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McCain may have conflict brewing

Times Staff Writer

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 alcohol issues that involve public health and safety.

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

Its executives, including John McCain’s son Andrew, have written at least 10 letters in recent years to the 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.

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

The involvement of McCain’s family 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. As president, however, McCain would face far more difficulty distancing himself from an issue with such broad scope.

Cindy McCain holds the title of company chairwoman 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 License and Control. Cindy and John McCain keep their finances separate, and he has no stake or role in Hensley.

In an interview in May, she said she knew “everything that is going on” and communicated with her executive team every day. She added that she did not need to be at headquarters to be in charge. So far, she has given no hint of what changes, if any, she envisions. “That’s very premature,” she said.

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

The McCain campaign issued a statement Friday 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.

Political analysts said they were astounded that the presumptive Republican nominee had not already addressed the issue.

“You can’t run a beer company out of the White House,” said Samuel L. 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 will clearly be 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.”

Public disapproval

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

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

For some, abstinence -- and a disdain for the industry -- is religion-based. Leaders of the Southern Baptist Convention, which has more than 16 million members, expressed “total opposition to the manufacturing, advertising, distributing and consuming of alcoholic beverages” in 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 S. Oldham, vice president of Southern Baptist Convention relations.

A close look at Hensley shows that the company has opposed changes that critics of the beer industry 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, though alcohol content varies widely.

Public interest groups have petitioned the Treasury Department in recent years to require that every container of beer, wine or liquor carry a label disclosing the amount of alcohol 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 nutrition information such as calories.

But the beer industry has argued that such labels 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.

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“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 letters were written by Chief Executive Robert M. Delgado and other senior executives. Hensley executives have also contributed heavily to the 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.

‘High-wire act’

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 McCain as senator, a president can not recuse himself or his administration from public policy issues as broad as alcohol, which is regulated by agencies including Treasury, the Federal Trade Commission, Health and Human Services, and Transportation.

“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 alcohol industry 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 of their similarity to soda pop.

The beer industry, including Hensley, tried unsuccessfully to block liquor makers from getting into the market for the drinks.

Douglas Yonko, a Hensley vice president, wrote to the Treasury Department on that issue in 2003, asking the agency to avoid dealing “a severe blow to beer wholesalers” by blurring the line between the beer and liquor industries.

In 2006, the Treasury Department issued rules classifying the flavored drinks as beer, though up to 49% of the alcohol in them can be from distilled spirits.

The beer industry, including Hensley, responded by also moving into the market with such products as Tilt, a caffeinated alcoholic drink 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 the Alcohol Policies Project at the Center for Science in the Public Interest.

It is not clear exactly how Cindy McCain could avoid such controversy, but a 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 of Mothers Against Drunk Driving, said his organization would be watching carefully if a future McCain administration 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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ralph.vartabedian @latimes.com

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Times staff writer Maeve Reston contributed to this report.


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