Second Virginia ABC Employee Files Whistleblower Lawsuit Against Authority

A second employee of the Virginia Alcoholic Beverage Control Authority has filed a lawsuit against ABC, alleging he was wrongfully put on administrative leave this May in retaliation for reporting “millions” of dollars worth of missing liquor inventory to executives and Gov. Glenn Youngkin’s administration.

In a lawsuit filed in the U.S. District Court for the Eastern District of Virginia, former Assistant Director of Retail Operations Thomas Aruanno claims former ABC CEO Travis Hill and current Chief Retail Operations Officer Mark Dunham put him on administrative leave “to keep him quiet and to make him a scapegoat for their own wrongdoing” and then ordered an armed raid on his house that was halted at the last moment.

Va. ABC official files whistleblower suit, alleging retaliation for reporting millions in losses

Subsequently, he said, he was issued a disciplinary notice that was later withdrawn, demoted, and then “micromanaged, harassed, and subjected to a hostile work environment” that drove him to quit.

Aruanno’s suit says those actions violated the state’s whistleblower law and his free speech rights. He is also charging ABC, Hill, and Dunham with defamation and denial of due process.

“Leadership at ABC were made fully aware of the missing merchandise, and instead of taking action on the issue, they decided to attack the person who brought it to their attention,” Aruanno told the Mercury in an interview.

When asked about the claims in Aruanno’s case, ABC spokesperson Pat Kane said, “Virginia ABC is unable to comment on litigation.”

Many of the claims contained in Aruanno’s suit are mirrored in a separate legal action brought by former ABC Director of Retail Operations Jennifer Burke in December. Both Aruanno and Burke were among the four authority officials placed on administrative leave last year in connection with a string of embezzlements that occurred in 2022. The pair allege they had no involvement with those cases and that ABC, Hill, and Dunham engaged in a pattern of retaliation against them after they reported $2.7 million in missing liquor inventory and improper vendor payments at the authority’s former warehouse on Hermitage Road in Richmond.

“Virginia ABC harassed and retaliated against [Aruanno] as part of their cover-up, as alleged,” said Aruanno’s attorney, Sarah Robb, who is also representing Burke. “We should be able to trust Virginia ABC to account for taxpayer dollars.”

A series of problems

Like Burke, Aruanno claims he flagged a series of problems with ABC inventory and shrink for Hill and Dunham that later led them to retaliate against him.

In early 2022, the lawsuit claims Aruanno determined “the ordering system appeared to be continually manipulated by Dunham and his team to reduce shipments of bestselling items,” and a new warehouse constructed by ABC in Hanover County was short 500 spaces for items.

According to the lawsuit, both he and Burke were part of a team put together by ABC to stabilize operations in the authority’s warehouses. After conducting what the suit describes as “the first exhaustive inventory of Virginia ABC’s entire warehouse system in recent memory,” the team found $1.7 million in lost inventory as well as nearly $1 million in improper payments made to a vendor. Later investigation would lead Aruanno to increase the shrink estimate to $2.7 million, while he claims ABC Assistant Director of Information Technology Stephen Orford informed him the warehouse lost $5.3 million worth of inventory in 2021-22.

While Aruanno’s suit says he and Burke shared their findings with Dunham in spring 2022, he claims Dunham told the two to “hold off” sharing the information with ABC leadership and then never reported it. In December 2022, Aruanno and Burke reported the losses to ABC Chief Administrative Officer Dave Alfano.

In February 2023, Aruanno claims ABC began convening “accusatory” meetings with him where he was questioned about lost inventory. Following one such meeting, Aruanno alleges that “after Hill left the room, Dunham smiled at Aruanno while giving him the middle finger.” In March, ABC called him into a meeting to investigate any knowledge Aruanno had of a particular type of cash register transaction that was used in some of ABC’s embezzlement cases.

In April, Hill allegedly stated in a meeting of ABC’s C-suite that Aruanno and the others who reported wrongdoing were on a “hit list,” “were not to be trusted,” and were “not acting in the best interest of the authority.”

On May 4, 2023, Aruanno received a call from leadership saying he had been placed on administrative leave. He alleges he was not told why and was asked if he had an attorney. Three other ABC retail leaders, including Burke, were also placed on leave.

A planned ‘raid’

On May 6, Aruanno said his stress caused him to seek medical help, and he was sent to the emergency room, where a doctor told him to take off at least a week of work. After filing a medical leave of absence with the authority, Aruanno received a call from Dunham on May 9 that ABC personnel would be arriving at his house to “retrieve ABC assets.”

The lawsuit alleges ABC did not have a warrant to enter Aruanno’s residence. He also was still considered an ABC employee during this period.

The complaint alleges emails and texts among Virginia ABC staff obtained by Aruanno through a Freedom of Information Act request show Dunham and ABC Human Resources Director John Singleton planned a “raid” on his house. The lawsuit says those communications contained “instructions for two armed Virginia ABC agents and an armed member of local law enforcement to ‘stage’ outside of Aruanno’s house, await orders and then enter the home as a unit, ‘no exceptions.’”

An email from Singleton identified the purpose of the raid as the retrieval of Virginia ABC property, including “two ABC laptops, State Vehicle, Two credit cards (SPCC-Gas Card), Employee Badge, Company keys, Cell phones, [and] Any ABC assets to include files or documents.”

The Mercury filed the same FOIA request as that sent by Aruanno, but ABC declined to send any documents, as FOIA officer Meaghan O’Brien said they contain exempt “personnel information concerning identifiable individuals.”

Scared of a raid by law enforcement on their residence, Aruanno’s adult children and mother-in-law hid in their rooms and locked their doors, the lawsuit says. After Aruanno’s wife emailed Hill to tell him the situation “is causing a great deal of stress on our entire family,” the special agent in charge of Virginia ABC’s Bureau of Law Enforcement was instructed to “release the agents back to their normal duties.”

“I think they were going to scare me,” Aruanno said. “They wanted to show me that at any time, their secret agents can roll up to my house and get what they want.”

On May 17, Aruanno returned his state-issued property to the authority without incident.

Further alleged retaliation

On June 5, Aruanno received a notice of pending disciplinary action in connection with the cash register transaction issue ABC had detected in the embezzlements. He was also accused of embedding a program into ABC’s business and operational tools in an attempt to dismantle them and failing to turn over his passwords.

Aruanno says all of the accusations were false. ABC later withdrew the notice against him, and he returned to work on July 5.

Upon his return, the lawsuit alleges he was informed that his position had been eliminated due to “budget constraints.” Aruanno was then offered the option to leave ABC or stay and accept a lesser position with a large pay cut outside of his expertise.

“It’s basically the same job I was doing before — they just retitled it,” Aruanno said. “Instead of assistant director of retail operations, they decided to call it an area manager’s position.”

The lawsuit alleges he was then denied a 5% raise granted to state employees and a cost of living adjustment and made to work in “intolerable” conditions.

“The hostile work environment Aruanno experienced on a daily basis took a toll on him, and he reached a point physically and emotionally where he could not continue working at Virginia ABC,” the lawsuit says.

Aruanno submitted his resignation from ABC on Sept. 24.

“I will miss the dedicated team that I worked with, and I am sorry to see them also struggle with retaliation while just trying to do their jobs,” he wrote in his resignation letter, which he shared with the Mercury. “I truly believed that if ABC was willing to find a solution, together as a team, we could have assisted ABC to get back on the right track.”

Auranno is seeking a jury trial for his case and damages of up to $2 million. He is also asking the court to reinstate him to his former role of assistant director of retail operations with a raise and to order ABC and Dunham to engage in and provide training on whistleblower protections.

by Meghan McIntyre, Virginia Mercury

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