Wine Traders International: liquidator appointed

I understand that at the creditors' meeting on Wednesday that RSM Tenon were appointed as the liquidators of the company. I am hoping to get further details from Tenon early next week and will post them when I have them.

Two trials to come in the autumn – previous successes for the SFO

As there are two wine investment trials due to start in October following police investigations, I thought it was timely to list previous prosecutions for conspiracy to defraud brought in these instances by the Serious Fraud Office – see press releases section. Details of some of these trials are on my www.investdrinks.org site.

Cavendish Wine Merchants/Hamilton Spirit Management
This was the first prosecution brought by the SFO in respect to drinks investment fraud and involved 'investments' in barrels of malt whisky. The case involved Lewis Daulby, who pleaded guilty before the start of the trial, Lee Rosser and Julian Blee. Rosser and Blee were found guilty.

Details:
http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2001/whisky-and-champagne-investments-four-convicted-for-defrauding-clients.aspx

House of Delacroix 
This was an associated trial (early 2001) to Cavendish/Hamilton as this was a company dealing in Champagne for the Millennium set up by Blee and Rosser with Craig Dean. Blee and Rosser pleaded guilty before the start of the trial. Craig Dean was found guilty.

Details: http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2001/craig-dean-sentenced-in-millennium-champagne-fraud.aspx


Marshall Wineries 
Marshall was another malt whisky investment company, which also offered Champagne for the Millennium. The trial was held in the first part of 2004. The appropriately named Stephen Jupe was found guilty.

Details
http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2004/owner-of-whisky-investment-business-guilty-of-fraud.aspx

Vintage Wines of St Albans
The company offered wines and spirits as investments to Americans, targeting doctors in particular. Four of the five defendants were found guilty in August 2008 – one was acquitted. Two of the four couldn't be named at the time. Shameen Suleman was found guilty, while Stephanie Callebaut pleaded guilty before the trial started. Haroon Khatab also also found guilty but his name had to be concealed until he was later pleaded guilty to an Asian meals fraud. This food fraud also involved a couple of victims of the Vintage Wines fraud.  

Details
http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2008/vintage-wines-of-st-albans-–-four-sentenced.aspx

Asian food fraud:
http://www.sfo.gov.uk/press-room/latest-press-releases/press-releases-2009/jail-for-bedfordshire-frozen-foods-businessmen.aspx

22nd July 2010: Two jailed for a £7 million “boiler room” fraud

 (Press release from the SFO (Serious Fraud Office)

Two men were sentenced at Ipswich Crown Court today for running an illegal high pressure, share-pushing operation from call centres in Spain.  Around 1,250 investors in the UK were persuaded to buy over £7 million worth of shares.  Using their “Gordon Gekko” contract notes to complete the transactions, the fraudsters siphoned off around 80% of the invested funds.  

David Arthur Vidgeon (DOB 02/01/1980), a UK national resident in Spain was sentenced to seven years imprisonment. Rahul Natwar Patel (DOB 09/09/1975), a UK national resident in Spain was sentenced to seven years imprisonment.

They were found guilty of conspiracy to defraud, contrary to Common Law, on 15 July.  Three other defendants, Baldur Sigurdsson, Roland Pibworth (tried in absentia)* and Craig John Clark were acquitted.

SFO Director Richard Alderman said:  "A boiler room is a predatory and orchestrated 'attack' on private investors so it's very satisfying to see justice delivered for such callous dishonesty.  I hope that publicity of today's outcome will serve as a warning for people to think twice when hard-sell investment offers, usually unsolicited, appear tempting. ‘No’ is the right answer".  

Outline

David Vidgeon and Rahul Patel conspired to defraud investors, many of whom were retired and elderly, by high pressure selling of shares in small/obscure companies, with false claims as to their future worth.  This fraudulent sales practice was carried out by unlicensed offshore brokerages known as “boiler rooms” under the control and direction of Vidgeon and Patel.  The period covered is April 2003 to November 2006.

The lynchpin in the fraud was Vidgeon.  He arranged and controlled the deals between the boiler rooms in Spain and the UK companies whose shares they were to sell to unsuspecting investors.  Vidgeon obtained these companies through the sourcing activities of an intermediary. Together they supplied several sales operations with companies’ shares to sell.  These were based in Spain, one of which was in Barcelona and operated by Rahul Patel. Two other persons suspected of criminal involvement in Patel’s enterprise fled the jurisdiction.

The companies whose shares were sold were worthless.  Their function in this conspiracy was as vehicles used by Vidgeon, Patel and the boiler rooms to take not less than 80% of the investors’ money. 

One company was Toppurinn UK Ltd, a timber buildings business in the leisure market.  It was supposedly planning to enter the steel frame market; at one stage exploring the possibility of becoming involved in supplying to Iraq as part of the US-led reconstruction.  This did not materialise.

COL Systems Ltd was another company whose shares were being pushed.  Its product “Crime-on-Line”, a concept developed in Iceland, was described as a theft prevention/recovery system for registering property ID references on a central online database.  The claim was that it would enable the police to return recovered stolen

property to the owners.  The system was said to have been initially piloted in partnership with the Icelandic police and insurance sector but in reality did not achieve commercial viability.  

Another company, the Osborn Group, trading as “The Crowd Went Wild”, purported to market sporting memorabilia on the internet.  It had no real substance and like “Crime-on-Line” it was simply part of the deception. A template contract note obtained during the investigation was file-named “Gordon Gekko”; an indicator of the business philosophy of the operators.  Similar templates were used across all the boiler rooms.

A further four companies were sold by the boiler rooms. None of these companies had any trading activity.

The ‘boiler room’ is a recognised engine of fraud. Boiler rooms are essentially call centres, concerned in the selling of shares on behalf of companies. The selling of shares is an activity regulated by the FSA. Boiler rooms are not authorised and operate illegally, often from abroad.

The ‘boiler rooms’ sell by cold-calling and use hard-sell tactics. The success of their deception is measured not only by the sums of money extracted but also by the nature of the people who were persuaded to part with their money. Even people who believed they were experienced investors were victims of the fraud.

Vidgeon’s own boiler rooms generated in excess of £2.3 million, nearly a half of which he retained, the rest being paid out to other conspirators. Rahul Patel earned more than £960,000 from the operation.

Bank accounts in Spain, Latvia, Cyprus and other overseas jurisdictions were established to help manage the monies received from investors.

Investigation and proceedings

The SFO investigation commenced in May 2005 with support from Norfolk and Suffolk Police.  Later that year searches were conducted in several locations within the UK. Searches were also conducted in Spain with assistance from the Spanish Police.  Evidence was obtained from eight countries outside the United Kingdom.

The defendants were charged in December 2008. The trial opened at Ipswich Crown Court on 14 April 2010 with HHJ Holt presiding and the jury returned verdicts on 15 July.  

In passing sentence, HHJ Holt said “It was a sophisticated and prolonged boiler room fraud and had as victims sensible, ordinary people many of whom lost life savings...An investor buying any of these shares will have a better chance of a return by buying a lottery ticket. You knew this and did not care.”

* Roland Pibworth, who was acquitted, was the founder of Australian Portfolio Wines in Australia. 

Encarta Fine Wines Ltd: 'the worst case scenarios from our company' (part 2)

HM (see previous post) received a number of calls and emails from Encarta Fine Wines Ltd. One of them sent by Paul Stapleton, senior portfolio manager.

'Dear Investor

Thank you for your interest in our company. Attached is some additional information to keep you upto date with the sector and how it is progressing. Please find below the wines that we have in allocation which are a GREAT START, to a successful working portfolio. These allocations are flying out, so if you have any questions, queries or would like to add one of these to your portfolio, please email me or call my direct line.

I look forward to hearing from you.

 Kind Regards

Paul Stapleton
Senior Portfolio Manager

Encarta Fine Wines Ltd
Mayfair House
14-18 Heddon Street
Mayfair
London
W1B 4DA'

Stapleton illustrated his point with three wines: 2007 Léoville-las-Cases (Encarta price: £1500), 2005 Lynch-Bages (Encarta price: £1400) and 2006 Pichon-Lalande (Encarta price: £895). He claimed an compound annual growth rate of 14% for the Léoville, 13% – Lynch-Bages and 25% for the Pichon.

Remarkable rises and doubtless tempting! However, outside an 'exciting, faced paced broking environment staffed by  'driven, money motivated individuals' the reality is considerably less tempting. wine-searcher.com shows that in mid-June 2010, the 2007 Léoville-las-Cases could be bought for £795 from Robert Rolls  (8.6.09), Veblen Wines Ltd had the Lynch-Bages for £775 (10.6.10) and Interest in Wine Ltd had the Pichon at £635.

Encarta price for the three wines:                     £3795

Price if bought from cheapest merchant:           £2205
Difference                                                       £1590

Mr Stapleton's 'GREAT START': 72% more expensive.

Furthermore, Encarta's claims of the rise in price of these wines are meaningless and misleading. These percentages show, if they mean anything, only by how much Encarta has whacked up the prices in its short trading history.

 In reality wine-searcher shows that the Léoville fell by 10.6% from the lowest price available in June 2009, while the Lynch-Bages was up by 6.5% and the Pichon by 8.7%. Furthermore, prices for these three wines have dropped over the past month with the Léoville (£780: minus 10.7%), Lynch-Bages (£750: 3.3%) and Pichon (£620: 6.5%). 

   

The figures speak for themselves!

••

 Bromley based jobs with Encarta Fine Wines Ltd

Some extracts from a advert placed with WorkFinders network by Encarta: 

SALES/ BROKERS WANTED URGENTLY – CALLING ALL EXPERIENCED OPENERS & CLOSERS – £120K+ OTE

MUST BE BULLISH - MONEY MOTIVATED - RESOLUTE – HIGHLY DRIVEN AND VERY COMPETITIVE!

DON’T WASTE YOUR TIME IF YOU AREN’T A CLOSER, THIS JOB IS FOR WINNERS ONLY!

ONLY APPLY IF YOU HAVE EXPERIENCE IN SALES OR BROKING AND A DRIVE TO SUCCEED. 

•

 

WANTED: BULLISH PEOPLE WITH PASSION....................

We are seeking professional closers who can demonstrate a proven track record.

Unlimited earning potential with top performers earning on average over £10k per month, with prompt payment for you!

Now is the time to take advantage of the Wine investment market. 

•

Those with experience in stock broking, wine broking, land broking are ideal although if you have a strong sales background and are sharp on the phone, WE WANT TO HEAR FROM YOU!

WE NEED CLOSERS, BROKERS, AND SERIOUS SALESPEOPLE WHO WANT TO MAKE SERIOUS MONEY AND WHO AREN’T AFRAID TO ASK FOR THE MONEY!

YOUR EARNINGS ARE UNCAPPED AND YOU CAN MAKE £10K - £15K PER MONTH

•

Our young and energetic company, is based in the bromley*, with fantastic incentives on offer. We believe strongly in rewarding sales people who work hard and beat targets!

ROLE:

WORKING WITHIN A PHONE SALES ENVIRONMENT YOUR ROLE WILL INVOLVE:

• SPEAKING TO POTENTIAL INVESTORS AND INTRODUCING THE COMPANY AND THE CONCEPT OF WINE INVESTMENT

• NURTURING AND MAINTAINING RELATIONSHIPS

• CLOSING DEALS

Where to apply, inquire, or obtain further information

Dean Doughty

Tel: 08009707991

E-mail: investjob@hotmail.co.uk

 

Full advert is here.

 * If the company is based in Bromley why change the registered office trom Bromely to Heddon Street in Central London in October 2009 and give this as its contact address on the website? You would have thought that 'a good, down to earth, friendly and helpful fine wine investment company' would want its clients to know its trading address.  



 

Encarta Fine Wines Ltd: 'the worst case scenarios from our company' (part 1)

I have received a recent enquiry from HM about Encarta Fine Wines Ltd

HM

'I have been approached by Encarta Investment Group regarding investing in wines. They are offering 2009 Carruades de Lafite - Rothschild. Half a case for £2,200. They cold called me earlier this year.

I declined their offer then, but said I might be interested in the future. Since then I have received calls and emails.

My response

Encarta Fine Wines Ltd was set up on 9th July 2009 with Dean Doughty as the director and Lucy Damato as the company secretary. A further director, Matthew Hart, was appointed on the 19th August 2009. The company's website was registered on 5th October 2009. Its registered office is at Mayfair House, 14-18 Heddon Street, London W1B 4DA.

However, the Encarta Fine Wines' website explains that its origins were earlier than this:

'Encarta Investment Group was founded in 2006. When the company was formed, we believed that there was the need for a good, down to earth, friendly and helpful fine wine investment company offering a range of fine wines from Bordeaux. A sort of antidote to the increasing anonymity and sameness of the big chain stores. We have been rewarded in the enormous increase in wine investors and the resulting growth in demand for en premier first growths.'

Encarta Investment Group is not a limited company. Its address is Fox House, 135 High Street, Bromley BR1 1LF. There is one similarly named limited company in the Bromley area – Encarta Associates Ltd, which founded on 5th August 2009 at Imperial House, North Street, Bromley BR1 1SD. This was also the registered office of Encarta Fine Wines Ltd until 7th October 2009 when it was changed to Heddon Street.

However, the company would appear to trade from the Bromley as this just ad indicates:

'Encarta fine wines (London/South East) Full Time Tuesday, January 5th, 2010

Job Description:

We currently have full time investment broking vacancies in our team on the trade floor, this is available for driven, money motivated individuals with a passion for sales. Those with experience in stock broking, wine broking or land broking are ideal – although if you have a strong sales background and are sharp on the phone, we want to hear from you! with a basic salary and a strong ongoing commission structure, this is the perfect role for those looking to develop their sales career in an exciting, fast paced broking environment

This is not a job for those afraid of hard work, the job involves speaking to investors across the UK and IRELAND, no matter how wealthy! The hours are long, the job is tough & demanding, BUT the rewards can be tremendous!

hours 10.30-7.30pm

salary is 800pcm to begin with (comissions on top) with huge potential for promotion in a short period of time for the right candidate.

OTE 50,000 to 100,000 a year

Location: Bromley, Kent

Compensation: 800pcm

Telecommuting is ok.

Encarta Investment Group Address: Fox House
135 high st
Bromley - BR1 1JF
Kent

Contact: Dean'

Back in February in an exchange of emails Matthew Hart explained the company background:

'Encarta Fine Wines Ltd was registered with companies house in 2009, however has been sole trading since 2006 on very a small scale basis, but must also highlight a mistake* you have which is I am not the sole director, our prices are generally around 25% above the prices shown from some of the larger Merchants for example Farr Vintners, but within this increased price we include storage for up to 5 years**, and of course advice on purchasing.

We can resell to existing clients & potential new clients, portfolios of existing clients thus offering only a 5% selling commission. So I agree we may be more initially to purchase, but also offer investment advice for this service, but are less expensive to sell the portfolio.

I myself have been a lover of fine wine and have visited Bordeaux region wine tasting etc, as this is a passion of mine.'

My notes:
* Correct Dean Doughty is also a director
** Five years storage at LCB's Private Reserves is £71.91 inc vat.

2009 Carruades de Lafite - Rothschild

There is no doubt that the price of Carruades de Lafite has shot up in spectacular fashion over the past few years. In June 2006 you could have bought a case of 2005 Carruades for £335. Today the cheapest price on wine-searcher is £2600. This rise is entirely down to the Chinese affection for Lafite. and not through a re-evaluation of its intrinsic quality. Carruades is essentially the second wine of Château Lafite, although grapes from some parcels of vines that wouldn't go into the grand vin are included and it has a higher proportion of Merlot. In China it is apparently known as baby Lafite. All in all an example of a bubble that may or not not burst – hardly the sort of wine with which to start an investment portfolio. 


From the Encarta website:
'At Encarta we take great pride in helping our clients build the perfect investment portfolio of fine wine.'

 

'Our experts will help you source and choose the wines that represent good value.'

Encarta's price for six bottles of 2009 Carruades is £2200 (equivalent to £4400 for a case of 12).A quick look at wine-searcher.com shows that a number of companies are offering a full case (12 bottles) of Carruades at prices ranging from £2400 (Albany Vintners) to £2800 (Farr Vintners are at £2700). In this instance Encarta are a whopping 83% more expensive than the cheapest established fine wine merchant. Encarta: 'the wines that represent good value'!!

I emailed Matthew Hart asking about both the pricing and the choice of Carruades de Lafite as a starter wine for a portfolio. 

Matthew Hart's response (15.7.10): 

'You seem to pick the worst case scenarios from our company, In our opinion Carruades de lafite offers fantastic investment grade wine & returns.

What about the 2007 Lafite Rothschild that we are selling at present for £6000 are you willing to say that this is not competitive??

It seems to me that you have nothing better to do that contact us and keep checking up on our pricing structure!

I suggest you try and track down the scam companies out there that are not actually purchasing wines!!

I am sure one call to LCB and they will confirm that we have a constant stream of wine going into accounts held there.

I will not reply to any further emails that you send to us.'

My response:
Your price for 2007 Lafite is certainly more competitive than that quoted for 2009 Carruades. However, it is more expensive than any other companies currently quoted on wine-searcher.

It is also more competitive than than the example of growth sent out by Paul Stapleton on Tuesday, June 22, 2010 featuring 2007 Leoville Las Cases, 2005 Lynch-Bages and 2006 Pichon Lalande. All, particularly the Léoville las Cases and 2005 Lynch Bages well over market price.***

Although I could phone LCB and they might confirm that Encarta have an account with them, they are not going to tell me what is in the account nor what comes in and out, nor whether cases enter at a trickle or a flood. Incidentally when did Encarta open the account at LCB?
  
Naturally it is entirely up to you whether you respond to my questions. It remains proper that I give you the opportunity to respond.


*** I will be commenting on the example of growth sent out by Paul Stapleton in a separate post. See part 2 here.


My advice
Although they may have done a small amount before the company was founded in in July 2009, Encarta Fine Wines Ltd has no track record, particularly in relation to buying en primeur. I wouldn't advise buying en primeur from Encarta until they have established a track and trading record. Nor would I advise buying bottled wine from them until they become more competitive and cease trying to sell investments through cold calls.   

Claremont Forbes Ltd: Collective Investment Scheme and Limited Liability Partnerships

There is an interesting article by Tony Hetherington on whether having a Limited Liability Partnership means that a land banking property company will not be classified as a collective investment scheme. A number of the UK land banking companies have been shut down on the grounds that they are a collective investment scheme and therefore come under the aegis of the Financial Services Authority, which means that those managing a CIS must have FSA approval and also offers investors some protections. 

Incidentally wine investment funds are collective investment schemes and the 1990s ostriches/ostrich eggs investment schemes were also judged to be CISs.   

Tony's article appears on Midas Extra, which is a subscription site run by Associated Newspapers. Click here for details.

Although I cannot reproduce Tony's article I can mention some of its salient points.
Claremont Forbes intends to offer investors parcels of land that already has planning permission. Each land site would be organised and managed as a Limited Liability Partnership.

Terence Farr, director of Claremont Forbes, believes that this would mean that it wasn't a collective investment and so those offering and managing it would not need to be approved and registered with the FSA (or with the Bank of England when it takes over the FSA functions). He does, however, expect that the FSA will attempt to close him down on the grounds that this is a CIS.

It is quite possible that the FSA will take a close look at this use of LLPs for land banking schemes. They are likely to want evidence that the investors are actively running the partnership and the building plot scheme. Not a question of being just a sleeping partner!  

You have to wonder how many investors will have both the inclination and the skills to be actively involved running an LLP.

••

Following a message I received from Terence Farr, director of Claremont Forbes Ltd, I have reviewed the comments made by his company on two earlier posts. I have made some amendments and deletions.

I have asked Terence Farr the following questions and am looking forward to his response.  I will be particularly interested in learning exactly what experience he and his 'highly experienced team' have in the property and land development market. We do know that some of the sales force including a 19-year-old do have experience selling wine while working for a company (Finbow) now under investigation by the Metropolitan Police. 

'We are a leading London based company dedicated to offering exclusive UK land development opportunities to private clients on a worldwide basis.’

From Claremont Forbes website

Since Claremont Forbes was incorporated on 29th January 2010, is the description ‘leading’ justified here?

‘At Claremont Forbes you will find a highly experienced team who take pride in offering a best-in-class service.’

What property experience do you and your team have?

From Tony Hetherington’s article on Midas Extra:
‘So, what is Claremont Forbes offering?  So far, not a lot.  The company is run by 28-year-old Terence Farr, who has never headed a limited company before.  He told me that it is offering land in Kent, but he added that it was ‘in the process of acquiring one new site as well as finalising a recent property investment club’ – so it appears there is as yet no LLP up and running that the FSA could put under the microscope.’

What land with planning permission in Kent are you offering? Also is Claremont Forbes (Margate Kent) LLP up and running.

 

Would agree that Tony Hetherington’s conclusion (see below) is fair comment?
‘But unless those investors know what they are doing, and perhaps have some knowledge of planning and development, and land values, it is hard to see the attraction.  And with Claremont Forbes itself anticipating a battle with the FSA, it is easier to see the downside and decide to steer clear.’

Wine Traders International Ltd: creditors' meeting

A meeting of creditors has been called by the Official Receiver for Wednesday 28th July at 11am. It will be held at the offices of the Official Receiver, 21 Bloomsbury Street, London WC1B 3QW.

See also this earlier post.

Fine Wine Vintners Ltd: first annual return overdue

'As one of the UK’s leading fine wine traders we are ideally positioned to assist clients to identify and acquire wines with the greatest potential to appreciate. We combine financial discipline, market insight and wine knowledge to optimise returns.'

Quote above from Fine Wine Vintners website.

'Optimise returns'? Probably a little too early to judge as the company was founded just over a year ago on 4th June 2009 but apparently unable to file its annual company return on time as require by UK company law. Some of the 'discipline' mentioned above required I'd suggest.

••

'There are currently opportunities for ambitious, entrepreneurial team spirited individuals, who have the zest to succeed in a high-pressure environment.'

From the careers section of the Fine Wine Vintners website.

How the most expensive vintage ever was sold

'3 Jul 2010 by Jancis Robinson/FT but this is longer

Even Bordeaux's châteaux owners themselves admit to surprise at the sky-high prices of the 2009s, in a tortuous, bad-tempered campaign designed to attract as many euros as possible to France's fine-wine capital. It is finally drawing to a close, in time for France's long holidays, with some UK merchants even suggesting 2009 prices are designed to prop up those of the 2005s.

Four years ago the prices for Bordeaux's last exceptional vintage, 2005, seemed quite extraordinarily audacious and we thought we would never see their like again. In the event, the embryonic, unbottled 2009s have been offered at prices between 50 and 100% up on 2005 opening prices, and some are even approaching 2005 current prices.' 

Read the rest here. 

Apparently sales to the UK have been 'massive'. How far this is for resale to Asia-Pacific remains to be seen but it is clear that a number of traditional UK buyers of en primeur have not bought this year due to the high prices. I suspect that a substantial amount of sales to the UK have been for investment. It remains to be seen how far it will be possible to sell these stock on, so generating the returns investors expect.      

Also story on decanter.com on record UK 2009 en primeur sales and indicating that the Asia pacific did buy 2009s but solely at the top end:

'The story from Farrs is the same. Browett said Far East customers were responsible for more than a third of value sales, but a tiny proportion of volume.

'Sales by value have been 60% UK, 40% Far East, but by volume it's about 85% to 15%, as Far East customers have mainly bought only First Growths and "super-seconds".'

He added, 'There has been virtually no interest from the USA.''