Premier Cru owner pleads guilty to $45 million fraud

John Fox, the owner of one California's biggest retailers Premier Cru, has turned himself in and admitted to scamming customers of over $45 million. An FBI investigation has uncovered years of embezzlement and fraud leading to thousands of customers left out of pocket...

In January, Decanter.com reported the bankruptcy of Californian retail giant, Premier Cru. The company folded with debts of over $70 million, with just $7 million in assets – leaving thousands of unsecured creditors, as well as customers, out of pocket.

California’s Premier Cru wine retailer files for bankruptcy

Now it has been revealed that the company was not only crumbling, but also corrupt. On August 11 the owner of Premier Cru, John Fox, admitted to scamming customers out at least $45 million. He faces over six years in federal prison, and will be forced to pay restitution to those affected.

In the words of the District Judge, Fox was running a ‘wine Ponzi scheme’, which involved feigning returns for old investors that were simply taken from new investors. He used fake names and multiple bank accounts to siphon cash out of the company.

John Fox cuts the ribbon at Premier Cru’s opening celebration. Credit: Premier Cru facebook

Fox was also running ‘pre-arrival’ sales schemes for wines he did not have, which meant customers were left waiting months – or even years – for wines they had already paid for.

An FBI investigation has brought to light that Fox was pocketing the payments from these fake sales to fund his extravagant lifestyle.

The San Francisco Chronicle reports Fox squandered his customers’ money on ‘fancy cars and a home in Alamo’, as well as almost $1 million on women he met online.

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Premier Cru was founded in 1980, with the aim of providing wealthy Californians with exclusive access to the fine wines of Bordeaux and Burgundy. It promoted the use of wine future trading; selling wine to customers before it had arrived in the US.

But this exclusive service left customers vulnerable to exploitation, as they were essentially paying for wines that Premier Cru did not yet own.

The prolonged success of Fox’s fraud appears to be down to how he managed to sustain the company’s opulent image.

In 2011, co-owners John Fox and Hector Ortega moved the business to an up-market new store – specially designed by a Berkeley architect and covering 29,000 square feet. The interior was fitted with wooden paneling, tapestries and featured a ‘rare wine room’ encased in glass.

Interior of Premier Cru’s Berkeley store, California. Credit: Premier Cru facebook

According to WineFraud.com, Premier Cru’s customers included some of the top financiers and tech magnates – including Adebayo Ongolesi, the lead director of Goldman Sachs, and Arthur Patterson, an early investor in Facebook.

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By hiding behind email campaigns and online sales, Premier Cru was able to keep up the pretence of plentiful stock and affluence – despite numerous lawsuits going on behind the scenes.

Fox will be sentenced at the San Francisco federal court on December 14.