Premier Cru warning

[Lindsay E.]

Sorry to bring this thread back from the dead...

I attended back-to-back dinner events tonight and ended up eating way too much food. I turned on my TV while I was beached on my couch waiting to digest my food enough to go to sleep. Lo an behold, CNBC channel's American Greed was on and airing a story on John Fox/Premier Cru. Many juicy detail were revealed! I probably won't surprise anyone that a guy who ripped off 70 million from customers had multiple exotic cars, a 2.3 million dollar house, 2 expensive golf memberships and a trophy wife 20 years his junior and a kid in private college. What might be surprising to some is that John Fox allegedly spent 1 million dollars on online dating sights that helped link up sugar daddies with young college aged gold diggers. Once linked up with these women, Fox would spend tens to hundreds of thousands of dollars to help pay the women's college tuition bills and fund their lifestyles. Most surprisingly, John Fox was being extorted for several years by one of these young women to the eventual tune of $200k. The female extortionist eventually called Fox's daughter at college and spilled the beans about her dad's infidelities. Its nice to know Fox was getting a dose of his own medicine on some level. However, 6 years in prison is not nearly a harsh enough penalty for Fox's crime.

The way I see it, we have such light sentences for fraud in this country that we are almost incentivizing people to attempt fraud.

The show is American Greed, Season 11, episode 16. You can watch a preview of the episode and get additional info at cnbc.com/american-greed

-Lindsay

[Roy Hersh]

Fox sentenced to 6 1/2 years in jail followed by 3 years of Supervised Release.

I would suppose this would be prison and not jail.

[Moses Botbol]

6 year for such a fraud and all the harm he caused seems like a light sentence.

[Lindsay E.]

The episode of "American Greed" featuring Premier Cru is rerunning tonight at 10pm on CNBC channel for those that have cable and are interested.

-Lindsay

[Eric Menchen]

Well, I still lost out on Premier Cru, but got a second check in the mail last week from them. Apparently they sent out first checks, and if people didn't cash them promptly, the remaining funds were distributed to those that did.

[Moses Botbol]

Well, I still lost out on Premier Cru, but got a second check in the mail last week from them. Apparently they sent out first checks, and if people didn't cash them promptly, the remaining funds were distributed to those that did.

If were to get a check from them, I'd be racing to bank as soon as envelop was opened!

[Eric Menchen]

If were to get a check from them, I'd be racing to bank as soon as envelop was opened!

To clarify, this was from the bankruptcy proceeding trustee; but still, I did the mobile phone deposit immediately.

[Andy Velebil]

Well, I still lost out on Premier Cru, but got a second check in the mail last week from them. Apparently they sent out first checks, and if people didn't cash them promptly, the remaining funds were distributed to those that did.

I'm Sure it didn't cover your losses but I guess something is better than nothing.


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[Tom Archer]

In the aftermath of Premier Cru has anything been learned? Has anything changed?

I have a big issue with professional wine storage companies who advertise that they are 'fully insured' - because they are not.

On two fundamental counts, most if not all fail:

1) Their insurance only covers minor day to day mishaps - they have no cover for a calamitous physical loss. The commercial rate for such cover is typically around 0.3% of replacement value - so the company charging £10 a year to store a case worth £5000 cannot be fully insured, as the insurance alone would cost £15.

2) They do not have fidelity cover - that is, they are not insured against insider fraud. The cost of this is harder to estimate, but had Premier Cru had fidelity cover, everyone would have got their money back..

[Andy Velebil]

In the aftermath of Premier Cru has anything been learned? Has anything changed?

I have a big issue with professional wine storage companies who advertise that they are 'fully insured' - because they are not.

On two fundamental counts, most if not all fail:

1) Their insurance only covers minor day to day mishaps - they have no cover for a calamitous physical loss. The commercial rate for such cover is typically around 0.3% of replacement value - so the company charging £10 a year to store a case worth £5000 cannot be fully insured, as the insurance alone would cost £15.

2) They do not have fidelity cover - that is, they are not insured against insider fraud. The cost of this is harder to estimate, but had Premier Cru had fidelity cover, everyone would have got their money back..

Nothing will change. Just like counterfeiters. Because wine people love a good deal and must have that special bottle even when common sense is trying to tell them otherwise.

[Glenn E.]

1) Their insurance only covers minor day to day mishaps - they have no cover for a calamitous physical loss. The commercial rate for such cover is typically around 0.3% of replacement value - so the company charging £10 a year to store a case worth £5000 cannot be fully insured, as the insurance alone would cost £15.

I agree with what you're saying, but in the case of this point they can't really ever be fully insured. At least some off-site storage places have no idea what they're actually storing; they're just providing the location and controlled conditions. Since I have access to come and go as I please, and can bring in new bottles or take away old ones any time, they'd never know how much insurance to get.

Something like Seckford's is a different story, though, at least as I understand it.

[Tom Archer]

I agree with what you're saying, but in the case of this point they can't really ever be fully insured. At least some off-site storage places have no idea what they're actually storing; they're just providing the location and controlled conditions. Since I have access to come and go as I please, and can bring in new bottles or take away old ones any time, they'd never know how much insurance to get.

The fact that storage companies never ask customers to declare the value of their stock evidences the lack of proper insurance.

My big beef with this is that virtually every storage company boasts full insurance cover, whilst leaving very significant caveats buried deep in their T&Cs.

Most customers believe the insurance offered does not necessitate further cover, yet this is simply not the case. Most home insurance companies understand that customers sometimes have goods stored away from their main address, and either allow for this to be included in the insured amount within the policy wording, or will add an endorsement to the policy noting the location and value of goods kept at a second address.

This is a fairly straightforward process, the only problem that could arise is that they may exclude theft that does not follow 'forcible and violent entry' - so the fidelity element may be hard to cover..

[Moses Botbol]

Wine storage companies shouldn't promote that your wines are insured, but instead let customers buy insurance based on their inventory or perceived risk from vendors they've worked out competitive rates from. Just like a landlord does not have insurance on a renter's belongings...

[Eric Menchen]

I have a separate insurance policy for my wine. I believe it covers offsite storage (which I don't use, so I'm not 100% sure on this). I do know it covers my wine in transit. But yes, an inside job might not be covered. I did have to send the company an inventory, and come to think of it, I should probably update that.

[Eric Ifune]

Yes, wondering if theft or arson is covered. There's that famous case of the wine warehouse in Vallejo set afire by a wine industry con man who wanted to destroy evidence against him. Many retailers and wine producers stored their wine at that location and lost everything.

[Andy Velebil]

Yes, wondering if theft or arson is covered. There's that famous case of the wine warehouse in Vallejo set afire by a wine industry con man who wanted to destroy evidence against him. Many retailers and wine producers stored their wine at that location and lost everything.

IIRC, the issue with that he wasn't paying the insurance he supposedly provided with the storage of the wine producers wines. Hence, when he burned it there was no insurance to cover the loss. Even if he did, I am not sure it would have covered it anyways as self-arson can be a policy disqualifier (disclaimer I have no idea what he may or may not have had in his rider clause).

In California (and I assume elsewhere) it's kinda like auto insurance. You can buy it for your car even if you don't have a license. But the clause in it says if you crash and you're unlicensed you're not covered. So if he torched it himself that may cause a non-payout.

As for private offsite storage. As I store in offsite, I can tell you it is not insured by the storage location. You can get a special rider to your home owners insurance if you're lucky enough that your provider has it for wine and doesn't charge an arm and a leg for it (most I've heard about it's crazy expensive and generally not worth it....Chubb Insurance seems to be the exception).

[Tom Archer]

So if he torched it himself that may cause a non-payout.

Most insurance policies have a standard wording excluding 'any wilful or deliberate act'

[Eric Ifune]

IIRC, the issue with that he wasn't paying the insurance he supposedly provided with the storage of the wine producers wines. Hence, when he burned it there was no insurance to cover the loss. Even if he did, I am not sure it would have covered it anyways as self-arson can be a policy disqualifier (disclaimer I have no idea what he may or may not have had in his rider clause).

If I remember the story correctly, he was a con man, ala Premier Cru, selling wine he didn't own. He set the fire in this large warehouse where he and many other legitimate companies and wineries stored their wines. He wanted to destroy his stocks and records but took everyone else's wines with them. The other companies were the ones hurt. I remember because some of the last stocks of the 1875 Isaias Hellman "Port" and Angelica were destroyed as well. There was huge financial loss by the legitimate companies.

[Andy Velebil]

IIRC, the issue with that he wasn't paying the insurance he supposedly provided with the storage of the wine producers wines. Hence, when he burned it there was no insurance to cover the loss. Even if he did, I am not sure it would have covered it anyways as self-arson can be a policy disqualifier (disclaimer I have no idea what he may or may not have had in his rider clause).

If I remember the story correctly, he was a con man, ala Premier Cru, selling wine he didn't own. He set the fire in this large warehouse where he and many other legitimate companies and wineries stored their wines. He wanted to destroy his stocks and records but took everyone else's wines with them. The other companies were the ones hurt. I remember because some of the last stocks of the 1875 Isaias Hellman "Port" and Angelica were destroyed as well. There was huge financial loss by the legitimate companies.

Yes I recall that too. I was just responding to the insurance related question.


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[Houston Porter]

Tangled Vines: Greed, Murder, Obsession, and an Arsonist in the Vineyards of California by Frances Dinkelspiel

This is about the guy who set fire to the Vallejo wine warehouse. It's a fascinating story and a good read.