"It's a voice-recognition-capture device," the court reporter later explained. "I'm basically a parrot."
Welcome to one of Pennsylvania's most obscure courts, the Office of Administrative Law Judge, where the legal bar and liquid bars meet.
"If you talk to anybody that's not in the business, they wouldn't know what an administrative-law judge is," Rago said in a recent interview. "And half of the people who are in the business don't know what it is, either."
When the Pennsylvania State Police's Bureau of Liquor Control Enforcement cites one of the 18,145 active liquor-license holders in Pennsylvania for a violation of the liquor code, the cases are heard by one of the state's seven administrative-law judges, who can order fines, alcohol-management training, and liquor-license suspensions and revocations.
Before 1987, the Pennsylvania Liquor Control Board not only distributed and regulated the sale of alcohol in the state, but also investigated, prosecuted and stood in judgment of those deemed to be in violation of the liquor code.
In other words, the Liquor Control Board was your dealer, the cop who investigated you and the judge who determined your fate. It was not an intrinsically impartial system.
Act 14 of 1987 tried to fix that. It created the bureau, under the leadership of the State Police, as the agency charged with investigating liquor-code violations. It also created the office, an "autonomous" civil court under the Liquor Control Board, to handle adjudications.
But the office is about as autonomous from the Liquor Control Board as the vodka is from the tomato juice in a Bloody Mary.
Not only does the office get all operating expenses - which totaled $2.12 million from July 2012 to June 2013 - from the Liquor Control Board, it also remits to the board all the fines it collects, which tallied $1.47 million last year, according to the office.
The office also depends on the board for its administrative needs, which leaves open opportunities for the board to seek retribution against the office if it doesn't like a decision, according to testimony by office Chief Judge Eileen Maunus to the House Liquor Control Committee in 2012.
"Quite frankly, in the past four years or so, we are disheartened to report there has been what we perceive as attempts to assert command pressure, not in any one case, but rather in the broad perspective of operational control," Maunus testified.
Maunus, who would only answer questions from the Daily News via email after they were filtered through a PLCB spokeswoman, declined to comment on what "command pressures" her office has felt.
Edward McHugh, Rago's defense attorney who specializes in liquor law and previously served as a bureau prosecutor, said that on top of all that, when a defendant wants to appeal a decision made by an administrative-law judge, he or she first appeals the ruling to none other than the Liquor Control Board.
"So that's kind of wacky," he said.
When Rago appeared at the office's Plymouth Meeting courtroom in February for the promoting-prostitution case, it was because an undercover liquor-control-enforcement officer said a Scruples dancer had verbally agreed with him to exchange sex acts for money.
About four out of five bureau cases begin with an investigation by an undercover bureau officer, said Sgt. Dan Steele of the bureau's Philadelphia arm.
Cases are typically initiated by complaints from neighbors, public officials, the Liquor Control Board or anonymous citizens, Steele said. The bureau's Philadelphia office averages between 70 and 100 complaints a month.
"All complaints that are received here - anonymous or not - the bureau is charged with investigating," Steele said.
Although bureau officers are authorized to cite for violations of the liquor code, an aspect of the law also allows them to bring civil citations under the crimes code.
Take Rago's case: Even though promoting prostitution is a criminal offense, it was charged in a civil context by the bureau and brought before the office, a civil court.
McHugh used the example of a licensee who is caught serving an underage person. Although the youth would be charged with underage drinking in criminal court, the charges the licensee would face from the bureau would be civil.
"You would think it's criminal in nature, but the liquor code is a unique animal," McHugh said. "The [liquor-control-enforcement] officers have the authority to cite for criminal conduct, but the citation is not criminal."
Of the 2,577 cases received by the office last year, 92 percent were waived before reaching a judge, Maunus said. That means the state's seven administrative-law judges heard just 207 cases last year - about 30 cases each.
Of those licensees who do bring their cases before a judge, most agree to stipulate to the facts and to the penalties recommended by prosecutors. Of nine cases observed by the Daily News over two days recently, all but Rago's took less than 10 minutes.
"It's difficult to completely prevail before the [administrative-law judge]," McHugh said. "There's no requirement for the prosecution to prove intent, and a preponderance of the evidence, which is 51 percent, is enough to go against the licensee."
Even Maunus, in her legislative testimony, said the costs of fighting a case before the office may outweigh the cost of just eating the citation and paying the fine.
"In this environment, many licensees, who operate on a shoestring, find it cost-prohibitive to retain counsel," she said.
McHugh, whose practice is focused on liquor law, said he provides office counsel to his clients as a courtesy.
"You want them protected in the long run, but at the same time, you can't charge them an arm and a leg to do it because sometimes the fine is less than what it would be to charge them," he said. "There's definitely a cost-benefit analysis for licensees."
Last year, office judges ordered 369 days of license suspension for 88 offenders. That's down significantly from the 2,662 days of license suspension they handed out in 2011. However, the office revoked 156 licenses last year, an increase from the 94 it revoked in 2011. Fines from the office can range from $200 to $5,000.
Although the penalties may not seem severe, McHugh said the risk of accumulating repeat violations is a deterrent.
"I think the way the [office] works is they will give the licensee the benefit of the doubt on the first violation, maybe even the second, but when they start to accumulate a third or fourth violation on the same offense, in my opinion the penalties increase significantly," he said.
When Maunus addressed the House Liquor Control Committee in 2012, she said it was the first time in her 16 years as chief administrative-law judge that she was asked to describe what the office does.
Even though the office receives little attention, Maunus declined to do an in-person or phone interview with the Daily News.
Maunus - who in her legislative testimony complained about command pressure that her supposedly autonomous office receives from the Liquor Control Board - directed inquiries to a board spokeswoman and required that all questions be emailed. The chief judge took 27 days to respond to the Daily News via email.
The office declined to provide photos of its relatively unknown judges, "for security reasons," the board spokeswoman said. Meanwhile, several judges in Philadelphia's Common Pleas Court - who routinely sentence murderers, rapists and armed criminals - have their photos on various public websites. What is known about the administrative-law judges is this: They are civil servants appointed by the governor, and their positions have no term limits. Of the current group of judges, those with the longest tenures were appointed by Gov. Bob Casey in 1987, when the office was first created.
Candidates must have a law degree, be a member of the state bar with five years' experience and have completed a "rigorous" civil-service exam, Maunus said.
The judges are split among three offices: Plymouth Meeting, Harrisburg and Pittsburgh.
Their salaries range from $93,458 to $124,402, Maunus said.
The low end of the pay scale for administrative-law judges is about what the going rate is for a liquor license in Philadelphia - about $90,000, according to McHugh.
In the suburbs, liquor licenses are going for much more. McHugh said the fair market value for a restaurant liquor license in Montgomery and Bucks counties is about $225,000 right now.
That makes for one hell of a hangover if an administrative-law judge revokes a liquor license. The judges in Pennsylvania's most obscure court may not have the power to sentence someone to prison, but they do have the power to take their dreams - and their livelihoods.
For now, Rago, the strip-club owner, should be fine. Administrative-law judges render verdicts by mail, and although he hasn't heard anything yet, the bureau prosecutor in court that day recommended a $700 fine, and the judge mentioned possibly issuing a one-day license suspension.
If he doesn't agree with the judge's verdict, he can always appeal - to the Liquor Control Board.
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