Yes to all of these? Then a career in white collar fraud may well be for you.
Over the past decade one of the most popular alternative investment scams has been drink. Since 1993, drinks investment scams in Europe have probably turned over around
£150 million. In 1997, the Serious Fraud Office (SFO) estimated that scams involving casks of whisky alone were worth £60 million. More recently, the Department of Trade & Industry (DTI)
estimated that current red Bordeaux investment scams are worth £50 million. This takes no account of Cognac scams run from Madeira in 1998 and 1999. Add in those scams that
have targeted Americans (especially doctors for some reason), and the figure is likely to rise to £400 - £500 million. In truth nobody really knows, but whatever the figure, there is easy
money to be made.
In December 2001 the DTI closed down the twin companies of City Vintners Ltd. (set up April 1998) and Goldman Williams Ltd. (set up April 1999). Both companies
sold wine at two to three times the market price, while promising their victims that they could expect a double figure annual return. Together they turned over close on £19 million. Their
1,450 clients now find that the wines they bought as an investment are worth, at the very most, £8 million. A total of £2.2 million disappeared overseas from the two companies without
James Devereaux was one of the most successful whisky investment scam companies - there is no secondary market in casks of whisky. At its height the company had a shop in the
Burlington Arcade in London. The company went into liquidation in December 1996 owing £1.9 million, including £1.3 million in unfulfilled orders. Shortly before the collapse, Gary
Eldridge, a Canadian, took £247,000 out of James Devereaux 'without adequate explanation'. Doubtless the UK authorities would be interested in a fuller explanation from Mr Eldridge,
but they have yet to catch up with him.
Last April, David Allan's Allwines Ltd. went bust. The deficit has now climbed to around £3 million. This is mainly wine that was never bought for investors, or wine that was sold
off without the proceeds being credited to them.
If the rewards are temptingly clear, what of the risks? Absolutely minimal, especially if you remain an employee and are not tempted to set up your own scam company. Even if you are a
director, your chances of legal retribution are satisfyingly slim.
From the nearly 100 companies that have been involved in various drinks investment frauds, only four people - Julian Blee, Lewis Daulby, Craig Dean and Lee Rosser have so far been
convicted. They got sentences totalling 21.5 years: Daulby for his part in Cavendish/Hamilton Spirit Management, a whisky investment fraud, Blee and Rosser for The House of
Delacroix, a Champagne investment scam, as well as the whisky fraud, while Dean went inside for Delacroix. In their hey-day all enjoyed an expensive life-style.
Rosser, for instance, had a series of flashy sports cars - a Ferrari followed by a Porsche - as well as two adjoining apartments in Gibraltar and a villa in Marbella. In November 2001
Southwark Crown Court ordered him to repay £519,000 or face a further three years in jail. The four fraudsters netted £10 million from these scams, with Rosser making £4.4 million - not
bad for someone in their 20s. Although the offences took place between 1993 and 1997, the first arrest wasn't until December 1998 and the first trial did not start until September
2000. Furthermore, they all got legal aid.
It would be surprising if the four fraudsters didn't count themselves unlucky. Doubtless in the middle of the night, they must, with some reason, wonder "why did they pick on me?"
The SFO had at least three other investigations into drink investment scams dating back to 1993-1996. Two of the investigations have now been closed without any charges being
brought. In the third, Stephen Jupe, who ran Marshall Wineries, was charged with fraud in June 2002 and is now awaiting trial.
Progress in these investigations can sometimes be slow because of the need to have a police officer present when a suspect is questioned. Scarce resources and other priorities
means that it can be a long wait before one is available.
If your employment is suddenly terminated by the DTI closing the company down, your job prospects are unlikely to be blighted for too long. There is nothing to stop the same operation
opening up again under a different name. It may, of course, be best to use a different set of directors.
The team that ran Liquid Acquisitions Ltd. (closed in the public interest on 30th January 2002), now runs James Hewitt Associates Ltd. David Jackson, general manager of
Goldman Williams Ltd. set up Bordelais & Dutch Ltd. a week after Goldman Williams was closed by the High Court. Bordelais & Dutch may well have no connection with the former
directors of Goldman Williams, but there was no requirement on Jackson to prove that he is a fit and proper person to offer investment advice. Instead the onus is
on the DTI to prove that the new companies operate against the public interest.
Don't be flash. Make sure you don't get too big and attract too much attention. The people who ran City Vintners and Goldman Williams, the leading claret
investment companies, forgot this principle. They also ran penny share dealing operations in Barcelona and Grenada. On 23rd June 2002 the SFO raided 13 addresses in the UK,
Grenada and Barcelona to gather evidence. This investigation started in March, so has moved fairly quickly. Although no arrests have yet been made, it will be surprising if the SFO
does not press some charges.
Should wine investment not work out because of unfavourable publicity, then there are similar scams in art - or you could try ostriches, greyhounds, rare coins - anything that is not
covered by the Financial Services Act.
Gotta stay flexible. Know wot I mean? See that brand new Ferrari over there? It's mine - and I paid cash.
|Visit Jim's own site, www.investdrinks.org, for news and background to drinks investment scams plus some penny share scams too.|
Jim Budd is an award-winning author and contributor to many books and magazines on wine. One particular obsession has gripped him in recent years however, and that is uncovering and exposing wine-related fraud. Jim has helped several investors track down fraudulent wine investment companies and gain the satisfaction of prosecution. It has even led to attempts to "put the frighteners on" Jim himself. It's a dirty, dangerous job, and all fine wine-lovers are ultimately in Jim's debt.