Bordeaux Wine Enthusiasts

Premier Cru filed for bankruptcy yesterday afternoon. A few details thanks to Don Cornwell (more available on the Wine Berserkers board):

They filed Chapter 7 (liquidation), not Chapter 11 (reorganization).

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

Secured claims are $936,033.
Unsecured priority claims are $175,000.
Unsecured claims are $69,174,148.

Estimated assets are mostly inventory of $6,800,000, $6.5 million of which is listed as being "on site" and $300,000 which is held by other parties.

Thanks for posting David.
I'm out of town, what are the Berserkers saying about the enormous disparity between assets and liabilities?

It was just posted late last night, but early polling favors Ponzi scheme.

Dan Posner, months ago, suggested PC had dug themselves a $50 million dollar hole. He was in the right ballpark.

Based on the numbers in the filing, it looks like well under 10 cents on the dollar will be left for unsecured creditors. And that's without considering legal expenses.

I'm wondering whether the banks behind the credit card issuers will offer chargebacks for charges >60 days old and eat the losses when a merchant files for bankruptcy. Is the answer different if fraud has been proven?

I've done over 2,000 Chspter 7 bankruptcies over the years but nothing on that scale.
I wonder if the owners have suffered from some sort of substance abuse issues?
Clearly, these numbers suggest some sort of disconnect with reality.

Do you know if they have scheduled a 341 meeting yet? Usually they do that within hours after the filing.

I wonder who is going to do the auction(s).

This is too bad for a lot of customers including friends here and elsewhere. Relatively it's of slight importance but I wonder what effects this will have on the retail market in general, i.e., to what extent did PC's bogus scheme and discount pricing exert pressure on the rest of market participants to offer more competitive pricing. If the answer is even "somewhat" then didn't we (meaning we who were not directly benefitting [many of us got "deals" from them over the years] or directly losing) all benefit "somewhat" from the scheme?

The creditors matrix must be a mile long.

With that kind of disparity between assets and debts I have to believe there is going to be substantial litigation objecting to the dischargeability of debts based on fraud and attempts to pierce the corporate veil.

What a mess. Where did that $63 million go? Did Fox and friends spend it all on fast cars and nose candy as Jim wonders? These weren't paper profits, real people with real money actually paid in advance!

It would be one thing if they kept losing a little bit of money on too-good-too-be-true offers, that could eventually catch up to them, but liabilities on this scale shows someone was just pocketing vast sums of ill-gotten money.

PC used to be my biggest wine expense, by a lot. That changed in 2009 when the online auction market took off and I focused on backfilling.

Jim I don't know the answers to your questions. I don't know how to look these things up but the following information might help you find the filing and the details. It's probably available on the web.


Case No. is 16-40050. The Chapter 7 Petition was filed at 1:23 pm on Friday, January 8.

The assigned Chapter 7 Trustee is Michael G. Kasolas of San Francisco.

The Bankruptcy Judge is William T. Lafferty of the Oakland Division of the Bankruptcy Court for the Northern District of California.

Found a link to the PC bankruptcy filing.

I didn't think I had any outstanding orders and I was correct. Somebody named Arthur Patterson is owed $800,000+.

My CC company will entertain a dispute charge. Whether they will grant it remains to be seen. They do agree that the 60 day limitation from time of promised delivery does not rule out a dispute when there is non delivery but no promised time of delivery. That PC has gone Chapter 7 makes it easier in that normally CC companies require a cardholder to attempt to resolve the dispute directly with the merchant and apply for a refund from the merchant before the CC company will act.

An irony could develop eventually: credit card companies reimburse those who did not receive their wine, while a bankruptcy trustee claws back the wine that was delivered.

HM$, so I guess you don't have to file a SOFA in a corporate Chapter 7?

Looks to me like they haven't been paying their payroll taxes. Jesus Christ what a fraud here!

How do these numbers compare to Rare LLC?

Wow. They owed me money for refunds which I had not received, I am out a couple of thousand dollars. A drop in the bucket compared to some, but still a sizeable amount.

JimHow wrote:Looks to me like they haven't been paying their payroll taxes. Jesus Christ what a fraud here!

I think I suggested on the WB board that was a real risk for staff, since its common with struggling firms, and that loss comes back to roost with the employees. The IRS generally doesn't care who/why shorted them --- they'll get their money eventually. And they have persuasion levers that normal creditors don't.

This is why the smart staff especially highly compensated ones quit early on. Perhaps someone looked very carefully at their payroll processing statements.

There was some bad shit going down here.

I don't think the ordinary employees have anything to fear from the IRS. Certainly PC withheld from their pay but did not remit to the IRS. That's actually the first source of illicit "financing" for many troubled companies. However there is personal liability for the "responsible person" usually the chief executive but also often a lesser exec whose job it is to actually remit the funds.

AlohaArtakaHoundsong wrote:I didn't think I had any outstanding orders and I was correct. Somebody named Arthur Patterson is owed $800,000+.

Art, and here I thought that was you...

I shouldn't be making jokes and it's not funny. It is real money. Apparently Art Patterson is a venture capital bigwig so who knows if that is a life-changing amount. No doubt it's a major loss for many people on the unsecured creditor list.

I think some of the big numbers belong to speculators who came late to the game, hoping to make a quick profit on flipping high-end wines that PC was offering at too-good-to-be-true discounts towards the end. Of course the prices were too good to be true. The sudden influx of large orders by people with a different agenda and less patience than PC's traditional customers just hastened the inevitable crash and burn.

So where did the money go? And when? Maybe we'll find out if/when criminal proceedings take place. Fox had a home worth a few million, the store building and a nice car or two, but nowhere near $60-70 million. If he was selling wine on almost no margin and making it up on the volume, payroll and other overhead could possibly put him a few million in the red per year. You'd have to figure doing that for 10-20 years to dig that big a hole. How long has John Fox been the owner? Or it could be addictive behavior: drugs or gambling. Addicts can spend money at light speed.

That would be 40,000 bottles at the price I'm accustomed to paying.

Sadly, you can see me on the long list too.
$8k. Very painful for me and I'm kicking myself for not taking action sooner.
I doubt the credit card company will do anything since it's so long ago.

I suppose it doesn't matter that I filed a small claims suit against PC in Dec 2015?

Michael-P

If you prosecuted the claim to judgment, maybe.

AlohaArtakaHoundsong wrote:I don't think the ordinary employees have anything to fear from the IRS. Certainly PC withheld from their pay but did not remit to the IRS. That's actually the first source of illicit "financing" for many troubled companies. However there is personal liability for the "responsible person" usually the chief executive but also often a lesser exec whose job it is to actually remit the funds.

I hope that is the case, but I've read/heard too many situations where individual employees have had to repay the withholding that was stolen from them. That being said, it's not something that can build up for a long period of time (i.e. 10 years or something) without eventual notice. People are normally filing taxes every year.

I am not a lawyer, and lack even a fraction of the knowledge that Jim or Arv or Art have here, but I will offer this...

Those who have been caught out and attempt relief via their credit card company may run into a 60- or 120-day time limit between the time the charges were processed and the time the complaint was filed. Most card issuers should have exceptions for purchases with unspecified delivery dates and for bankruptcies.

A little Googling revealed the MasterCard policy manual here:
http://www.mastercard.com/us/merchant/p ... Manual.pdf
The relevant section is 3.26, on Goods or Services Not Provided. It begins on page 3-133, about halfway through the document. The policy may differ for other card issuers.

All those who bought futures with a credit card should take a screen shot of PC's term page, where they say that pre-arrivals, especially Bordeaux, can take over 2 years to deliver. It is a statement of the merchant's own policy and it is clear that the delivery window is open-ended with no promised delivery time frame. That might help the credit card companies understand the nature of the business and convince them you are not making this up. Here's a link to the PC Pre-Arrival Terms:
https://www.premiercru.net/premier/comp ... 78DCBC8EA7

You should also have a copy of the bankruptcy filing, linked here:
https://drive.google.com/file/d/0B8JZFw ... ZleGs/view

Armed with the above, you should have a strong argument for a refund from the credit card company even if your charge was over 120 days old.

The wine futures market is now dead.
At one time you could buy futures and there was a huge difference in price at time of arrival.
That hasn't been the case since 1995.
PC preyed on people that thought released wines were still available at future prices that never existed to begin with.

I wonder if a creditor's meeting has been scheduled yet.
It is usually scheduled within hours following the filing.
I'm guessing that one will be scheduled by tomorrow.
Everyone listed on the petition will get a notice.

The copy of the petition provided by David does not appear to be complete.
It looks like it stops in the middle of Schedule F.
I'm assuming even a corporation has to file a Statement of Financial Affairs, which this filing does not seem to contain.
That section would contain a lot more detailed information about what has been going on.
I'm wondering if they intend to file an amended petition.
It's possible they filed an incomplete petition to stop something bad that was about to happen imminently.

The filing does look like a rush job to meet a deadline.

David I just went over to the Berserkers site. Someone mentioned that a Statement of Financial Affairs WAS filed. I didn't see it after a quick look at the link you posted. In fact, the schedules in your link seem to end in the B's on schedule F and then goes into the creditor matrix. Do you know if there is a more complete link out there somewhere?

Don't know where they found that but I'll ask one of the attorneys.

Doesn't look like the site will allow me to attach it, Jim. I've emailed it to you.

Ok thanks David I'll check it out.

It doesn't say much. Looks like a rush job that they are planning to complete later. Similar to the filing.

Yes I agree.
Looks like there will be a lot more information coming.
They will be filing an amended petition.