How to buy En Primeur
- Monday 24 May 2010
At the start of March, the Metropolitan Police Fraud Squad made six arrests in connection with a wine investment company called Nouveau World Wines Ltd. Nouveau sold Australian wine as an investment. But according to the police, no wine was bought. It could just as easily have been en primeur Bordeaux. Since 1998, some 20 wine investment companies have been closed in the public interest on petition by the UK authorities.
The latest was Elite Wine Portfolios Ltd, which was closed on 28 January in the High Court. Elite’s clients received certificates stating their wine was stored at one of the UK’s leading bonded warehouses. On contacting the bond, however, they found the company had an account but there was no wine in it.
En primeur offers are a fraudster’s dream. The two-year gap between ordering and paying for your wine and its delivery gives a fraudster plenty of time to bank your cash and disappear before you begin to wonder what has happened to your wine.
Not forgetting all the hype, media coverage and razzmatazz of a successful en primeur campaign, allied to the mystique that surrounds fine wines. It can also be extraordinarily difficult to ascertain whether wine you have ordered en primeur has actually been ordered and paid for by the merchant.
Sometimes a wine can seem just too cheap – as one investor, offered 2005 Pétrus at a bargain, failed to realise. Having compared the going rate on www.wine-searcher.com and found his quote was £2,500 less than the lowest listed price, he called the company offering the wine. ‘A client going through a messy divorce needs to sell,’ he was told. Foolishly, he wrote the cheque; no surprise that there was no 2005 Pétrus available.
Many of the dubious wine investment companies rely on cold calls. I’m always amazed how readily some people are prepared to write large cheques – often up to six figures – buying wines from companies about whom they know virtually nothing.
It is particularly surprising since it has never been easier to check out a company on the internet before buying from them. In the UK, Companies House (www.companieshouse. gov.uk) is an obvious starting point. Apart from basic information, all other company documents – accounts, annual returns etc – are now all available online, for £1 an item.
Don’t be fooled
It can be instructive to compare information from Companies House with claims on a company’s website. Here are some examples: ‘Templar Vintners is one of the leading fine and rare wine merchants.’ The company in question only started trading in autumn 2009. Or this quote from Fine Wine Vintners Ltd and Global Fine Wine Ltd: ‘As one of the UK’s leading fine wine traders, we are ideally positioned to assist clients to identify and acquire wines with the greatest potential to appreciate.’
Fine Wine Vintners was incorporated in June 2009 and Global Fine Wine in August 2009. The quote is actually identical to that on the website of Bordeaux Index, one of UK’s largest fine wine brokers, which threatened immediate legal action; the offending website was amended.
I was recently told by a police officer involved in some of the investigations: ‘Unfortunately I cannot take on all the suspected wine investment scams as there appear to be too many.’ It is encouraging to see that a number of police forces, including those in London and Hertfordshire, now appear to be taking economic crime more seriously, but fraud investigations and subsequent trials are time-consuming and expensive.
Most people who order 2009 en primeur, especially if they deal with wellestablished
merchants, will receive their wines in due course. But as 2009 is a heavily hyped vintage, I fear there will be a number who will be disappointed and find that certificates of ownership have no value if the merchant, who may have placed an order with a négociant, has
failed to pass on your funds.
It would be wrong to suggest that all companies offering en primeur which subsequently go bust are set up specifically to defraud. Clearly some are. But firms such as Uvine (bust in 2006) and The Cellaret (bust in 2007) look to have been set up as legitimate companies. Sadly, when they got into financial difficulties, they used en primeur cash to shore up the company instead of passing it on. Because there are a number of links in the en primeur chain, there are several risks, including the possibility of a négociant going bust or overselling a wine.
Check whether your merchant insists on the négociant providing a French bank guarantee, so funds are secure. And ensure your wine comes direct from the château to the bonded warehouse – you don’t want your merchant sourcing wine on the secondary market when the case may have travelled around the world (see overleaf).
Should everything go wrong – a firm disappears with your cash leaving you with no prospect of receiving your wine – there may be other avenues to explore. The fraud insolvency division of chartered accountant Grant Thorton is one possibility.
(This is the company that investigated the 2006 collapse of Mayfair Cellars Ltd, due to embezzlement by an employee.) This division focuses on recovering funds for victims of fraud, unlike a criminal investigation that aims to secure a conviction. Some cases are taken on a no recovery, no fee basis.
My advice is to buy en primeur only from well-established companies with a track record. Even here you should check their financial health before placing your order. It is also likely that, if, as anticipated, there is huge demand for the top 2009s, long-established merchants are likely to have a better chance of securing allocations than new entrants.