One of the more bizarre stories to surface in the world of wine recently… the release from prison of the author of a notorious Californian wine Ponzi scheme…
More on that in a moment… But first, has your wine been tainted? This week, resident wine expert Julien Miquel explains “cork taint”, including where it comes from… why you see wine snobs sniff their corks (and what to sniff for when you do the same)… and how to protect the bottles in your collection from it…
Take it from us – wine is not an industry one enters to make a fortune.
Sometime around 1990, John E. Fox was on the verge of learning that lesson. Premier Cru, the San Francisco wine shop he had opened a decade earlier, was in financial trouble.
According to the FBI, that’s when John hatched the scheme. Over the next two decades, he would go on to sell his customers some $20 million worth of wine that never existed. By the time he went to jail, he was bankrupt, in hock to an escort for $10,000 a month, and the owner of several sports cars.
Every year, some €100 million worth of Bordeaux is sold en primeur, that is, in advance of the wine’s release. Also known as “wine futures,” these advance sales allow collectors and investors to buy premium vintages at a reduced price from the expected retail or market price.
We’ve tossed back and forth the possibility of en primeur sales for our rarest Calchaquí vintages. Otherwise, we have little experience with them. According to our resident wine expert, Julien Miquel, advance sales represent but a tiny portion of the overall multi-billion-dollar-a-year wine industry.
Says Julien:
“Futures are mainly for high-end Bordeaux wines. Occasionally, some Burgundy producers may use them as well. I’m guessing some collectable wines in the US are likely sold that way as well on a limited basis, especially when you have waiting lists for the latest vintages.
“However, the revenue for Bordeaux en primeur has got to be in the 100+ million euros scale – relative to the whole wine industry, it’s not huge.”
Barry, our importer, also weighs in:
“We’re talking Rothschilds and Lafite. We have tried it a few times with some higher-end wines ($100), but it is not even 1% of our business.”
Perhaps it was the scarcity of the practice, then – aided, no doubt, by the wealthy San Francisco clientele – that made it so easy for John E. Fox to pre-sell not-yet-produced vintages for twenty years.
He lived well with his ill-gotten gains, buying Ferraris, Maseratis, and the company of several women, on whom he reportedly spent $1 million. One of these lovely ladies proved his match in crookery, going on to extort poor John for $10,000 a month and $300,000 in total. (As enterprising as she was criminal, a subsequent investigation discovered that she had been running the same scheme on six other men.)
Eventually, Mr. Fox ran out of new dupes. Upon hearing some of his customers had complained to the FBI, he declared bankruptcy. That didn’t forestall his arrest and at the age of 66, he got 78 months. Ever the optimist, our John told the online newspaper Berkleyside that he planned to make the most of his time in the slammer by taking computer science classes. Upon release, he would use these newfound skills to form a company and become a billionaire.
If you come across a wine futures IPO, make sure the name Fox doesn’t appear anywhere in the SEC filing.
Until next week,
The Wine Explorer
