Wine shop owner admits to $45m fraud

The owner of a wine shop in California has pleaded guilty to scamming customers out of at least $45 million after having orchestrated a massive “wine Ponzi scheme”.

John Fox, 66, of Concord and the owner of the now-bankrupt Premier Cru wine shop in Berkeley, pleaded guilty to wire fraud last week after charged were filed against him in June.

The shop, which was founded by Fox in 1980, sold wine in-store and through a “wine futures” business, which saw wines sold to customers before Fox had taken possession of them.

Fox promised, through his website, that once ordered the company would deliver European wines to customers within a time period of approximately six months to two years after customers had paid for the wine – with many of the wines requested en primeur.

However despite taking millions from trusting customers, the wine was never ordered with Fox admitting to orchestrating a “massive scheme to defraud” by selling wine that he knew he would never be able to deliver to his customers, a statement released by the US Justice Department said on Thursday.

In many instances Fox falsified purchase orders for wine that he had not contracted to purchase, entered them into Premier Cru’s inventory for sale, and then sold or caused Premier Cru’s salespeople to sell the phantom wine.

Between 2010 to 2015, he sold or attempted to sell approximately $20 million worth of phantom wine that he had never actually purchased, prior to entering them onto Premier Cru’s inventory.

When Fox did contract to buy wines from foreign suppliers he generally promised to pay suppliers within 30 days., but admitted that he knew Premier Cru would not be able to make payment within 30 days, or ever in some cases.

This was because he had been embezzling money from Premier Cru’s business accounts and diverted money coming in from current customers to obtain wine for prior customers who had never received their wine.

The embezzled funds were also used to make payments for personal expenses using fakes names to divert case from Premier Cru business accounts into his own. The case was used to pay for personal credit cards, memberships to private golf clubs, the purchase or lease of expensive cars including Corvettes, Ferraris, a Maserati, and various Mercedes-Benzes as well as $900,000 on women he met online.

At the time of Premier Cru’s bankruptcy, customers had paid at least approximately $45 million to the company for wine that they had not received, with the company accruing debts of $70m.

Fox faces up to twenty years imprisonment and a $250,000 fine, with a sentencing hearing scheduled for 14 December.