Feds try to link tax break, gifts to co-speakers

A federal grand jury that continues to probe former House Speaker Jim Black's political and campaign activities is looking into political donations made by beer and wine wholesalers who lost a special tax break in 2003 that was partially restored a year later.

Dean Plunkett, executive director of the N.C. Beer & Wine Wholesalers Association, confirmed the investigation in a prepared statement but declined to talk further. He said the association and its members "follow the law and maintain high ethical standards."

"We are confident that the investigation will show that all of the [political action committee] contributions were recorded properly," Plunkett said. "All of the political donations made by the association are a matter of public record and we are committed to fully cooperating in any way that we can."

Federal authorities are not commenting about the investigation. But records show that the beer and wine wholesalers stepped up their giving to Reps. Jim Black and Richard Morgan when both served as co-speakers of the House at a time when they had the power to partially restore the tax break or keep it dead.

The tax break was worth roughly $4 million to beer and wine wholesalers. It had represented a 4 percent discount that the state allowed the wholesalers to take on their excise tax payments. The state has allowed the tax break so wholesalers are compensated for paying the excise tax on damaged goods that could not be sold.

Late in the 2003 state budget negotiations, state lawmakers removed the tax break. It's unclear which lawmaker suggested the tax break's elimination.

No one in the association saw it coming, one wholesaler said.

"When they did away with that, it was a huge hit to the wholesalers," said Worth Harris, chief executive officer of Harris Wholesale in Raleigh and an association director. "All I remember is when they took that out at the last minute, we didn't get the chance to explain why it should be in there."

State Sen. David Hoyle, a Gaston County Democrat, sought to partially restore the tax break by amending an unrelated bill that year. The bill passed the Senate, but the House did not move it.

Senator explains move

"I had constituents back home who had businesses in my district who told me it adversely affected their businesses," Hoyle said. "It was something they had had, and had counted on having and it was a way they took care of certain losses that they incurred. They felt it was unfair to have it taken away from them."

The House passed the bill by a unanimous vote the following year and it was signed into law. The 2 percent tax break lawmakers restored for wholesalers is worth roughly $2 million today.

Between the loss of the tax break and its partial restoration, beer and wine wholesalers and their PAC gave roughly $20,000 in political contributions each to Black, a Mecklenburg County Democrat, and Morgan, a Moore County Republican.

In addition, the wholesalers gave $7,200 and beer manufacturer Anheuser Busch gave $25,000 to a political group that Morgan and his allies had created, the N.C. Republican Main Street Committee. A few days after the bill passed, beer and wine wholesalers contributed another $5,000 to Morgan's political group.

Chris Valauri was the president of the wholesalers' association at the time. He could not be reached for comment. He continues to lobby for the association.

Harris, who contributed to both speakers' campaigns, said he was not aware of any request for political contributions tied to the tax break. He also said he was unaware of a federal investigation until he was contacted by The News & Observer.