Premier Cru files for bankruptcy as the biggest wine fraud unfolds

Last Friday, Berkeley, the California based wine seller Premier Cru filed for Chapter 7 bankruptcy liquidation. It cited more than $70 million in debt liabilities. The default is being treated as one of the largest defaults in the American wine retail history. The shop owes customers money varying in hundreds and thousands of dollars. The now shut store was run by a partnership under the name Fox Ortega Enterprises. It was highly praised and well-known for its active email program that sent out wine deals to potential purchasers around the globe.

Earlier warnings regarding the delays ignored

Earlier, Daniel Posner, the proprietor of New York based wine retailer Grapes The Wine Company, tried to warn the buyers about the strange delays that are caused by Premier Cru. He warned indirectly before the recent bankruptcy was announced. “The wine business is no different than any other industry. Alleged Ponzi schemes occur very often in real life, and the wine business is not immune to such greedy behavior. In regards to Premier Cru, there were warning signs of problems with unusually late deliveries for the past decade. Many people saw those signs and acted upon them. Others, preferring to get the best price available, no matter how unseemly it appeared, chose the other route. For many, it worked out in the long run, and they got their wines. But for far too many others, to the tune of $70 million, they will not receive those wines, nor refunds from Premier Cru for lack of delivery. That is a shame. Smaller instances of such behavior have rocked the wine world in the past, and we have been able to move on. Unfortunately, for many, the amount of money potentially lost might put a bitter taste in their mouth and they may not trust another wine merchant again. I cannot blame them, but it is obviously not the norm. There are many great wine merchants in this country offering outstanding deals on wine. Are those deals 40 percent less than everyone else? Of course not”, said Posner.

Premier cru leaves customers in a muddle

Premier Cru issued a bankruptcy statement on Friday. The 1401 page file was mostly devoted to buyers. The document suggest that Fox Ortega Enterprises is indebted to over 5,000 customers after Premier Cru failed to ship purchased bottles of wines. The amount owed to customers is highly varied as it ranges from $100 to $10,000.

The company has a highly skewed asset to liability ratio. It has listed assets worth $7 million but owes almost ten times more in terms of liabilities. The creditors have minimal hopes of being refunded. They might not receive the ordered wine too. There are talks in the industry about whether the money was ever used to buy wine bottles for the customers ever. This default is being considered as the biggest wine retail-related default to have ever occurred in America. It will affect the regular buyers and more importantly the wine connoisseurs. The liabilities for Fox Ortega also might increase as there are chances that other government and business entities can make additional claims. Till now, no criminal charges have been filed against the company’s president, John Fox.