Berkeley wine shop owner John Fox pleaded guilty to wire fraud Thursday after falsifying purchase orders over the course of five years for approximately $20 million worth of phantom wine that he never purchased.
According to the plea agreement, Fox admitted to organizing a Ponzi scheme at Premier Cru to defraud customers by selling wine that was never delivered to them. Fox’s total personal gain was approximately $5 million.
“He worked at this business for 30 years, and he’s truly sorry for what happened,” said Fox’s defense attorney Robert Breakstone in an email. “He’s trying to make amends now by pleading guilty.”
The U.S. Attorney’s Office recommended that Fox, 66, be sentenced to more than six years in prison and pay restitution to cheated customers. The maximum sentencing for Fox’s charge is 20 years in prison and a restitution payment of twice the amount gained as a result of the scheme.
Approximately 4,500 Premier Cru customers were left without their purchased wine bottles when the company declared bankruptcy in January. Michael Kasolas, Premier Cru’s bankruptcy trustee, filed a motion to liquidate Premier Cru assets and sell more than 78,800 bottles of wine to repay creditors in March.
Fox co-founded Premier Cru in 1980 with several others, later moving the company to its University Avenue location in Berkeley. The business primarily operated based on commitments to deliver European wines to customers within about six months to two years after their purchase.
Several complainants filed lawsuits in 2015 against Premier Cru for almost $70 million, alleging that the company failed to deliver purchased wine. In January 2016, Fox Ortega Enterprises — the company that owned Premier Cru — filed for Chapter 7 bankruptcy. At that time, approximately $45 million of wine had been purchased by customers who had not received their orders.
“He will try to make restitution as best he can,” Breakstone said in an email. “Because that’s part of the judgement that’s going to be against him. Is he going to be able to pay 45 million dollars? I have no idea.”
Fox embezzled funds by using the wine shop’s business account for personal expenses as well as transferring cash from the business accounts to personal accounts in both his own name and fake names, according to the plea agreement.
The embezzled money was used to pay for personal credit cards and purchase expensive cars such as Corvettes, Ferraris, Mercedes-Benzes and a Maserati. He also bought private golf club memberships and paid for personal expenses, including $900,000 on women he met online.
Fox estimates that he owes between 5,000 and 10,000 people money, according to court documents. His liabilities are between $50 million to $100 million.
Fox’s sentencing hearing is scheduled for Dec. 14 in Oakland.