Berkeley Wine Shop Owner Sentenced To Six And A Half Years In Prison For Running Wine Ponzi Scheme
SAN FRANCISCO – John E. Fox, the former owner of Premier Cru, a now-bankrupt wine shop based in Berkeley, has been sentence to 78 months in prison for wire fraud, announced United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. The sentence follows a guilty plea entered August 11, 2016, in which Fox admitted to using his wine shop to run a multi-million-dollar wine Ponzi scheme.
Fox, 66, of Concord, Calif., co-founded Premier Cru in 1980, and eventually moved it to University Avenue in Berkeley. In his plea agreement, Fox acknowledged that, beginning in the 1990s, he orchestrated a massive scheme to defraud customers of the business.
As part of his plea agreement, Fox admitted that, in many instances, he falsified purchase orders for wine he had never contracted to purchase, entered the phantom wine into Premier Cru’s inventory for sale, and then sold or caused Premier Cru’s salespeople to sell the phantom wine. He also acknowledged that, between 2010 and 2015, he sold or attempted to sell approximately $20 million worth of phantom wine that he had never actually purchased prior to entering them onto Premier Cru’s inventory.
In addition, in instances where Fox actually did contract with foreign suppliers on behalf of Premier Cru to purchase wine, he generally promised to pay the foreign suppliers within 30 days. Fox admitted that he knew Premier Cru would not be able to make payment within 30 days, or in some cases, ever, because he embezzled money from Premier Cru’s business accounts and diverted money coming in from current customers to obtain wine for prior customers who had never received their wine.
According to the plea agreement, Fox embezzled funds from the Premier Cru accounts by both using Premier Cru’s business account to make payments for personal expenses and by making substantial cash transfers from the Premier Cru business accounts to personal accounts in his own name and in fake names. Fox used the embezzled funds to pay for personal credit cards; memberships to private golf clubs; the purchase or lease of expensive cars including Corvettes, Ferraris, a Maserati, and various Mercedes-Benzes; and a variety of additional personal expenses, including more than $900,000 on women he met online.
Premier Cru eventually filed for bankruptcy under Chapter 7 of the Bankruptcy Code. At the time of Premier Cru’s bankruptcy, customers were owed approximately $45 million for wine that they had not received. On June 28, 2016, Fox was charged with a single count of wire fraud in violation of 18 U.S.C. § 1343. Pursuant to his plea agreement, he pleaded guilty to the charge.
The sentence was handed down by the Honorable James Donato, U.S. District Judge. In sentencing Fox, Judge Donato referred to Fox’s conduct as, “a long running empire of deception.” In addition to the prison term, Judge Donato ordered Fox to serve three years of supervised release. He also found that restitution would be ordered, and scheduled a hearing on Wednesday, January 18, 2017, at 10:30 a.m., to determine a specific restitution amount. Fox is in custody and will begin serving his sentence immediately.
Assistant U.S. Attorney Benjamin Kingsley is prosecuting the case with the assistance of Bridget Kilkenny. The prosecution is the result of an investigation by the Federal Bureau of Investigation.