Charles Banks sentenced to four years behind bars

Charles Banks, the former co-owner of cult Californian winery Screaming Eagle, has been sentenced to four years in jail for defrauding retired NBA star Tim Duncan out of US$10 million.

Charles Banks and his wife Ali

Banks, founder of winery investment company Terroir Capital, which owns or manages nearly a dozen wineries in California, New Zealand and South Africa, was accused by the NBA star of defrauding him out of over $10m in investments Banks made on his behalf over a 17-year period.

Seeking damages of at least $1 million, Duncan filed a lawsuit against Banks on 29 January 2016, accusing the financial advisor of breach of fiduciary duty and tricking him into making loans to a failing sports merchandise controlled by Banks.

The NBA star accused Banks of persuading him to make a $7.5 million loan to Gameday in 2012 which would be repaid over five years at 12% interest. Duncan claimed that Gameday failed to make the payments.

“I invested in a series of opportunities presented by Charles Banks on his assurance that we were working together for my family’s long-term financial security,” the sportsman said.

“Banks exploited my good intentions and our relationship for his personal gain and my substantial loss. I’m saddened that my name will join the list of athletes to fall victim to this sort of misconduct.”

When the lawsuit was filed Banks denied the allegations to Wine Spectator, claiming that Duncan was using the lawsuit as leverage to cash out early on minimum investment periods following his divorce. However in April of this year, Banks pleaded guilty to one count of wire fraud against Duncan.

As reported by Reuters, this week US District Judge Fred Biery sentenced Banks to four years behind bars, ordered him to pay Duncan $7.5 million in restitution and serve three years of supervised release after he finishes his prison time.

In a statement read out in court, Duncan stated his wish for a strong sentence in order to prevent financial advisers from preying on young, impressionable and suddenly wealthy athletes.

“Judge Biery, you may not understand how difficult it is for me to be in the public light in this horrible way, as the poster child for a dumb athlete whose financial advisor took his money. I hate it and am embarrassed by it more than you can imagine.”

In a brief statement before sentencing, Banks apologised to Duncan for “breaking his trust”.

NBA star Tim Duncan accused Charles Banks of defrauding him out of over US$10 million

Banks’ conviction has caused further difficulties for Terroir Capital, and its interests overseas, notably his ties to New Zealand–based Trinity Hill Winery, of which Terroir Capital acquired a controlling share in 2014.

New Zealand’s Overseas Investment Office (OIO), a government agency responsible for regulating foreign direct investment, is already seeking to remove Banks from the investment on the basis that his “good character” has been tarnished.

In a statement released following Banks’ sentencing, the OIO said: “We are aware that US wine fund manager, Charles Banks, has been sentenced to four years imprisonment for fraud in the United States. Mr Banks is the majority shareholder of Terroir Capital LLC, which manages the Terroir Winery Fund.

“The Terroir Winery Fund was granted consent to acquire Hawke’s Bay winery Trinity Hill in 2014. A condition of consent required the ‘individuals with control’ of the Terroir Winery Fund (including Mr Banks) to remain of good character. In light of Mr Banks’ conviction and sentence, we consider that Mr Banks is not of good character.

“We are in discussion with Terroir’s representatives about removing Mr Banks from having any interest in Terroir’s investment in New Zealand.”

Mr Banks has already resigned as director of Trinity Hill Limited.

Similarly, Banks is also facing a second civil lawsuit from American Eagle Outfitters and DSW chairman Jay Schottenstein, who bought the Mayacamas winery in Napa with Banks and his wife in 2013. The Schottensteins are suing Banks for breach of fiduciary duty, and asking him to step down as winery president, believing that his status as a convicted felon puts Mayacamas’ licenses and permits at risk. That case is ongoing.

Banks bought Screaming Eagle in 2004 with real estate magnate Stan Kroenke, but sold his share in the winery in 2009 to set up winery investment group Terroir Capital, leaving Kroenke as the sole owner. Since founding Terroir Capital, Banks has assembled a portfolio of 11 brands that produce 500,000 cases annually from vineyards owned or managed in California, New Zealand, South Africa and Burgundy, including Qupé, Wind Gap, Trinity Hill, Mulderbosch and Fable Mountain Vineyards.