Bonds against the Scammers

Representatives from EHD and London City Bond (LCB) met with me on Tuesday 21^st April in Central London to discuss launching a new initiative – Bonds against the Scammers. In particular they will now be sharing information with each other and investdrinks about scam wine investment companies. 

Although in competition with each other, EHD and LCB are committed to making life difficult for wine investment scammers. This is certainly business that they do not want.

It is not wanted because wine should be enjoyable and they do not want to see their customers being ripped off. It is also not wanted because when things go wrong and the scam company goes bust or disappears, then it is usually the bonded warehouse that is left to pick up the pieces. Left to deal with understandably upset and irate investors, who may often have sunk a significant proportion of their life savings into wine they either doesn’t exist or for which they have been charged far too much.

Although the bonded warehouses are not in any way part of these scams, it is not surprising that some defrauded investors unfortunately assume that the bonded warehouses are somehow part of the scam.

HMRC (HM Revenue & Customs) and the money laundering regulations require bonded warehouses to carry out due diligence on customers wishing to open accounts. It is clear that these regulations put the emphasis on those wanting to open accounts to prove that they are legitimate.

LCB and EHD already do refuse to open accounts for companies they consider dubious as well as closing or freezing accounts of companies or individuals whose accounts arouse suspicion.

Often scammers refused an account at one bonded warehouse will apply to another bonded warehouse in the hope of slipping through. EHD and LCB agreeing to share information on companies and individuals refused an account or who arouse suspicion will make life more difficult for the scammers.

The bonds will also exchange information on their due diligence procedures and see how far these can be coordinated.  

We hope that other bonds especially other third party warehouses like Octavian will join in this initiative. 

Premier Cru: the questions Cult Wines Ltd declined to answer

This post covers questions sent to Cult Wines Ltd yesterday as well as a look at who has legal control over the wine portfolios held by Premier Cru Fine Wine Investments Ltd.

Questions to Cult Wines Ltd: 

Yesterday I sent request to Philip and Tom Gearing, the directors of Cult Wines Ltd, to answer some questions. As is their right, they declined to answer the questions at this time. Chris Mercer at Decanter magazine was later told that Cult Wines are bound by a confidentiality clause until 15th August. Unfortunately clients of Premier Cru have until 14th August to accept the proposal from Cult Wines Ltd ...

Questions I put to Philip and Tom Gearing of Cult Wines Ltd:    

a) Cult Wines Ltd will be charging Premier Cru clients a 5% management fee for the first two years? Are there additional advantages to being with Cult Wines that have not been covered in the emails received by clients of Premier Cru?

b) Has Cult Wines Ltd paid Premier Cru for the right to handle clients portfolios? If so what was the sum involved and when was this agreement concluded?  If no money was involved when was the agreement made?

c) What is the name of the company that is handling the arrangements to put Premier Cru Fine Wine Investments Ltd into liquidation?

d) Do you have any indication how the liquidator will view the wine in Premier Cru clients' accounts?

e) In your email to investors (7.8.2014) you mention a shortfall in some of Premier Cru clients portfolios.

What is the value of this shortfall?

Is this shortfall down to en primeurs that have yet to be delivered or is there a shortfall in bottled wine that should be clients' portfolios? If this is the case do you know why wines are missing and how much is missing? To what value?

f) If there is bottled wine missing is it ethical for Cult Wines Ltd to be offering 2013 Bordeaux en primeur as a replacement?

•••

Further reflections and questions including who has legal control over the wines: 
One further question I could have asked is: what have you been told by Premier Cru about the 'shortfall' in clients' portfolios? What reasons for the shortfall have you been given? 

.. and another on the 5% management fee. What additional expenses to Cult Wines Ltd are involved in the transfer that justify imposing a management fee of 5% for the first two years that you admit is 'so high'? 

-          Why are the fees so high moving to Cult Wines?

Service Fees – In order to explain the rates being quoted for years 1 & 2, our 5% annual charge for years 1 & 2 are linked to a reducing liquidation fee so should you decide to exit on either year 1 or 2 the total cost will not exceed 10% which matches the current cost for liquidating your portfolio at the prevailing market rates

'a reducing liquidation fee' 

One well-placed observer has commented that the handover 'appears to be a shambles'.

It is not clear that Premier Cru Fine Wine Investment Ltd is actually going into liquidation or will just be wound up. The only mention of a liquidator in any correspondence I have seen is in the email sent from Cult Wines Ltd to Premier Cru clients sent on 8th August.  The letter from Premier Cru (31st July 2014) makes no mention of a liquidator. 
 
It is crucial to know who has currently legal control over the wines clients portfolios held in Premier Cru's umbrella account at EHD as whoever has control can release the wines to Premier Cru clients assuming that title was clear.  

From the Premier Cru letter (31st July 2014) appears that Premier Cru Fine Wine Investments Ltd still has legal control over their clients' wines stored at EHD as the agreement with Cult Wines Ltd is not due to be finalised until 14th August.

'We have therefore undertaken a review of our market competitors and have concluded that Cult Wines, who are currently the UKs leading fine wine investment company as the best positioned to assume management of your portfolio and on this basis we are finalising an agreement to migrate our private clients to Cult Wines (PCI) Limited which we hope to complete by August 14th 2014.' 

It is interesting that there is no mention of a liquidator here. Premier Cru Fine Wine Investments Ltd has legal control over the wines until 14th August 2014. After that date legal control will be with Cult Wines Ltd assuming that the agreement is finalised as envisaged.

Assuming that title to their wines can be established, then Premier Cru ought to be able to release wines up to 14th August to their clients who do not want to accept Cult's proposal and want to make their own arrangements. From 14th August it would appear to be Cult Wines Ltd, who will be able to release wines.  

From Premier Cru to their clients (31st July 2014):
'To help us complete the transition to Cult Wines as quickly and as smoothly as possible, please confirm your agreement to the transfer of your account to Cult Wines by no later than August 14th 2014.  All you need to do is reply to this notice indicating that you would be content to transfer your account to Cult Wines.  If we do not receive any reply to this notice by August 14th 2014, we will assume that you do not object to this transfer.'

The inferred advice from Premier Cru to their clients not wishing to accept Cult Wines Ltd's proposal is to contact them (Premier Cru) 'no later than August 14th 2014 declining Cult Wines Ltd's proposal and asking for their wines to be transferred to whatever arrangements individual clients are making. This notification may have to be done through Premier Cru's registered office.      

      

The address of Premier Cru (Fine Wine Investments) Ltd registered office is:

Barnes Roffe LLP 

3 Brook Business Centre 

Cowley Mill Road 

Uxbridge 

Middlesex UB8 2FX 

Tel: 01895 256423
http://www.barnesroffe.com  

Links to other posts on Pass the portfolio. Here and here.

Albany Vintners buys Vinance data base and takes over management of clients' stock

Locke King Vaults – cases stored in one of the tunnels 

The client database of Vinance plc, which went into administration on 16th November 2012, has been bought by Albany Vintners Ltd. Set up in 2003 by Marcus Edwards, who had worked for leading fine wine merchant Farr Vintners for 10 years – last four as their accountant, Albany Vintners is based in Cambridge. It offers its own in bond storage facilities through Arc Reserves using dedicated storage at Locke King Vaults, the fine wine storage section of EHD Bond.

Albany/Arc will take over the management of client accounts.

I understand that there were eight other bidders.

It is still down to the administrators, Herron Fisher, to discover what Vinance plc's deficit is and to ascertain what the position is in regard to any en primeur wines ordered by its customers. Whatever the level of Vinance's debt is, this is separate from the deal with Albany Vintners Ltd.

Marcus Edwards comments: “Already we have had customers of Vinance contacting us to sell their wine. We expect to be able to help as we have a wider distribution network than Vinance – we sell to the trade, to private clients and also to export markets. We have still to sort out commission rates for these clients.

Vinance plc charged a 25% upfront commission on purchase but 0% on selling.

investdrinks asked Edwards whether the client database would be passed onto Albany Portfolio Management Ltd, an associated company offering wine investments and a founder member of the Wine Investment Association.

"These are two separate businesses. Our main priority is looking after the stock.  Passing on the database to Albany Portfolio Management is not a priority, we haven't considered this as a possibility. It is something we are unlikely to do."

As listeners to Saturday's BBC Radio 4's Moneybox would have heard the directors of Vinance plc were more concerned to score points rather than express regret for the collapse.

It is encouraging to see that the database has been bought by a company with a good reputation and not by a white knight operation set up to mislead investors caught up in the collapse of Vinance plc. Unfortunately this was not the case when Bordeaux UK Ltd went down in November 2011, when Vin Bordelais emerged using the same website and the same phone number as Bordeaux UK Ltd. See here.  

Entrance to the Locke King Vaults (above and below)

The Locke King Vaults are on the edge of the old Brooklands motor racing circuit. It was originally an extensive air raid shelter, which has now been converted to fine wine storage.  

Inside the vaults: side tunnels run off this corridor

An old air raid notice

James Temple: i/c wine storage at the vaults 

Statement by Herron Fisher, administrators:

'ADMINISTRATORS OF VINANCE PLC FIND A BUYER
Christopher Herron and Nicola Jayne Fisher, insolvency practitioners and administrators of Vinance Plc , have reached agreement with Albany Vintners Ltd/Arc Reserves Ltd (Arc) an experienced fine wine specialist, to take over the management of Vinance client accounts.

Nicky Fisher of Herron Fisher said, “We have made this arrangement in order to make life easier for the clients going forward, but of course it is subject to each individual client’s consent.”

All investors have been sent a letter from Arc Reserves with further information.

Arc Reserves said in its letter to creditors that it has reached agreement to take over the management of client accounts.  Going forward Herron Fisher, the administrators, are still working to confirm allocated wines and once this is completed they will liaise with Arc Reserves and investors to facilitate the transfer of cases subject to clients’ consent.

Albany Vintners Ltd is a wholesale fine wine company specialising in buying from Bordeaux and selling direct to private collectors and merchants in the UK, Europe and Asia. It has a dedicated logistics arm, Arc Reserves Limited, to provide a specialist storage and portfolio management solution for private clients.

Herron Fisher, led by Chris Herron and Nicky Fisher, is an expert corporate recovery and insolvency firm. For more information visit: www.herronfisher.co.uk   or e-mail vinance@herronfisher.co.uk. To contact Arc Reserves, email: enquiries@arcreserves.com or visit: www.arcreserves.com'