John E. Fox, who admitted to running a $45 million wine Ponzi scheme from his store, Premier Cru, on University Avenue, will be released from federal custody tomorrow, almost two years earlier than expected.
Fox was sentenced in December 2016 to 78 months in prison or 6.5 years. He had pleaded guilty to a single count of wire fraud although he also admitted he sold phantom wine futures to some of the richest and most powerful men and women in the world. When money came in from one customer, Fox said that he would use it to pay off suppliers or buy wine to give to customers who were complaining about not getting the bottles they ordered.
Over the years, Fox siphoned $45 million from about 9,000 customers, according to court documents. He used most of those funds to keep Premier Cru running but he took about $5 million to finance a lavish lifestyle. He purchased a high-end home in Alamo, joined two country clubs, paid his daughter’s college tuition, and bought numerous luxury cars, including “Corvettes, Ferraris, a Maserati, and various Mercedes Benzes,” according to court documents. He used to park them in the space reserved for disabled drivers behind Premier Cru, according to former employees.
Fox also spent about $900,000 meeting young women online and paying for sex and their company. He took his dates to a coffee store on Fourth Street so often that employees started surreptitiously taking photos of the encounters.
Fox could have gotten 20 years under federal sentencing guidelines. But he cooperated with authorities by explaining his scheme and showing them how he operated the scam on the computer. Fox also helped snare a Seattle woman, Seul Ki Yum, who was extorting him and others. Fox had gotten involved with her and she threatened to tell Fox’s wife about their sexual relationship unless he paid her about $10,000 a month via PayPal, according to court documents. Fox agreed to tape their phone conversations, which helped officials convict her. She was sentenced to one month in jail. For that reason, authorities recommended Fox only be sentenced to 78 months.
Berkeleyside reached out to Gene Vorobyov, a San Francisco attorney the court-appointed to represent Fox, the U.S. District Court and the U.S. Attorney’s office to try and understand why Fox, 70, is being released early. No one was able to provide any information as to why. Fox did not respond to a letter sent to him by this reporter.
However, the Bureau of Prisons can reduce a prisoner’s sentence for good behavior at a rate of 54 days per year sentenced. If that was applied for Fox’s sentence, he would get 324 days off his prison term. That still leaves one year unaccounted for. Many prisoners around the U.S. are also being released early because of the threat of COVID-19.
Fox has been incarcerated at RRM Raleigh a residential reentry management program in North Carolina run by the Bureau of Prisons. Prior to that, he was incarcerated at the Federal Correctional Institution, Lompoc, a low-security prison north of Santa Barbara.
Fox admitted to the FBI that he sold $20 million in “ghost orders” over a 20-year period, starting around 1992 or 1994. After Premier Cru filed for bankruptcy, the bankruptcy trustee Michael G. Kasolas inventoried the company’s business records and found that Fox had taken in $45 million of orders for which there was no wine.
The bankruptcy case is still winding its way through court.
After being released from prison, the U.S. Probation Department will monitor Fox’s whereabouts for three year. As part of the plea reached with the government, Fox also agreed to pay $45 million in restitution to his 9,000 former customers.
The government will enforce that provision by requiring Fox to pay a monthly set amount in restitution. If he doesn’t, or if he is found hiding assets, that would be a violation of his probation, according to a person who understands the process but asked not to be named. If Fox hasn’t fully paid restitution after his probation ends, the U.S. Attorney’s Office can have its Financial Litigation Unit order him to keep paying.
When Fox was sentenced in 2015, he expressed remorse for running the Ponzi scheme. U.S. Federal District Court Judge James Donato excoriated Fox for his crimes.
“This was a long-running empire of deception that Mr. Fox carefully tended to for years at the cost of thousands of victims and tens of millions of dollars,” said Donato. “It was thought out. It was deliberate. Even though some of his clients were wealthy, this is not a Robin Hood story. This is a man who defrauded whoever walked through his door.”
Fox vowed to pay back the customers he had defrauded.
“I wish I could go back in time and undo all the damage I caused, but I know I can’t,” said Fox. “I want to serve my time in prison. When I get out I hope to pay back everyone. With good health, I can pay everyone back.”
When Donato asked Fox how he would pay back the customers he defrauded, Fox said that he planned to take courses in prison and get a degree in computer science. When he is released, he said he hoped to start a company and “become a billionaire.”
Update, 2/24: The story originally said Fox was sentenced in December 2015. It was December 2016, which means he is getting out of prison two years early.