SALT LAKE CITY — A key lawmaker on liquor issues called Wednesday for a change in top management at the Department of Alcoholic Beverage Control.

"I believe the executive director should change at this point," Sen. John Valentine, R-Orem, told reporters after hearing testimony from DABC Executive Director Dennis Kellen about a $300,000 loss by a package liquor agency.

Valentine said he believes the department's management was either "incompetent or they actually misled" the DABC commission about problems with the now-closed agency in the Ogden Valley.

The Business and Labor Interim Committee listened to Kellen defend the department's handling of the package liquor agency's losses, identified by a legislative audit in May that concluded "the DABC exercised poor management."

Kellen took responsibility for the problems surrounding the situation, but had difficulty answering specific questions. He said the department has made changes to keep closer watch over package agency operations.

He declined to speak with reporters after the hearing, but said in a statement later that he was "staying in my position until the commission has the opportunity to select a replacement for me."

There has been talk since the audit was released that Kellen was looking to retire after more than three decades with the department. Former DABC commission Chairman Sam Granato, whose term ended June 30, has said he is interested in becoming executive director.

Gov. Gary Herbert is expected soon to name two new members to the five-member commission. Any changes in department management would come from the commission in consultation with the governor, and be subject to confirmation by the state Senate.

Herbert's spokeswoman, Ally Isom, said Kellen "has indicated to the governor that he plans to retire sometime this calendar year." The governor has asked Kellen to stay on until his replacement is named through what she said would be "a thorough process."

During the hearing, Rep. Don Ipson, R-St. George, said he's already drafting legislation to change the accounting process for package agencies.

"I think we have a time bomb here waiting to blow up in our face," Ipson said, warning unless changes are made, there will be further problems that result in "huge losses."

Another committee member, Rep. Gage Froerer, R-Huntsville, suggested the state should consider privatizing the package agencies rather than issue contracts for their operation, usually in rural areas.

"Is now the time to look at some type of privatization that takes this out of the hand of government?" Froerer asked.

Rep. Derek Brown, R-Cottonwood Heights, questioned the department's competing responsibilities in controlling the sale of liquor in the state. He said the department has to both control and promote the sale of liquor, which he called "schizophrenic."

Kellen said the department has to both make liquor available to the public "in a reasonable manner" while making "sure those people who don't want to deal with alcoholic beverages don't have to be involved in it."

He acknowledged there is a conflict. "We pretty much do what we're told to do," Kellen told the committee. "But we do try to run it like a business."

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