Just watched the Sour Grapes documentary this afternoon. Interesting.
I’ve not read this entire nearly 200 page thread, so not sure what the latest is. Is “Rudy” still believed to be active in wine fraud?
Alleged fraudsters indicted by pun-loving EDNY AUSA:
United Kingdom Citizens Indicted in Brooklyn Federal Court for Multi-Million Dollar Loan Scheme
The Defendants Allegedly Caused Investors to Invest over $99 Million in Sham Loans Purportedly Collateralized by Valuable Bottles of Wine
Thanks Dave. Yes, this is a case I’ve been aware of since 2019 and have worked a little bit with the FBI on. While you couldn’t tell that from the press release or the indictment, Bordeaux Cellars actually began operating about a decade ago and started making collateralized wine loans by no later than 2011. Both of the principals, Stephen Burton and James Wellesley, are previously-convicted felons and both fled (or tried to flee) the UK trying to avoid arrest in connection with this scam. It was also the subject of a prior large class action civil lawsuit in the UK – the outcome of which I am unclear about.
More to come on this later …
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ANOTHER MAJOR WINE PONZI SCHEME EXPOSED – BORDEAUX CELLARS
As many of you may have seen from the recent news reports, two UK citizens, Stephen Burton and James Wellesley (whose real name is Andrew James Fuller), were indicted by the Justice Department on February 28, 2022, in the Eastern District of New York, and are charged with multiple counts of wire fraud, conspiracy to commit wire fraud and money laundering relating to the operation of Bordeaux Cellars (London), Ltd, a UK corporation and Bordeaux Cellars, Limited, a Hong Kong corporation. Bordeaux Cellars claimed to be in the wine brokerage business.
As the indictment explains, which you can find here, https://www.justice.gov/usao-edny/press-release/file/1478851/download, Bordeaux Cellars operated a Ponzi scheme. The story behind Bordeaux Cellars is a pretty extensive and sordid one. The indictment provides a bare bones description of Bordeaux Cellars and its principals. The information below goes well beyond what is included in the indictment. I have been investigating this, and working silently in the background, since early 2020.
While the indictment refers to the Ponzi scheme operating from June 2017 through February 2019, according to a detailed written report prepared by the German accounting firm Otto Geisel in March of 2014, Bordeaux Cellars “was founded in 2009 by Mr Stephen Burton, Mr James Anderson [i.e. Andrew James Fuller, a/k/a “James Wellesley”] and Mr Paul Miller and was originally built up as a trading company. BC [Bordeaux Cellars] acts as a broker for wine loans since September 2011.” (See the chart at the end).
Bordeaux Cellars made loans to wine collectors at high interest rates (15%). The loans were allegedly collateralized by high value wines from a designated eligible wine list (mostly first growth Bordeaux and high end burgundies). The loans made allegedly represented a maximum 35% of the appraised value of the collateral (later changed to up to 45%). The wines accepted as collateral were allegedly placed in storage in London-area storage facilities under Bordeaux Cellars’ control: Big Yellow warehouse for wines not in bond storage and Octavian for wines stored under bond. A 2014 article in the Financial Times stated that Stephen Burton was seeking to expand his successful business and was seeking new storage facilities in Geneva to store the wines of European wine loan customers.
Bordeaux Cellars funded their loans by selling them to investors at very high interest rates (12%). The investors received loan paperwork prepared by a UK attorney and a schedule of the wines supposedly collateralizing the loans that they were purchasing. Investors were promised quarterly interest payments. For a number of years, interest payments were made utilizing funds obtained from other investors as part of the Ponzi scheme.
Stephen Burton very actively promoted his program of collateralized lending to wine collectors and the investment community. The investment opportunities were presented both through investor presentations/seminars conducted around the world and on television. Stephen Burton’s Bordeaux Cellars was featured on CNBC in March of 2013. See https://www.cnbc.com/video/2013/03/01/dough-for-merlot.html (There is also a related written story on the CNBC website: Need Money? Score Big Cash for Fine Wine
As explained in the CNBC video, Burton claimed that he began making collateralized wine loans because banks were not lending money and wine collectors were unable to obtain loans from the banks. Burton offered term loans of 12 to 18 months at 15% interest and offered 12% returns to the “investors” for making the loans. Burton claimed he had a significant number of investors providing funds from Singapore, Hong Kong and Japan because those countries offered negligible interest rates. Burton claimed that he had made more than 200 loans for more than $30 million and never experienced a default.
It doesn’t take a rocket scientist to figure out that there’s no way to run this purported loan business on a 3% gross ratio, but apparently many gullible people bought it. There were even companies who invested, including a Delaware-based wine investment fund named SMPI Bordeaux SPV3 LLC, Strategic Bank International Corp., of Puerto Rico, and Agricultural Land Corporation, of the Cayman Islands.
The Ponzi scheme started unraveling in 2018. According to one of the witnesses from the wine trade that I spoke with in the UK, in late 2018 Stephen Burton showed up at the Octavian storage facilities and used a credit card to pay the duty and VAT on the wines stored in bond there and then took every bottle stored there. He also cleaned out every bottle stored at Big Yellow warehouse.
As the indictment makes clear, most of the loans were fake and the claimed wines collateralizing the loans for the most part did not exist. The money collected from the “investors” went to pay interest to earlier investors, or into the pockets of the principals. According to the indictment, from June of 2017 through February of 2019, Bordeaux Cellars and its principals “induced investors to invest in excess of approximately $99.4 million into Term Loans.”
A class action lawsuit was filed in the UK entitled SMPI Bordeaux SPV3 LLC and others v. Stephen Burton and others, High Court case number CL-2019-000172, which as of June 2020 included 133 plaintiffs. That lawsuit alleged that the 133 plaintiffs suffered damages in excess of 56.7 million Pounds (or $75.41 million in today’s dollars).
The Principals of Bordeaux Cellars
Stephen Burton
Stephen Burton, whose aliases include “Andrew Pittman,” “Robert Allison” and “Derek Campbell”, was the founder and Chief Executive Officer of Bordeaux Cellars. Both Burton and Janes Wellesley resided in Tunbridge Wells (Kent) in the UK.
Stephen Burton’s photos from his former website:
On February 14, 2019, the police went to a hotel in Kent England on a tip that Stephen Burton was there – for whom they apparently had arrest warrants. When they got there they found him – along with two fake passports, and almost a million pounds worth of currency, gold bars, Kruggerands and some high end collector watches. https://www.kentlive.news/news/kent-new … nd-3294848. Burton was charged with counts for money laundering and the fake passports, plead guilty to both, and was sentenced to four years in prison for those crimes on September 6, 2019.
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Stephen Burton’s booking photo from his arrest in Kent on February 14, 2019
At some point in the fall of 2020, after the FBI had commenced an active investigation and was cooperating with the Serious Frauds Unit in the UK, Stephen Burton was released early from prison (apparently due to Covid) with no advance notice to the FBI. He immediately fled the country and has not been seen since. Stephen Burton is currently a fugitive and the FBI is requesting assistance to locate him. If you see or come in contact with Mr. Burton/Pittman/Allison/Campell, please contact me immediately, or notify the FBI by calling 1-800-CALL-FBI or by visiting tips.fbi.gov .
James Wellesley
James Wellesley, whose real name is Andrew James Fuller (his wife is named Fiona Fuller), of Tunbridge Wells (Kent) UK, was the Chief Financial Officer and Operations Manager of Bordeaux Cellars. Andrew James Fuller (better known as James Wellesley in connection with Bordeaux Cellars), also used the aliases “Andrew Templar” and “James Anderson.” According to one knowledgeable wine industry member I spoke to in the UK, Wellesley, while residing in Singapore in 2009-2012, began participating in Bordeaux Cellars under the alias “James Anderson.”
Andrew James Fuller was convicted in the UK in 2013 for defrauding a British bank out of 3.5 million Pounds ($4.65 million). Fuller obtained a £5.7 million loan from a UK bank, which was to be used to redevelop a piece of property into 18 luxury flats/condominiums. The project got into trouble, and Fuller absconded with £3.5 million of the loan proceeds and fled the country. He went to Singapore using a fake passport identifying him as “Andrew Templar.” He continued to live in Singapore, and apparently began participating in Bordeaux Cellars using the alias “James Anderson” in 2009.
Fuller was caught sneaking back to England to visit his wife Fiona Fuller at a home they owned in Bath in 2012. He was arrested, charged, and pled guilty. Property developer conned bank out of £3million to fund nights in luxury hotels and extravagant shopping trips | Daily Mail Online
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Andrew James Fuller booking photo from 2012
Fuller was sentenced to six years and three months in prison. According to the same UK trade witness, Fuller was released early from prison in 2016, and resumed working for Bordeaux Cellars at that time as its CFO and Operations Manager under the alias “James Wellesley.”
In late 2018 or early 2019, after the Ponzi scheme collapsed, Fuller/Wellesley once again fled the UK fearing imminent arrest. He was arrested on February 4, 2022 (I do not currently know the details) and is now awaiting extradition to the United States.
Dominic Shelly
A third listed partner, according to the March 2014 Otto Geisel Report, was Dominic Shelly. According to the report, Mr. Shelly was principally involved in obtaining the capital needed to operate the business from investors. At that time he also oversaw logistics and ran the company when Stephen Burton was abroad. (As explained above, from 2009 to 2012, “James Anderson” a/k/a James Wellesley and in reality Andrew James Fuller, was apparently living in Singapore, where he had fled to avoid arrest in 2009.) Mr. Shelly’s name disappeared as a listed director of the Bordeaux Cellars entities after 2015.
Burton Is Now Trying to Point the Finger at Andrew James Fuller (a/k/a “James Wellesley”
While Stephen Burton was in prison in the UK in June of 2020 he was forced to testify in connection with the SMPI Bordeaux SPV3 LLC v Burton et al lawsuit. According to an article published by Law 360 on June 17, 2020, Burton filed a written defense with the High Court on June 12, 2020 and testified in Court thereafter.
In the written defense, according to Law 360, Burton’s attorney stated that: “Mr. Burton’s involvement was as the figurehead of the business in light of his knowledge of the wine industry, but he relied on and acted upon Mr. Wellesley’s instruction in other respects.”
“Burton argued that Wellesley introduced him to the concept of wine brokering in the first place. Wellesley drew up the contracts and marketing materials and oversaw how money was paid in and out of the business.”
The article continues, explaining:
- “Burton said in court documents that his signature appears on the company’s loan documents only because Wellesley told him to sign it or - in some cases - signed it on his behalf. At no point did he believe the documents were untrue, or that any representations made by Wellesley or other people promoting the loans were false, Burton claims.
He also admitted to pitching the idea to investors in the Mexican city of Cancun. But he said that his remarks were entirely scripted by Wellesley, except for information on the wines. He knew that investors’ money was being spent on gold, wine and - in some instances - himself, Burton said. But he claims he was told that investors were happy with the situation if their interest payments kept coming in.”
A few months after this testimony was given, Burton was released from prison due to Covid and fled the country. Stephen Burton is currently a fugitive and the FBI is requesting assistance to locate him. If you see or come in contact with Stephen Burton or any of his aliases – “Andrew Pittman,” “Robert Allison” and “Derek Campbell”, please contact me immediately, or notify the FBI by calling 1-800-CALL-FBI or by visiting tips.fbi.gov.
THE KNOWN LIST OF ENTITIES RELATING TO BORDEAUX CELLARS LONDON:
• ABM Partners, Ltd. incorporated Feb 11, 2011 and dissolved December 12, 2017. ABM Partners operated under the name “Bordeaux Cellars.” Bankruptcy was filed in 2018. ABM PARTNERS LTD overview - Find and update company information - GOV.UK
• Bordeaux Cellars (Management), Ltd. was incorporated Feb 21, 2011. https://opencorporates.com/companies/gb/07536344 The entity was initially registered as ABM Management Ltd and changed its name to Bordeaux Cellars (Management) Ltd. in late 2011. One website claims that ABM Management Ltd was dissolved in 2017. Stephen Burton was listed as sole owner and director on a couple of websites.
• Bordeaux Cellars Limited (Hong Kong) – incorporated March 7, 2011 and apparently still in existence.
• Bordeaux Cellars (London) Ltd. (incorporated Feb 20, 2017; still in existence but no person in control of company) https://opencorporates.com/companies/gb/10627391 This entity was apparently formed when they dissolved Bordeaux Cellars (Management) Ltd. (a/k/a ABM Management in 2017). Stephen Burton was the listed director
These additional related entities were located at the same office:
• Bordeaux Cellars (Brokers) Ltd. (incorporated July 31, 2012; dissolved March 24, 2015). https://opencorporates.com/companies/gb/08162815 This entity had an additional director – David Sodey
• Bordeaux Cellars (Nominees) Ltd. (incorporated March 10, 2011, dissolved Aug 20, 2013) https://opencorporates.com/companies/gb/07559777 Burton was the director here
• Hanover Trust Corporation Ltd. Hanover Trust Corporation Ltd · Bordeaux Cellars, 52 Berkeley Square, London, W1J 5BT, ENGLAND
• Hanover Property Finance, Ltd. Hanover Property Finance Ltd · Bordeaux Cellars, 52 Berkeley Square, London, W1J 5BT, ENGLAND (dissolved in 2017)
• Bordeaux Cellars Bond 1 PLC (dissolved in 2016) BORDEAUX CELLARS BOND 1 PLC - company is dissolved. This is historic information.
• A series of six limited partnerships, which were referred to Bordeaux Cellars Syndicate No. 1, LP through Bordeaux Cellars Syndicate No. 6, LP. All were created on March 16, 2011 and all were dissolved on September 16, 2014.
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Thanks Don for all this information. It’s really interesting reading. Call me pessimistic, but I think any “investment opportunity” involving wine is primarily a scam.
A tired quote, but whoever said “Crime doesn’t pay”. A million pounds in Krugerrand, watches, etc and he gets less than 4 years? No wonder there is little deterrent for illegal schemes in the fine wine business.
So if I understand this BC scam, it was this:
- Claim to have people who want to borrow money at high interest rates of 15%. These borrowers, for unknown reasons, cannot resort to normal lending and, for other unknown reason, have access to incredibly valuable wine that they are willing to pledge/pawn as collateral for these loans (rather than just selling the wine???).
- Convince “investors” that they will make 12% if they fund these loans. BC will take a 3% cut to store the wines and move the money around and, presumably, liquidate the collateral wines if the borrower defaults.
- No one is actually borrowing money at these rates (duh!), so use the funds of the investors to a) purchase wines to store as collateral (gotta have wines in storage to show the investors!), b) pay back earlier investors (the Ponzi part), and c) fund the fraudster’s lavish lifestyle.
Do I have this correct? If so, it’s amazing to me that there are people dumb enough to believe the premise in step 1 such that they participate in step 2! Who in the world with that kind of wine would not be able to borrow money at normal market rates? And if they really can’t, why wouldn’t they just sell their wines? Even amazing wines surely don’t appreciate at 15% per annum (present market conditions not withstanding), such that this would be an attractive source of short term liquidity!
A fool and his money are soon parted, I guess.
The “fools” here parted with $99.4 million in a period of less than two years (June 2017 - Feb 2019). It is ironic that the people who “invested” have filed a big class action suit and pushed hard to get the FBI to investigate this matter.
A civil plaintiff claiming fraud has to prove “reasonable reliance” on the fraudulent promise. The parties here relied on the promise, but as you say, it certainly doesn’t appear to be “reasonable” under the circumstances.
$99.4 MILLION!!!
Peter Hellman, the Wine Spectator Journalist who wrote many stories about Rudy Kurniawan, released a story in Wine Spectator today providing details about how the Ponzi scheme was operated, including a series of offshore entities to mask the “investments,” and the investor presentations that were made. How Two Men Allegedly Duped Investors with a Tale of Rare Wines | Wine Spectator Definitely worth a read.
I’ve been trying to look into some of the records from the UK litigation that were filed with the High Court in the UK. One interesting wrinkle that I had not seen before was that Andrew James Fuller (a/k/a James Wellesley, Andrew Templar and James Anderson) previously worked as a law clerk at the office of U.K. Solicitor (U.K. attorneys are classified into two groups, Solicitors and Barristers) and embezzled client funds. According to the “Amended Particulars” of the Complaint for which a default judgment was granted in the UK,
- On 8 September 1997, Mr Wellesley (under the name Andrew Fuller) was found
by the Solicitors’ Disciplinary Tribunal (“SDT”) to be guilty of “abus[ing] the trust
placed in him by his employers” in committing the “cynical and calculated theft of
clients’ funds”. The facts as contained within the SDT’s findings are, in
summary, that between 1989 and 1995 whilst employed as a solicitors’ clerk, Mr
Wellesley made improper withdrawals from client accounts totalling £127,212.65
and paid the funds into various bank and building society accounts held in his
own name and/or the name of his wife. The SOT ordered that Mr Wellesley was
not to be employed in connection with the practice of a solicitor in future without
the permission of the Law Society, and made an order for costs against him in
the fixed sum of £2,755.20
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How on earth could someone working as a solicitor’s clerk (by which I assume they mean he was not yet fully licensed) could have control over £127,000 in client funds? I wonder if the supervising solicitor was disciplined.
John:
I think the term “clerk” is more generic. Fuller was likely a trusted staff employee of the law firm who had access to the law firm’s client trust accounts for some reason. He was someone who appeared knowledgeable and competent from an accounting/bookkeeping perspective, but who embezzled the funds. (The usual story for embezzlements – it’s often the trusted bookkeeper or secretary). But what caught my eye is the fact that the thefts from the trust account extended over a six year period before this was detected.
Then there is the even bigger mystery of how does someone who has been caught embezzling £127,000 in client funds, and was officially found responsible by some UK regulatory body, end up obtaining a real estate loan for £5.7 million?? Was the embezzlement of client funds not in a public record which a UK bank could see? Clearly, there are a lot of hard to explain factual coincidences here.
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Wine Spectator just posted an article about the scam mentioned above - probably got the idea from Don’s super-sleuthing, first-to-announce breaking news in this thread!~
This story is still fascinating even after all these years. I can remember the one photo (I was standing near Mel when he took it.)that keeps circulating with Rudy and Manfred Krankl posing at HDR. When the SQN lot came up for bids he put up his paddle and never took it down. I also remember Rudy drove right up to the picnic tables in his Escalade. Don’t know how he got onto the grounds.
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CRIMINAL CHARGES BROUGHT IN NORTHERN DISTRICT OF OHIO IN CHARLES-WINN LLC CASE
On June 14, 2022, the US Department of Justice filed criminal charges against a UK citizen named Casey Alexander, and charged him with one count attempted wire fraud in connection with the Charles Winn LLC wine investment scam that described in my December 2021 post (see copy below). The complaint in United States v. Alexander, , Case No. 1:22-mj-3155, was filed the US District Court for the Northern District of Ohio in Cleveland. The complaint alleges that that the previously-described cold-calling investment scheme primarily targeted elderly US investors The complaint alleges that 150 US investors were victimized resulting in monetary losses of $13 million. Not a single investor has received the return of any portion of their “investments.”
The investors were solicited to purchase wines or whiskey through three different Delaware LLCs – Charles Winn, LLC, Windsor Jones LLC, and for whiskey investments – Vintage Whisky Casks, LLC. The victims were initially contacted by cold-calling, followed up by aggressive emails and further phone calls. With one exception described below, none of the victims ever met with anyone from any of the three companies. While each of the companies claimed a Delaware office address, there were no such offices. Two of the claimed addresses were virtual offices operated by a third party, who opened mail, scanned it, and forwarded it to an email address for the company. The call recipients were allegedly promised 30% to 40% annual returns on their investments which would be used to purchase allegedly rare wine and cask whiskey that was allegedly stored in the UK. The phone solicitations claimed that the companies would receive a 10% of the net profit from the eventual sale of the wine or whiskey in question and no compensation in the event that the wine or whiskey was sold at a loss. The cold callers with English accents utilized multiple aliases such as as Eilliot Stewart, Robert Wilson, Sebastian Renner or Michael Phelps to make the phone calls. The victims reported being contacted by the same people (e.g. “Elliot Stewart”) despite the fact that the contacts were made on behalf of three different companies. Most of the phone calls were made from phone numbers with Delaware area codes.
In or about May of 2020 the FBI secured the cooperation of a witness employed at one of the virtual offices, who began supplying information to the FBI. The witness confirmed that no one from any of the companies visited the virtual office location at any point. The witness began forwarding copies of checks received in the mail to the FBI, who in turn contacted victims and informed them about the scam. Many victims stopped payment on their checks and the criminal complaint alleges that $466,200 in check payments were stopped. After one of the victims located in Phoenix Arizona stopped payment on a $100,000 check, the defendant, Casey Alexander, came to visit the victim in Phoenix. The victim referred Casey to an alleged “friend” of his located in the Northern District of Ohio who was interested in a similar cask whiskey investment. This “friend” was in fact an individual who had been previously-charged and convicted of securities fraud, who had agreed to cooperate with law enforcement in hopes of reducing his sentence.
In or about April of 2022, the FBI’s criminal informant paid $7,000 to purchase 2017 Blue Hill (Craigellachie) whiskey from Vintage Whisky Casks, LLC. The criminal informant indicated his interest in making a “large-scale” investment in cask whiskey. The criminal informant was contacted by a person identifying himself as “Eiliot Stewart” who arranged to meet with the informant in Cleveland to discuss the investment. On May 18, 2022, defendant Casey Alexander met with the informant in Cleveland. The following day, Alexander was arrested by the FBI.
I anticipate that, at some point, there will be a superseding indictment which will add additional criminal charges to the complaint.
Here, I will offer some editorial comment. The claims of 30% to 40% annual returns are so preposterous on their face that it is difficult to believe that anyone could have believed the claims that were made. This was not a Ponzi scheme and there were no people out there attesting that they had received the promised returns. In the case of Charles Winn, there were six sets of state cease and desist orders labeling the company’s operations as fraudulent. A quick check of the company name on the internet at any point in 2021 would have revealed the claims were fraudulent.
Don, I would typically agree with your comment about people falling for this. That’s before I started dealing with my 92-year-old MIL and one of her neighbors. The neighbor fell for a phone scam that bilked her out of $6,000, thinking she could make some extra money for a grandchild. She’s not going to see that money again.
Then my MIL almost fell for something similar until my wife stepped in and stopped it.
Preying on the elderly can be low-hanging fruit unfortunately. There’s a large population of them that become lazy thinkers as they get older. There should be a special circumstances provision to fraud laws that add on punishment when targeting the elderly.
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My mother now has me to watch all her finances. Everything is tracked, documented, and explained.
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Does she know how much wine she’s buying? ![[rofl.gif]](/uploads/db3686/original/2X/a/a7452fcd8e675af869f8da01174474a545b03944.gif "rofl"){kind=small}
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A good point John. I suspect that there is sentencing enhancement for preying upon the elderly (a category I’m either in or about to join).
In the federal sentencing guidelines, there is no specific enhancement for elderly victims, but 3A1.1 allows for an adjustment when a defendant targets “vulnerable victims,” which many prosecutors and courts have interpreted to include the elderly.