Bordeaux Wine Enthusiasts

Selling? The thought of doing that did not cross my mind. Buying did because I do have a fair amount in cash, but I have not been doing homework on what to buy on a retraction. Maybe wine futures? I no longer have anything tied up in those, but I don't think prices on them dropped today.

The FBI gets involved:
http://www.mercurynews.com/crime-courts ... -wine-shop

Howard, any thoughts on what the rush would have been to file a corporate bankruptcy while the potential for serious criminal charges exists?
Will there be one or more 341 meetings? Won't the principal have to testify under oath?
In the case of a no-asset corporate bankruptcy, what would be the rush to file now?
What would even be the need to file a corporate bankruptcy? Why not just dissolve the corporation and let the creditors pick at the remains?
The concern I would have is that Fox will have to make statements under oath that might be used against him as part of a criminal case.

Arv or David or anyone, do you know whether any of those 11 lawsuits name Fox and/or Ortega personally?

Jim:

I will say it more forcefully than you. This was likely a very bad move strategically, even if it had tactical appeal.

--First (little known fact), corporations do not get a discharge in Chapter 7, so suits can continue into eternity the moment the bankruptcy is over.
--Second, any error that Fox makes in the corporate case could bar his personal discharge if he files later. So he's just doubled his chances of turning his errors into grounds for never getting a discharge. I guess he can take the 5th, but that can get pretty ugly.
--Third, he has created an adversary (the panel trustee) who has the imprimatur of neutrality, and subjected himself to testifying in a federal forum (where we have laws about wire fraud, mail fraud, etc.). Prior to the bankruptcy, creditors had to spend their own money chasing him. Now they have someone doing it gratis for them.

What I tell my clients in cases with well-funded adversaries like this is that unless you have the wherewithal to make a substantial offer that can be used to bind your creditors in the bankruptcy (e.g. through a chapter 11, or through settlement of causes of action which only belong to the bankruptcy estate), corporate chapter 7s can often make the problem worse, not better.

I personally think the Hong Kong strategy has more legs.

hm$

IIRC a few of those suits did name them personally, based on the claim they were commingling the corporate assets with their own personal ones. They have been consolidated, in any case, and it seems like spending money on them (for the plaintiffs) is just good money after bad.

The first one was coming to trial in February, and I'm assuming they would have lost and gotten a judgment against them. So maybe the corporate filing (and all its risks/problems) only changed the timeline by a month or two.

Really amazing thing is how they held out post crisis for so long.

PS: the security guards suggest that there is someone among the aggrieved parties who doesn't send lawyers to resolve differences. And a discharge isn't going to pacify that person(s). I doubt someone who is broke is willing to pay the costs of guards unless they really fear what can happen.

It could be time to remove the Premier Cru link from the list in the "retailers and online resources"

Sam's too - they went bankrupt and were taken over by Binny's years ago.

The worst thing I read in all this Premier Cru mess was an interview where some guy said , "I bought these wines so I could flip them. Now I lost money. What do I tell my wife."

RDD wrote:The worst thing I read in all this Premier Cru mess was an interview where some guy said , "I bought these wines so I could flip them. Now I lost money. What do I tell my wife."

I think that's the same guy who tried doing that with a house around the corner from us. Found out the hard way that the county is serious about construction permits. So it's been floundering in notice of default limbo for the last 4 years, AFTER the housing recovery started here.

AKR wrote:

RDD wrote:The worst thing I read in all this Premier Cru mess was an interview where some guy said , "I bought these wines so I could flip them. Now I lost money. What do I tell my wife."

I think that's the same guy who tried doing that with a house around the corner from us. Found out the hard way that the county is serious about construction permits. So it's been floundering in notice of default limbo for the last 4 years, AFTER the housing recovery started here.

They love it when you skirt permits and then catch you. You'll never get loose of that. Might as well knock it down and re-start.

On Saturday I received a mailing from the bankruptcy court titled "Notice of Possible Dividend," with an explanation of how to apply for it. The note mentioned that a "notice of meeting of creditors advised you . . ." - sounding as if that was something I should have received already. Has anyone else received either/both of these?

I have received nothing, Jon.

I received the same letter indicating that there were no assets in the case but that a dividend may be possible. Not sure how all this works, but I am going to follow the instructions to see if I can get anything back.

RDD wrote:

AKR wrote:

RDD wrote:The worst thing I read in all this Premier Cru mess was an interview where some guy said , "I bought these wines so I could flip them. Now I lost money. What do I tell my wife."

I think that's the same guy who tried doing that with a house around the corner from us. Found out the hard way that the county is serious about construction permits. So it's been floundering in notice of default limbo for the last 4 years, AFTER the housing recovery started here.

They love it when you skirt permits and then catch you. You'll never get loose of that. Might as well knock it down and re-start.

That I think is what is happening here. Some kind of illegal kitchen work, where licensed tradesmen were required (gas lines, electrical etc.) and its not in compliance. So the the neighborhood chatter is that all the work has to be ripped out. And the speculator has walked away from the place. I think they had bought it out of FC, and gotten a hard money lender afterwards, so its all f'd up, and just sits there forlornly.

Dumpster fire.

I think the hand writing was on the wall by mid-to-late summer of 2015 that PC was a sinking ship (at least if one was listening to the most informed folks like Arv), but the sheer scale of the fraud blows my mind. I am in the camp that things were not like this all along, but in retrospect, something shifted fundamentally after the 2008 crash. A massive fraud occurred. I was a PC apologist for years, arguing that more fact-less speculations about its nature were old news until some one gave "evidence" that something was rotten in Denmark. I put the onus of the accusers (many of whom seemed to have an undue rage against PC, making them easy to dismiss unfortunately) and pointed to PC's track record.

Of course, evidence did begin to accumulate, finally, after so many years of generalized uneasiness. For me, I recall it was in late 2014 when my long-time contact at PC, a one James Gillerman who gave me the most reliable info through the years and seemed to be able to get things moving when I raised enough of a fuss, had left the business, that was when I was first thought all the rumors could be true as all the old hands at PC appeared to be cutting and running. Things snowballed from there, but I had enough warning to stop my purchases going forward and get out most of what I was owed (including a half case of the GPL 2010).

It will be fascinating to see how things develop from here, and putting aside the unfortunate monetary losses of friends and colleagues, this PC meltdown as provided some of the most riveting wine-related reading ever. I also agree with Jim that clawbacks will not happen, at least for transactions that occurred 90 days before the BK filing (I got my last shipment 114 days before the filing, so there could be some wishful thinking on my part).

My path with PC was similar to Patrick's. I almost completely stopped buying pre-arrivals around 2009 or 2010, having become fed up with the long wait on 2005 Bordeaux. I didn't really believe they were in a death spiral until last fall, but I managed to get out intact. I was stunned by the magnitude of their deficit. I still wonder if they bled out all that money trying to catch up with ever-increasing obligations or if they hid assets somewhere. I suppose a criminal investigation may give us some answers.

Gillerman got cited personally in some suits, which I suppose is when things got real for him, and presumably he (or his counsel) decided that when in a deep hole, they should stop digging, so he left.

I think they were pulling this scam for at least 15-20 years. They just got lucky, the markets and world economy and vintages were serendipitous for them. I remember them pulling these stunts that finally caught up with them at least as far back as 15 years ago. It was clear they were taking money and not buying the wines that their customers were paying for, with the expectation, not disclosed to the customer, that they would be sourced at a later date. I remember discussions about the PC "model" <rolls eyes> at least 12-13 or more years ago. I remember because I was pretty much done with buying even in stock wines from them as far back as 9-10 years ago. This was an epic wine fraud… The biggest ever? These guys are hard core criminals who need to be locked up.

I agree Jim, that for (at least) a significant percentage of the wines they offered since 2006 or earlier, they did not have solid or even potential contracts for these wines. It just appears that the scale of the fraud got bigger and bigger with each passing year, with consistently longer and longer waits.

I recall buying some PC prearrivals in late 2005 and getting them in the spring of 2006, for example. That kind of reasonable delivery time vanished for most of my orders made after 2006 (though oddly I got most of my modest stash of 2010 Bordeaux futures from PC in quite a reasonable time frame).

One theory is that they bet big on the 2005 Bordeaux futures prices going down after a historical big price jump, and when the prices stayed up, they were screwed and had to (very slowly) source these 05s at a big loss. Their fraud/Ponzi scheme was behind the 8-ball thereafter.

However it evolved, I concur these guys need to do jail time (maybe in a French prison!).

When did they cut the ribbon on their new "award winning" <rolls eyes> store? It seemed that the deals really got out of control while they were financing that project.

I think their new store opened in late 2010/early 2011?

RPCV wrote:I received the same letter indicating that there were no assets in the case but that a dividend may be possible. Not sure how all this works, but I am going to follow the instructions to see if I can get anything back.

Does 'no assets but a dividend might be possible' mean that they are going to aggressively pursue clawbacks? Speaking as someone who finally got a refund around 70 days from the bankruptcy filing, after several months of asking for one, this concerns me.

Blanquito wrote:I agree Jim, that for (at least) a significant percentage of the wines they offered since 2006 or earlier, they did not have solid or even potential contracts for these wines. It just appears that the scale of the fraud got bigger and bigger with each passing year, with consistently longer and longer waits.

I recall buying some PC prearrivals in late 2005 and getting them in the spring of 2006, for example. That kind of reasonable delivery time vanished for most of my orders made after 2006 (though oddly I got most of my modest stash of 2010 Bordeaux futures from PC in quite a reasonable time frame).

One theory is that they bet big on the 2005 Bordeaux futures prices going down after a historical big price jump, and when the prices stayed up, they were screwed and had to (very slowly) source these 05s at a big loss. Their fraud/Ponzi scheme was behind the 8-ball thereafter.

However it evolved, I concur these guys need to do jail time (maybe in a French prison!).

I will admit my foolishness re the PC 'model'. Based on their delivery times I had thought for a while that they did not actually have the wines physically purchased that they offered to customers. (Although I did wonder if they had some kind of potential contract or committment to deliver from some grey market middleman). I felt that they were relying on the indeterminate delivery time to source the wine at a profit or at least not at a loss based on the fluctuation of wine prices and currency values over the long period of time they took to deliver. So they were almost a 'wine finder' service rather than a conventional retailer. But I thought that they were somehow managing their risks in doing this fairly responsibly, or else how could they have continued to deliver through the long Bordeaux price runup of 2000-2010, the financial crisis, etc.? They would take some losses on some wines, get some gains on others, but over time they seemed to have figured out a way to balance it out.

Of course in retrospect it is idiotic to think that an entity that was basically sourcing free money for products it didn't own in a market with huge price fluctuations, based on a wink-wink relationship with the truth, was going to be able to manage that risk and resist the temptation to get in way over their heads.

Marc, Howard would know the answer better than I, but I think that it is initially designated as a no-asset case based upon the representations of the debtor. Then once the trustee determines that there is a possibility of a dividend, they send out the notice that you have received. I don't believe it has anything to do with clawbacks. At least that's how it works in typical personal Chapter 7 cases.

Wow, have you seen the latest PC bankruptcy filing. Fox is raising his Fifth Amendment rights.

They filed their amended Schedule F. There is some crazy shit in there.
Breathtaking in the depth of the fraud.

Fox pleading the 5th? Wow, I suspect he's on a no-fly list now.

Reading through the filing, makes me realize just how much of a small fish I am. On some level, I imagined I was a good customer at PC, that I 'registered' on some level due to seniority and purchase history, but I can see now that I didn't even hit some minimum threshold. Turns out that is s good thing.

Right you are, Patrick. Over the years my PC expenditures totaled in the low six figures, but there were a number of customers whose annual expenditures were more than my 15 year total.

Anyone have a link to the new filing? I saw the old one but not a new one asserting 5th amendment rights

It's amazing Hector Ortega and John Fox, were on the 'creditor list', along with other customers list which PC owes money. Both of them are owed $0 dollars. As far as I know, those are the only two on the list that are owed $0 by PC. May be they both cashed out long before. I am not sure if the owners have to be listed on creditor's list by law though...

The corporation was probably leasing from the building that they own, making them potential creditors. They may have also loaned money to the corporation. As for whether their shares in the corporation have any value on paper and whether that interest has to be accounted for I have no idea.

JimHow wrote:The corporation was probably leasing from the building that they own, making them potential creditors. They may have also loaned money to the corporation. As for whether their shares in the corporation have any value on paper and whether that interest has to be accounted for I have no idea.

Doesn't that mean that they both knew what's coming and made sure that they are not owed anything by PC???

I doubt it, it would/will just cause them problems in the bankruptcy. They basically WERE the corporation, I'm sure they were just drawing money from it as needed. I wonder if the wine business corporation had a ten or more year lease to their real estate corporation and whether the wine business was actually cutting monthly rent checks to the real estate business. I haven't looked at the schedules lately, wasn't there something called University LLC or some such thing? Sounds like that might have been a separate corporation for the building? So when PC refers to "our" award winning building, that would not be quite accurate.

> Does 'no assets but a dividend might be possible' mean that they are going to aggressively pursue clawbacks? Speaking as someone who finally got a refund around 70
> days from the bankruptcy filing, after several months of asking for one, this concerns me.

No. The forms are completed by computer input -- nobody should be relying on the estimates of a dividend or not. Clawbacks (a/k/a preferences) will be pursued sometime in the next two years. Unless you got a significant amount in the last 900 days in wine or a refund (>=$5000), I would not lose sleep about a clawback risk.

hm$

900 days or 90?

Luckily, Glenn tipped me off a few months ago that there was trouble and I swapped my remaining futures for wines that were available. As one of the past supporters of PC, I feel badly for anyone who got screwed. I noticed in the past 1.5 years that the deals were looking a little desperate.

Bill

Today I prepared my portfolio for a CC charge back. It is only about 150 pages as I cut out things that were not absolutely necessary. This was much less fun than buying wine, BTW.

After I learned of PC's problems last June I stopped buying anything from them that was not in stock. Arv gets at least partial credit for that. There was not much of anything that was in stock that I wanted, so I did not try to make trades (despite Arv's recommendation that I take whatever I could get), and I knew that it was unlikely that I could get a refund check that would not bounce. I thought it likely that the employees who gave me dates of scheduled container arrivals with what would be in the containers were not lying because making false statements would make them chargeable for conspiracy to commit fraud. I figured that if I got 1/3 - 1/2 of what was due me I would be ahead of the game. Unfortunately, only a six pack of Bdx came in as well as a six pack of Rhone that arrived too late for me to get it before the Chapter 7 filing. Bad judgment on my part, but the wine was more important to me than the money.

When I get some time I'll file a similar portfolio with the bankruptcy attorneys and send the hard evidence I have of possible criminal activity by PC and its employees to the FBI.

hm$ wrote:> Does 'no assets but a dividend might be possible' mean that they are going to aggressively pursue clawbacks? Speaking as someone who finally got a refund around 70
> days from the bankruptcy filing, after several months of asking for one, this concerns me.

No. The forms are completed by computer input -- nobody should be relying on the estimates of a dividend or not. Clawbacks (a/k/a preferences) will be pursued sometime in the next two years. Unless you got a significant amount in the last 900 days in wine or a refund (>=$5000), I would not lose sleep about a clawback risk.

hm$

Thanks. I got about $6000 in a refund, putting me on the line for whether to pursue. Should have told them to short change me ! I have already spent most of it so I guess I will just offer to settle for what I can if they contact me. DIdn't know about any of this clawback stuff till people brought it up in connection with the bankruptcy itself. Kind of shocking that such a sweeping power exists to reach ordinary non-insider consumers receiving refunds for legit purchases made in good faith.