Didn’t see any mention of PC selling fakes. Is there any evidence that Fox did that?
Interesting story nonetheless.
And I agree with others that the show went very light on Mr. Fox.
The orders were mostly mid- late 2012. I guess he was trying to fill a couple orders to satisfy some customers that were screaming the most. IMO
Put me in the basket of people who saved thousands because of all the naysayers on WB. I was always too afraid to pull the trigger, but came close on some pretty nutty deals. Thank you btw!
In their “reserve room” at their University Avenue retail location, there were a number of bottles of older BDX that were of highly dubious origin…
I am not sure fakes were ever a central part of it, but many years ago they did have large format 1945 Romanee Conti on offer (and at a time when others did too.) So I do think some Rodenstock and early Rudy material flowed through them (but I have no firm evidence to prove it), but not in a significant way- and certainly not in the deliberate manner in which it flowed through auction houses and many “private brokers”.
To address some of the earlier comments about whistleblowers getting trashed- sure there was some of that here, but in my experience it happened in all venues- in all the wine forums where I participated, and also in person talking with individuals I knew as fellow buyers at wine stores.
PC was once a viable and legitimate business serving a secondary market that had no online auction resources or winesearcher.com. 2004ish is when it began to look odd, 2009ish is when it became obvious things were completely wrong.
But there were naysayers right up to the end, including one idiot in particular on FB who ignored my warnings about a month before the lights went off.
I would also note that non-delivery is not the only issue. Heat damage and bottle condition also matter. For whatever reason, in many years of attending many offlines I have found that PC bottles have a higher degree of poor provenance- presumably (and I say presumably- no proof) to a need to cover orders with questionably sourced/stored stock as the markets turned against their ability to cover.
I don’t do offlines anymore with people whose collections are largely PC stock- and as an appraiser/referral advisor I will not handle such collections. And I am not alone.
A messy, messy business that was.
No fakes but no wines either. Lost over 2K on 3 orders. Never saw any wines and never got a penny back either.
In retrospect, it’s amazing that Rudy and Fox never connected. Would have been quite a match, particularly since PC often advertized onsies and twosies of rare wines. Rudy could have kept things flowing through there non-stop.
Yes to counterfeits.
I rejected some consigned for auction in 2002ish, and years later dealt with counterfeits he’d sold to a client of Chai Consulting. Def yes to counterfeits.
I think there needs to be a bit of a qualifier to what Maureen said in that clip. For many years, Fox WAS able to deliver the wine that customers ordered on pre-arrival, although the waiting time
kept getting extended. At least through the 1996 Bordeaux pre-arrivals, most people I knew were getting the wines they ordered.
But as time went on, that experience changed. Presumably PC/Fox got further underwater in orders received from customers versus orders actually placed by PC for the wine.
One thing the show didn’t really explore is what happened to the $70 million in unfulfilled orders vs. $7 million in inventory. It wasn’t all spent on online “dating” services…
Bruce
Agreed. One has to consider the possibility of untraceable ‘savings’ accounts, as, to me, he settled awfully quickly in the case. The money trail doesn’t settle up, and he’s serving a light sentence given the extent of the fraud.
I don’t think that was ever entirely clarified. But here’s a plausible scenario:
First, he was selling uncovered futures as early as 1982. I know because PC couldn’t deliver some '82 Bordeaux futures to a friend of mine in the mid-80s. (They offered him better wines in exchange.) As sales grew, Fox probably paid off old obligations from new sales, but if he had to cover in the post-release market, he was almost certainly losing money on those sales through the 80s and 90s. So even if he was managing to deliver orders through the late 1990s, you have to wonder if the business was solvent even then.
Then picture 2001 and 2002, when the California economy was in the tank because of the bursting of the dotcom bubble. Out-of-state sales weren’t what they are today, so that probably hurt sales of in-stock wines. Suppose he sold a lot of uncovered 2000 futures to compensate. As I recall, PC was very slow to deliver on 2000s. He’s accumulating liabilities for unfilled orders.
By the mid-2000s, the store had annual revenue of $20 million. He’s paying himself lavishly so he can afford the cars, girls and houses. And the store isn’t profitable because he’s selling wines well below the lowest possible price anywhere.
When you add overhead, Fox’s take, sales at very thin margins or below cost, plus cash outlays for purchases to cover back orders, it’s not hard to see how you get to a $60 million gap between assets and liabilities over, say, 15 years. That would be a $4 million increase in liabilities over assets each year on revenue of $20 million.
The American Greed episode had 3 key themes to the story of what brought the scheme down.
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His lavish lifestyle (cars, houses, golf club memberships) + Plowing $ into Seeking Arrangements + Being extorted by a former “conquest”.
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Recent weak vintages of Bordeaux never declined in price due to demand from Asia who didn’t care about scores… so when he tried to make good with clients he had to pay far more than he had charged… and when he couldn’t he started facing angry calls from screwed over Asian clients. Did the lawsuits even get mentioned?
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The run on the bank which they mostly attributed to the Haggler… I think WB had a lot more to do with it. The Haggler drove a # of PC clients to WB looking for advice.
What I would have liked to have heard was an elaboration on why the offers stopped. When the offers stopped revenue halted in tandem. My guess is he was already in conversations with his lawyer at this point and preparing to file for bankruptcy.
The detectives here starting digging up facts like his being in arrears in property taxes for his store, finding the lawsuits filed, and so on. Which further drove the run on the bank.
I would not be surprised if his story gets covered in a tell-all book at some point.
Sorry I missed it. Is it playing again?
Look for a rerun Saturday on CNBC.
I don’t think (2) above is right. It was the 09 and 10 Bordeaux vintages where prices shot up. He sold big quantities of those on futures, but he couldn’t sell futures on successive vintages – the new Ponzi money – to cover at least some of the 09 and 10 sales because the later vintages had poor reputations. I don’t think what sank him was losses covering on his sales of '11s and '12s.
What do you mean offers? You mean wine offerings shortly before the bankruptcy?
Thanks Steven
A couple of addenda to my post #32 above, from a Wine Spectator story about his arraignment in Aug. 2016. I hadn’t recalled that he admitted the Ponzi aspect went back to 1993 or 1994. My guess is that it may have gone earlier, but it may not have been a federal crime without the forged purchase invoices. (It sounds to me like his admission had to be framed in terms of acts that would constitute mail fraud.)
[In his plea agreement] Fox admitted scamming these customers in two ways. The first was to “falsif[y] purchase orders for wine that I had not contracted to purchase and enter them into Premier Cru’s inventory for sale.” Fox could then offer the wine on Premier Cru’s website below market price. > This practice began in 1993 or 1994> , according to Fox. From 2010 to 2015, customers paid approximately $20 million for these “phantom wines.” In his second scam, Fox said he “diverted money coming in from current customers to obtain wine for prior customers who had never received their wine.”
There’s more info here, too, about his spending:
Fox also admitted to using his company business accounts and credit card to pay personal expenses. These included home mortgage payments, his wife’s credit-card bills, his daughter’s college tuition, membership fees at two private golf clubs, and the “purchase or lease [of] expensive cars (including Corvettes, Ferraris, a Maserati and various Mercedes-Benzes).”
Fox also admitted to spending “more than $900,000 on women that I met online.” He paid them via PayPal.
Add in the business’s overhead and it’s not hard to see how the cumulative losses over two decades (1993-2015) led to a $60 million gap between PC’s inventory and the wines owed to customers.
My conjecture at the time was that all the chargebacks probably caused credit card processors to cut him off, which made raising more money via email offers unfeasible (the volume and prices offered on 14 Bordeaux and rare Burgundy were major signs of desperation). IIRC, a member here went so far as to order a mylar bag to see if they would process the charge, and they never did. There were also lots of rumors of out-the-back-door cash sales at the time.
Yes.