The auditor general is slamming the Newfoundland and Labrador Liquor Corporation for a lack of transparency when buying and selling fine wines, in addition to the former CEO conducting business that benefited a member of his family.

Julia Mullaley delivered her report to the House of Assembly on Thursday afternoon.

"The CEO may have breached his fiduciary duty to the NLC," Mullaley wrote in her report outlining problems with how the liquor corporation ran a program to sell fine French wines.

"The audit concluded that the corporation did not manage the procurement and sale of specialty wines in an effective manner and in compliance with legislation," reads a press release issued shortly after 2 p.m.

A complaint filed against the NLC sparked the performance audit, in addition to a government-wide review of anti-nepotism rules for all agencies, boards and commissions.

The complaint was filed by a wine distributor who alleged he lost business because the NLC began purchasing products from a company linked to the son of former CEO Steve Winter, who was let go from his position in January 2018.

According to Mullaley's audit, Winter made the decisions on where to buy fine wine. In an email about ordering, his son, Greg Winter, wrote, "You know I sell it right?"

And Winter replied, "I do. That's why I ordered it."

Auditor General Julia Mullaley has issued a report that outlines how Winter bought millions of dollars in wine from his son's company. (Paul Pickett/CBC)

In another example cited in the audit, Winter, as CEO, put a "rush" order for 96 bottles of wine from his son's company. The average retail price? $539 a bottle. To date, only four of those have been sold.

NLC has a regular process to buy products, but the fine wine products didn't adhere to that, allowing Winter to personally make the decisions about which companies the wine would be purchased from. And about one-third of the wine was purchased from his son's company.

'I didn't break any rules,' insists Winter

Winter declined an interview request by CBC News.

However, in a statement, he criticized the audit for its "very narrow focus."

"We're talking about $15 million over a long period which accounts for less than three per cent of the NLC's business activities," Winter said in the statement.

Winter said the reference to nepotism is "off base."

"This is about taking a run at my son's business.… I didn't break any rules and if the legislation is no good that's not my fault," Winter said.

He added that he "always tried to do what was best for the NLC" during his 13-year tenure.

Osborne says he'll seek legal advice from justice department

Speaking to reporters about two hours after Mullaley unveiled her report, Finance Minister Tom Osborne said the problems outlined the audit was one of the reasons Winter was fired as CEO.

When Winter was ousted, he described "unheard of" government interference when it came to the running of the NLC.

Osborne, the minister responsible for agencies, boards and commissions, said there may be legal consequences.

"I am going to be seeking legal advice from the Department of Justice" to look at whether further measures might be needed, like referring the issue to the Royal Newfoundland Constabulary, he said Thursday afternoon.

He reiterated there is a full review underway of conflict of interest rules government-wide.

Finance Minister Tom Osborne says he will be asking the Justice Department for legal advice on the issues related to former NLC CEO Steve Winter outlined in the auditor general's report. (Peter Cowan/CBC)

"I think in the very near future the Department of Justice will bring forward conflict of interest changes that will [have] an impact government-wide," said Osborne.

Osborne said concerns were brought to him by an unnamed employee about the NLC's CEO in August 2017, at which point he requested a meeting with the chair of the board of the NLC to advise.

"My priority was obviously protecting the NLC, protecting government and protecting the taxpayers," he said.

"But a further priority was, any time there's an allegation made about an individual, you have to keep account of the fact that the individual may be innocent."

The NLC said it will not be commenting on the issue until Friday.

Buying more wine than could be sold

Another blow outlined in Mullaley's review is that the fine wines were being bought faster than they could be sold — with almost $10 million in inventory unsold at the peak.

As of now, $3.8 million of inventory is still unsold: that's 23,434 bottles.

Some of the wines that were sold were done so at deep discounts. And, according to the report, when the NLC sold off some of that wine, it broke the law.

To try to recoup some of the money, the wines were sold and shipped directly to customers in other provinces, which is not allowed.

Instead, products are supposed to go through the local provincial liquor corporation of the province where the customer lives.

In his statement, Winter said he bought wines that would appreciate in value "for the good of the NLC," but with the wine being sold off at a discount, that value will not be known.

"They've chosen to give it away because they're trying to make me look bad," said Winter in the statement.

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