15 June – LAWFUEL – The Law News Network – A Colorado man who operated an Aspen Valley wine outlet called Rare LLC has agreed to plead guilty to federal fraud charges for bilking connoisseurs out of at least $2.5 million worth of wines and wine futures.
Ronald Phillip Wallace, a 47-year-old resident of Basalt, Colorado, has also agreed to plead guilty to conducting an unlawful monetary transaction in connection with his importation of a BMW M5 automobile from Germany.
In the plea agreement filed this morning in United States District Court in Los Angeles, Wallace admits that from early 2000 through January 2003 he operated a fraudulent scheme that purported to sell clients wine and wine futures. In the case of many customers, Rare did not own, had not otherwise secured and never obtained the wines promised to customers. Wallace admits that he collected “early deposits” from some customers who wanted to purchase wine futures from Rare, and that he used some of the later clients’ “early deposits” and other payments to pay-off or otherwise satisfy earlier clients.
In March 2003, Wallace’s fraudulent scheme collapsed, at which time Rare owed its clients more than $13 million in wines that were never delivered. The $13 million figure represents amounts paid by clients for the wines, but this figure was substantially less than the then-fair market value of the wines. Wallace and the government have stipulated that the provable losses for which Wallace will be held accountable at sentencing exceed $2.5 million. Wallace has agreed to pay restitution to his former customers, and the district court will determine how much each victim will be due.
Wine futures – particularly in relation to French wines such as Chateau Haut-Brion and Le Pin, the famed Cabernet Sauvignon- and Merlot-based wines of Bordeaux – refer to offers made by wineries, typically through merchants or negociants, pursuant to which the customer buys wine that has been fermented but not yet bottled. Bordeaux futures are commonly offered the summer after the wine grapes are harvested, which is typically about two years prior to the wine being bottled and released. Wine futures are generally sold at prices much lower than the anticipated retail price of the wine. In addition to benefits of lower costs, some collectors purchase futures because some wines are only available through this method.
Rare solicited business from individuals across the United States through the Internet and advertisements in publications such as Wine Spectator. In relation to 2000 Bordeaux, which was heralded by wine critics such as Robert M. Parker Jr. as an outstanding vintage, Wallace collected more than $8 million from customers who wanted to purchase futures. However, instead of using the monies to pay for the requested 2000 wine futures, Wallace used some of the monies to make payments toward a car; to pay French and London-based negociants, as well as domestic retailers, for older wines that he used to satisfy demands of earlier customers; to pay contractors to remodel his house; and to pay for expenses incurred during a November 2001 wine tasting at the Peninsula Hotel in Beverly Hills.
As set forth in the plea agreement, some of Wallace’s victims include Paul and Maurice Marciano, who are executives with Guess? Jeans; Jamie Moyer, a pitcher with the Seattle Mariners; Garth Ancier, an executive with the WB Network; Arthur Sarkissian, a movie executive; and Antonio Castanos, a local restaurant owner.
“Through guile and deception, Wallace exploited the trust his clients placed in him because of his knowledge of the world’s most collectable wines,” said United States Attorney Debra Wong Yang. “While Wallace plied his trade in the rarified world of wine connoisseurs, in the end he turned out to be nothing more than a common huckster. We are pleased that Wallace has decided to accept responsibility for running this fraudulent business.”
Wallace has agreed to plead guilty to two counts of mail fraud, four counts of wire fraud, and one count of conducting an unlawful monetary transaction in which he used $13,000 of Mr. Sarkissian’s money to import a BMW M5 from Europe. Wallace faces a maximum possible sentence of 70 years in federal prison and an order to make restitution to his victims. Wallace has also agreed that during a three-year period of his supervised release following release from prison, he will not work in the wine industry.
The date for Wallace’s change of plea has not been scheduled, but it is expected to take place in the next several weeks.
The case against Wallace was investigated by the Los Angeles Field Office of the Federal Bureau of Investigation and IRS – Criminal Investigation Division in Glenwood Springs, Colorado.
CONTACT: Assistant United States Attorney Pamela Johnston