The FBI confirmed Wednesday that it is looking into the company, which filed for bankruptcy Jan. 8 listing assets of $7 million and liabilities of $70 million.
“The FBI is investigating claims of a Ponzi scheme involving the Berkeley wine company Premier Cru,” said spokeswoman Michele Ernst. “It appears there is enough evidence that the FBI has determined an investigation is warranted.”
Ernst is asking anyone with complaints, concerns or tips to email them to a specially created email address, firstname.lastname@example.org.
On Feb. 8, Fox filed for personal bankruptcy stating that he had only $50,000 in assets but had debts of $50 million to $100 million. He listed about 9,000 people as his creditors. Presumably, they are the same creditors as those who are owed money by Premier Cru.
Fox also said he had moved to a house in Concord that he rents for $2,700 a month. Previously, he had been living in a house in Alamo that he purchased in 2010 for $2.3 million and sold in late January for $3.2 million. Fox used $700,000 of those proceeds to pay Premier Cru’s largest creditor, The Community Bank of the Bay. Premier Cru still owes the bank $150,000 to $200,000, according to court documents. He used another $1 million from the sale to pay off funds he owned The Taylor Trust, which had helped acquire the building, according to court documents.
The bank also has a lien on Premier Cru’s three-building complex at 1007-1011 University Ave. Fox and his business partner, Hector Ortega, formed 1011 University Ave. LLC around 2009 to purchase the property for $4.1 million, according to the Contra Costa Times. The partners remodeled it for $500,000. The property is now listed on the market for $6.8 million, down from its initial listing price of $7.5 million. Premier Cru owns about 60% of the property, according to court documents.
On Monday, bankruptcy judge William Lafferty approved the hiring of Brian Nishi, a former Premier Cru employee, to help the bankruptcy trustee interpret the computer records of the company, as well as a separate computer kept by Fox. Nishi, who started working for Fox when he was a student at UC Berkeley and has worked for him for more than 20 years, will help the trustee, Michael G. Kasolas, determine when various wines were acquired and sold.
The U.S. Trustee had objected to the hiring of Nishi because he had a vested interest in the case. As money was getting tight, Fox had charged $25,000 on Nishi’s credit card without permission, according to court documents. When Nishi found out, Fox paid him back in wine. Nishi is also owed $2,500 in back wages.
Tracy Green, an attorney for the trustee, said Nishi got caught up in a scheme that was not of his own making. He had never finished Cal and his only employment since then was with Fox and Premier Cru.
“He’s a poor little employee with no skin in the game with a viable credit card,” said Green. “He was naïve and tried to help out.”
Kasolas has been trying since mid-January to develop a plan to liquidate Premier Cru’s assets and distribute the funds to the company’s secured creditors and 9,200 customers who bought wine but never had it delivered. He has been hampered by the sorry state of the company’s finances. There was only $20,000 left in cash. There were 35,000 bottles of premium wine worth $6.8 million stored in the company’s 10,000-square foot warehouse on University Avenue, but Fox hadn’t paid insurance on the wine for a year. (The other $200,000 of wine was in warehouses in France and Holland.) Kasolas immediately petitioned the court for funds to pay for utilities, the burglar alarm, Internet service and to hire a company to do inventory.
Kasolas has identified about $200,000 worth of wine that is unencumbered, purchased by no one and promised to no one. He told the court he might seek to sell that wine soon to pay costs, which he estimated were $25,000 a month.
One of those costs is communicating with Premier Cru’s 9,200 creditors. It costs about $5,000 to mail them court notices. The trustee plans to reactivate the now-defunct Premier Cru website and use it as a portal to communicate with the creditors and have them file information about their claims with the court.
Update: 5/3/2016: This story was updated to include information about Fox’s $1 million payment to the Taylor Trust. The information became public after an April 11 court filing.
Berkeley’s Premier Cru paid its tech staffer in wine (02.04.16)
Shop Talk: The ins and outs of Berkeley businesses (12.22.15)
Berkeley store sued for not delivering $3M worth of wine (10.29.15)
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