Premier Cru (the wine store in SF) Update

[David M. Bueker]

Agree that this one was bigger by a wide margin, but it does seem that all the too good to be true pricing ends up being too good to stay in business.

[Robin Garr]

... estimated assets of $7 million and estimated liabilities of $70,285,181.

The more I look at this, the more remarkable it gets. Liabilities ten times assets? Is it reasonable to say this indicates that they stole 63 million dollars?

Is this entirely a civil matter, or is prison time a possibility here?

70 freakin' million!!!?!?! But they got all the money up front! Why were they "selling" wine that they didn't have a price for? I'm amazed it's this bad. Not Madoff bad, but really, seriously, bad.

The more I look at this, the more remarkable it gets. Liabilities ten times assets? Is it reasonable to say this indicates that they stole 63 million dollars?

Is this entirely a civil matter, or is prison time a possibility here?

Oh, pretty sure this will turn into criminal fraud case. But it's not that they pocketed 63 million. My theory:
1) they started off pretty legit, tried sharp pricing and thin margins. Sometimes they didn't complete deals in time, and had to source wine. But it generally worked out, and they got cocky.
2) my personal guess is that they were a little behind, and then '05 Bdx came out at huge increase in pricing, and they guessed pricing wouldn't hold. So they did futures campaign at low US pricing (not superextreme hard to believe, just maybe $500 for firsts that others were selling for $525-575. And didn't secure the wines, figuring they'd do later.
3) Oops, pricing held. So now they have to cover all of those orders. Need to generate cash. So they started selling other PA wines at most attractive pricing in US to generate that cash. And paid maybe $600 or $650 (or more) to get those '05 firsts (and equivalent premiums on other wines they hadn't sourced).
4) but prices held on those wines too, and PC had to sell more wines at imaginary pricing so they could acquire them
5) Now delays are mounting, and folks are hesitant to buy even at best in US pricing. So PC starts going 10-15% lower- hole gets deeper. Eventually even at 30-40% too many people were wary. Kaboom.

Sure, meanwhile Fox and Ortega were living large . But majority of money (as in most Ponzis) probably went to pay the premiums of acquiring the wines that they presold. Criminal in any case.

[Robin Garr]

... But majority of money (as in most Ponzis) probably went to pay the premiums of acquiring the wines that they presold. Criminal in any case.

Sounds like a sound analysis to me, Dale. Thanks!

Hey, everybody, I'm named as an unsecured creditor, with my full name and address! Thanks, Premier Cru!

Me too, even though I'm actually at $0 with PC. It looks like they started through client list listing amounts owed, then in Bs just gave up and listed client list.
I probably know at least 40-50 people on that list (hundreds more if you count "internet friends")

[David M. Bueker]

I have 4 friends on the list. Only one is active at all on wine boards. Sadly one of them is out $ in the mid 5 figures.

[Jenise]

I have 4 friends on the list. Only one is active at all on wine boards. Sadly one of them is out $ in the mid 5 figures.

Ouch-er-ooni.

I have a friend in 6 figures. Yikes. Even for someone well off, that has to hurt

It's easy to say now, but maybe my eclecticism was handy here. I checked, and I've never had more than 10% of my purchases with a single merchant. Obviously wine is a luxury good, but I'm sure it's a loss to those who were heavily invested. Moderation in all things, I guess.

2) my personal guess is that they were a little behind, and then '05 Bdx came out at huge increase in pricing, and they guessed pricing wouldn't hold. So they did futures campaign at low US pricing (not superextreme hard to believe, just maybe $500 for firsts that others were selling for $525-575. And didn't secure the wines, figuring they'd do later.

Yeah, I went long on 2005 Bordeaux at a number of venues, with PC being the biggest, but I shopped around and also bought from WineX, Binny's, Zachys... PC's prices were usually no better than 5-10% lower than the next best per WineSearcher.

However they worked it, the 2005 Bordeaux futures campaign was when things went screwy. I waited nearly twice as long for my 2005 futures to be delivered -- up to 5 years after ordering for some wines -- than I did for my 2000 and 2003 futures from PC. After so long a wait, my exposure was much, much smaller after that, but I bought on some 2009 and 2010 Bordeaux (which ironically were mostly delivered in record time, by PC's standards). My last prearrival order was in mid-2014 for a few Chablis.

Such a crazy spectacle. Thanks to those who with advice and facts helped limit my purchases there.

Wow, this bankruptcy news is really something, as is the 70 million dollar figure. PC has been debated in the wine boards for as long as I have been looking at them. It's yet another glimpse into the dark side of the wine business: the greed, the use of wine for status, the inability to see clear danger signs, etc. But it's still sad for the thousands that thought PC was still a safe bet.

So I received a notice from Firestone/bankruptcy court today
Just generic, but it starts off saying "notice of meeting of creditors advised you that there were no assets in this case. It now appears that a payment of divident might be possible."
With instructions for filing claim.
I actually don't have a claim- cleared my last PA order more than 6 years ago and picked up small instock this summer. But possibility of folks who were stuck getting at least something is good news. I'm not familiar with bankruptcy, but sounds like something changed. Hard to believe anything out of $7M in assets for $70M owed. Wonder what happened? Did they find hidden assets or decide Fox/Ortega had enough assets to pursue?

Here's a scan
https://drive.google.com/file/d/0B9YVNGpMvAtteHAySTN0cEJ3R00/view?usp=sharing

I'm on the list of creditors (no dollar amount) but I think it was for a single bottle of Leoville Poyferre. I see Itzhak Perlman is also listed.

Wow, JBL qoted, that brings back some WLDG memories

http://www.berkeleyside.com/2016/07/28/how-did-berkeley-wine-store-accrue-70m-in-debt/comment-page-1/

[Jenise]

Wow, sure does.

Strangely written article, though. Note the description of and Ferrari and "$90,000 two-door Corvette". Like Corvettes come any other way.

John Fox reportedly to plead guilty to fraud today
http://www.berkeleyside.com/2016/08/09/ ... -to-fraud/

Meanwhile, since they duped PC creditor list in his personal bankruptcy, I've started getting mailings from that trustee. I was on PC list for $39 (a mistake, not an undelivered order, but sales tax I paid when I had stuff picked up rather than shipped). I've never made a claim. After maybe a dz mailings in PC case I spent a stamp to write and say "PC owes me nothing" Still getting notices. And now notices from the Fox BR. At this rate creditors won't even get pennies on the dollar.

[Jenise]

I didn't send them a desist request, but same here. Anyway, hope they hang him high! So is Ortega being handled separately?

People ITB such as myself knew that something seemed to be terribly wrong but when I mentioned it to a couple of people they immediately accused me of criticizing competition because they sold wine cheaper. Other people ITB had the same experience so most of us just kept quiet with our opinions. The prices they advertised on certain wines were below any cost we thought possible for a store to obtain, just that simple in our minds.

Berkeleyside has more details on the guilty plea. Fox admits in court that he never intended to ship the wines.
http://www.berkeleyside.com/2016/08/11/embattled-berkeley-wine-store-owner-spent-almost-900k-on-women-i-met-online/

His attorney says:
“John Fox is devastated by what has happened. He is sorry. He acknowledges he is guilty. He’s hurt his customers and the people who trusted him. He has ruined himself [and hurt] his wife, his daughter and a whole bunch of family members.”

But the article concludes:
No friends or family appeared in the San Francisco courtroom to support Fox.

[Jenise]

Ernie, thanks. Interesting article, and here's a new wrinkle I hadn't heard before!

"In addition, Fox said he spent more than $900,000 “on women I met online.”

Wow, not even I can match that $$$ figure .

Good summary
https://www.bloomberg.com/features/2016 ... -john-fox/