In one of the largest defaults in American wine retail history, last Friday, Berkeley, California-based wine seller Premier Cru filed for Chapter 7 bankruptcy liquidation, citing more than $70 million in debt liabilities. The shop owes customers varying sums of money, some in the hundreds of thousands of dollars.
The now shuttered Premier Cru store, which was run by a partnership under the name Fox Ortega Enterprises, was widely known for its active email program that sent out wine deals to potential purchasers around the globe. The retailer sold highly sought-after, collectible bottles, often in quantity and often at attractive prices. Although a single wine bottle could run upward of a thousand dollars, such as the Rousseau Chambertin 2012, which Premier Cru recently listed at $1,299, in many instances this cost was still lower than prices offered by other sellers. For example, that same bottle is currently between $1,375 and $2,011.50 from various United States vendors.
... this may already be the biggest wine retail-related default to have ever occurred in America...
However, Premier Cru frequently sold wines on a "pre-arrival" basis, meaning that the store was not in possession of certain bottles, so shipping was not always immediate. Thusly, customers sometimes complained about long waits in obtaining pre-paid wines, and those delays could reportedly stretch into years. In fact, as recently as last fall, customers filed lawsuits against the vendor, alleging that fraud and misrepresentation had taken place, suggesting that Premier Cru had not met obligations of sale in late shipments of purchased wine. Now, many observers are echoing that claim, as the extent of the seller's liabilities have come to light.
Daniel Posner, proprietor of New York-based wine retailer Grapes The Wine Company, tried to warn buyers about the strange delays associated with Premier Cru long before the recent bankruptcy filing was announced. Per Posner:
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.
Friday’s bankruptcy statement—which runs 1,401 pages in length, mostly devoted to buyers who the shop owes funds—suggests that Fox Ortega Enterprises is indebted to over 5,000 customers after Premier Cru failed to ship purchased bottles of wines. While individual listings are sometimes as relatively small as around $100, many sums add up to over $10,000, and quite a few single entries are for over $100,000 in missing wine.
With assets of $7 million listed in the filing, versus a sum ten times as large as that in liabilities, it may seem unlikely that those now listed as creditors will ever see a refund or the wines they originally purchased. Some question whether their money was ever used to buy bottles on their behalf in the first place.
Although wine retailers have failed to deliver product in the past, leaving customers without their orders, this may already be the biggest wine retail-related default to have ever occurred in America, affecting a wide swath of both regular consumers and wealthy collectors, and more liabilities may still accrue as other government and business entities make claims against Fox Ortega. So far, no criminal charges have reportedly been filed against the company's president, John Fox, or other Premier Cru employees.
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