The bankruptcy has been investigated as a Ponzi scheme
The owner of bankrupt wine outlet Premier Cru may have significant jail time in his future. Wine Spectator reports John Fox will plead guilty to wire fraud this week, and he faces up to 20 years in federal prison.
The Federal Bureau of Investigation revealed in February it was looking into Premier Cru's bankruptcy as a possible Ponzi scheme after the Berkeley-based company had inspired a "high number of complaints" over the way it operated. Premier Cru often sold wines on a "pre-arrival" basis, meaning it accepted money from customers before it was actually in possession of certain bottles. Customers often dealt with lengthy waits before receiving their orders — sometimes years — if they received them at all. Last fall, a lawsuit was filed accusing the company of fraud and misrepresentation.
Premier Cru's Chapter 7 bankruptcy proceedings began on January 27, when the company claimed $7 million in assets and $70 million in debt. A federal judge ordered Fox to surrender a "secret computer" that operated outside the business's accounting system. The computer was said to contain "the best information to determine 'where the money went' (or didn't go) with respect to tens of millions of dollars of future contracts, among other transactions."
In addition to potential jail time, Wine Spectator reports Fox could be fined as much as $250,000, and he may be forced to pay restitution to Premier Cru customers who never received their bottles.
"The prosecution has selected one clear-cut example of wire fraud," a former federal prosecutor told Wine Spectator. "There is no such thing as a federal statute criminalizing Ponzi schemes. Bernie Madoff wasn't convicted of masterminding a Ponzi scheme. The charge was mail and wire fraud."
• Owner of Bankrupt Wine Store Premier Cru Will Plead Guilty to Fraud [WS]
• FBI Investigates Premier Cru's Bankruptcy as Possible Ponzi Scheme [E]
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