirement.

"We strongly oppose any proposal that would back a display of alcohol content in terms of fluid ounces or pure alcohol per standard serving," wrote Andrew McCain, the senator's son. The 2005 letter was sent to the Alcohol and Tobacco Tax and Trade Bureau, a unit of the Treasury Department. Andrew McCain is chief financial officer at Hensley and owns 6.8% of the stock, according to Arizona records.

Similar but not identical letters were written by Robert Delgado, chief executive of the company, and other senior executives. Hensley executives have also contributed heavily to the politically powerful National Beer Wholesalers Assn., which operates the nation's seventh-largest political action committee and has argued against the label. Delgado alone has donated more than $20,000 to the group since 2004.

McCain has avoided problems in the Senate by recusing himself on alcohol issues, according to executives at the Distilled Spirits Council, the liquor industry's trade association.

"Sen. McCain has been very, very fair to this industry," said Frank Coleman, senior vice president for the council. "He stays an arm's length away from issues that benefit the family business."

While that has worked for his job in the Senate, a president can not recuse himself or his administration from public policy issues as broad as alcohol, which is regulated by such departments and agencies as Treasury, the Federal Trade Commission, Health and Human Services, and Transportation, among others.

"It is going to be a very difficult high-wire act for the McCain family," said Bruce Lee Livingston, executive director of the Marin Institute, a nonprofit watchdog group in San Rafael. "The big question is how much access the beer industry is going to have to the White House. You would expect the president and first lady to be concerned about alcohol abuse and alcoholism. The first lady and the president need to have a bright line between the White House and the alcohol industry."

Aside from the labeling issue, Hensley has begun distributing controversial products known as flavored malt beverages, which critics call "alcopops" because they mask the taste of alcohol. The product was pioneered by liquor makers about a decade ago. The beer industry, including Hensley, tried to block the liquor industry from entering the business but lost the fight.

Doug Yonko, a Hensley vice president, wrote the Treasury on that issue in 2003, asking the agency to avoid dealing "a severe blow to beer wholesalers" by allowing the liquor industry to enter the business. But in 2006, the Treasury classified the flavored beverages as beer, even though up to 49% of the alcohol could come from distilled spirits.

The beer industry, including Hensley, has responded by moving into the market itself with such products as Tilt, a caffeinated liquor made by Anheuser-Busch. Critics say the product is directed mainly at youth and can leave them wide awake without knowing they are intoxicated. Other flavored malt beverages contain sweet fruit flavors that block the taste of alcohol.

"These products are starter beverages, intended to introduce consumers to alcohol and alcohol brands," said George Hacker, director of alcohol policies at the Center for Science in the Public Interest.

What exactly Cindy McCain can do to avoid such controversy is not clear, but a wide range of public interest groups say she should separate herself and her husband from Hensley ― no doubt a difficult and emotional issue for any heir to a family business.

Charles A. Hurley, chief executive officer of Mothers Against Drunk Drivers, said McCain has been careful in the past to recuse himself on MADD issues, but the organization would be watching carefully if a future administration of his exercised influence on any alcohol issues.

"I believe she would have to put that stuff in a blind trust of some kind," Hurley said, "where she would not be involved."

Other experts, however, question whether a blind trust would go far enough to insulate a McCain administration, since the ownership would still benefit the family.

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