Bordeaux Wine Trading Company and International Wine Commodities: June trial

The combined trial of the directors of these two wine investment companies is due to start at St Albans Crown Court on Monday 7th June.

Bordeaux Wine Trading Company Ltd:

Directors Paul Craven, Niklaus Cashman & Oseghale Hayble were arrested in June 2008. They were charged in March 2009 with conspiracy to defraud, and money laundering.  

International Wine Commodities Ltd

Directors Oseghale Hayble and Benedict Moruthoane were arrested in October 2008. They were charged in June 2009 with conspiracy to defraud and money laundering.  

All the defendants have pleaded not guilty.

  

The investigation into the two companies and their directors is being conducted by the Economic Crime Unit of Hertfordshire Police.

Avoid up-front commissions

A number of companies charge up-front commissions – sometimes called brokerage fees. My strong advice is never to deal with a wine investment company that charges an up-front commission. Very often this up-front commission will add 20%-25% to the purchase price. Although the investment company may have to add this commission to their prices in order make money as they are likely to be buying stock from one larger UK brokers, there is no reason why an investor should support a flawed business model. If you cannot offer wines at a reasonable market price then you shouldn't be selling a wine investment package. For the investor the sensible thing is to cut out the unnecessary additional link in the chain and buy from a cheaper source assuming they are well established.

Paying a an upfront commission makes no sense however it is dressed up: companies trumpet that declaring their upfront commission means that their pricing is 'transparent'. What matters is the price the investor pays for the wine – full stop. An upfront commission makes no sense because generally buying the wine, with certain rare exceptions like Pétrus and Le Pin, is the easy bit. It is much harder to sell wine, especially at a good price. Usually companies charging an upfront commission will not levy a commission on sales. Fine but what incentive do they have to sell your wine?

What happens if the company has ceased trading when you want to sell your wine? You will be faced with paying a seller's commission to another company. This means paying twice over (both when you bought and when you sold) and it is worth remembering that wine tends to be a medium to long-term investment.  

Say no to companies charging an upfront commission on investment wines.

Cult Wines Ltd: Tom Gearing's requests

Yesterday in a comment on this blog Tom Gearing made two requests – he says three but it looks like two to me.  

'I just have three requests:

1. Please can you remove/retract your blog.

2. Apologise for the use of confidential material in a public forum.'

The answer to both of these requests is no. 

Please can you remove/retract your blog.

My posting on this investdrinks blog related to a carelessly worded press release issued by Cult Wines Ltd on 22nd January 2010. If you don't want press comment don't issue press releases – period. If all drinks investment and not just collective wine funds were under the aegis of the FSA, such claims of guaranteed returns would not be allowed as one FSA authorised wine fund manager remarks:

"It is not possible to guarantee returns and therefore no sane fund manager would ever do so.  Most investment managers whether running regulated or unregulated schemes will publish health warnings (e.g. past performance is no guarantee of future performance, shares can go down as well as up etc etc) but will also highlight why they think they will be able to create value for the investor.

The FSA has extensive rules on financial promotions and the degree of information and inducement you can put into your marketing depends on what level of authorization and regulation you have as the investment manager. This also dictates who you can market to."   

Apologise for the use of confidential material in a public forum.

When I posted the initial response from Cult Wines Ltd to my questions following up on the press release (22.1.10) I was totally unaware that there was a confidentiality signature tacked onto the end of the email. Unaware for the very good reason that I cannot imagine why anyone would put such a clause on a response to a known journalist following up a press release issued by the company. It is not as though I had asked for the code to the company safe or the pin number for the company credit card.

A subsequent email stated: 'You do realise that printing this without permission is 100% against the law.'

Frankly I think it is highly unlikely that the law is at all clear cut on this. This might be of interest. I suspect in law much would depend upon the content of the email and whether the recipient had indicated that they would abide by the confidentiality signature.