Prosecutor Ann Evans told the St. Albans Court, in north of London, how the gang took advantage of the wine sold as ‘en primeur’ where wine is bought while still in the barrels at the winery. It is then bottled and shipped to the UK where it is kept in bonded warehouses and does not attract VAT or excise duty. It is not released to the client immediately, who is issued with a Certificate of Purchase,’
‘The sales pitch to potential investors involved hard selling over the phone promising Premier Cru wine sold “en primeur”,’ Evans said, adding that ‘The beauty of this scam was that the investors were not expecting to see the goods they had purchased for some time.’
The three companies involved and charged in the scam are- Bordeaux Wine Trading Company, International Wine Commodities Ltd and Templar Vintners Ltd. Although the victims paid a total of £2.5m, these companies allegedly had only one £10,350 case of wine in stock. No other orders were reportedly placed with the négociants.
Instead the alleged conmen spent the money on luxury goods, including cars and designer watches. The main defendant, 37-year old Paul Craven ran the Bordeaux Wine Trading Company. He bought a BMW convertible for £20,600, spent over £16,000 on various items in Selfridges, a wine cooler for £1225, a sport Land Rover for £55,700, BMW sports convertible for his girlfriend for over £32, 000 as well as a Jacuzzi bath and bathroom TV, instead of paying the suppliers for the wine for his clients.
The scam first started appearing in 2008. The Bordeaux Wine Trading Company was already under investigation by the Economic Crime Unit of Hertfordshire police but it reappeared under a different name in north London using a different company name: First Growth Investments (FGI), according to a report by Decanter.
Jancis Robinson had also warned her readers on her blog in April, 2008 about the possible fraud and advised people to stay away from the company; a trifle late for those who were already trapped.
Paul Cravan, Niklaus Cashman and Oseghale Hayble, Directors of Bordeaux Wine trading Company ltd. were arrested in June 2008 and were charged in March 2009 with conspiracy to defraud and money laundering. Bendedict Hayble, director of International Wine Commodities Ltd. was arrested in October 2008 too, as reported in the investdrinks blog.
This is not the first time such scam has been discovered nor will it be the last. ‘Over the past couple of years several UK merchants that offered Bordeaux en primeur, have gone bust. These include The Cellaret (2007), Mayfair Cellars (2006) and PMH Wines (2007), according to investdrinks.org, the drink investigative site and as reported by Decanter. Their customers were horrified to discover that these merchants failed to pass on the monies to the négociants- the Bordeaux merchants who buy from the châteaux and sell further, thus acting as middlemen. Reportedly, the monies have either been used instead to prop up the business or for other purposes,’ said a report on the investdrinks.org website.
‘Since 1993 thousands of investors have been falling for a succession of drinks investment scams. Investors may well have paid out anywhere between £150 million to £200 million on dodgy drinks investments. These are almost invariably worth far less than the investor paid for them. Sometimes they are completely worthless. Unfortunately some 'reputable' drinks companies are prepared to supply these dodgy firms even though they are fully aware of their methods and know that the chances of investors making money from these dodgy deals is as likely as seeing pigs flying,’ says Jim Budd who is one of UK’s most respected journalists sniffing wine scams, on his website www.investdrinks.org. and likes to snip the devil in the budd.
One of the major reasons he gives for such scams is that Drinks investments are often not covered under the investment and financial regulators. In Britain, anyone can set up this business without the need to satisfy the authorities about their legitimacy and competence. However, the UK firms can obtain authorisation to carry out investment business from the Financial Services Authority (FSA).
Budd gives the example of OWC Asset Management Limited which has a wine investment fund with proper authorisation from the FSA to carry out investment business, perhaps the first time a company specialising in wine investment sought such approval, implying that the company and its directors have been approved as fit to carry out this business. Two other funds have since taken the FSA approval-Wine Asset Managers (“WAM”) and The Wine Investment Fund.
The current trial is expected to last for 4-5 weeks. But as most Indians know it from experience and are currently enjoying a taste of it post the CWG, ‘Fraud is a profitable, business-low risk carrier,’ as the website lamely warns the viewers. It quotesLord Goldsmith, Former UK Attorney General‘To put it bluntly, the risk of detection, investigation, prosecution and conviction of an offence of fraud is small, and if you are unlucky enough to be caught, the sentence is probably tolerable for the gains you have made.’
Wine frauds and scams have not sprung up in India yet, but the common man in India who is always full of nuggets of wisdom will surely agree with this Golden statement. It would be in the interest of a small minority who already invests in ‘en primeur’ or is contemplating entering the ‘get rich’ schemes, to ensure that the antecedents of such companies are checked thoroughly and are worthy of trust before taking any hasty decisions.
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