John Fox, the embattled co-owner of the wine retailer Premier Cru, faced some of his long-time customers at a creditors’ hearing in Oakland on Wednesday. But rather than explain how his Berkeley company went bankrupt, leaving $70 million in debts and only $7 million in assets, Fox took the Fifth Amendment more than 50 times.
If Fox’s criminal lawyer, Dean D. Paik, had had his way, Fox would not have even stayed around to assert his right to take the Fifth. Before the proceedings began, Paik asked Michael G. Kasolas, the bankruptcy trustee, and Mark Bostick, the trustee’s attorney, if his client could leave because he had no intention of answering any questions.
“There really is no point in having him sit here,” said Paik, a former federal prosecutor who now specializes in defending white-collar criminals. “What is his obligation to appear here? He isn’t the debtor. The debtor is a corporate entity.”
Paik then expressed concern that Fox would receive a “public flogging,” at the hearing.
Bostick responded: “If you feel a corporation can file for bankruptcy and no one has to show up, you are mistaken.”
At one point during the hearing, Maggie McGee, representing the U.S. Trustee, got up from her chair in the back of the hearing room, headed over to the table where all the attorneys were sitting, leaned an arm on the table and looked Paik in the face to insist that he allow questioning to continue.
“You don’t know what the U.S. Trustee does, do you?” McGee said. “Maybe you should educate yourself on this.”
Paik eventually did permit the attorneys and Premier Cru creditors to ask questions; however, Fox did not answer any of them.
Throughout the 90-minute hearing, Fox did all that he could to make himself inconspicuous. As he entered the room, he stayed behind his three attorneys — Paik, who is representing him in the FBI investigation into Premier Cru’s finances, the company’s bankruptcy lawyer, and Fox’s personal bankruptcy attorney. Fox was dressed casually, in jeans, sneakers and a jacket, and he wore a gold cross around his neck. Fox averted his eyes from the 20 creditors and attorneys in the room both when he walked in and during the hearing. He spoke in a low voice while asserting his Fifth Amendment privilege and many in the audience had difficulty hearing him clearly.
Still, there didn’t seem to be anger in the room.
“I wanted to see what he looked like [now], because he was always so arrogant,” said Kevin Wencke, who drove up from Palo Alto for the hearing out of “curiosity.” Premier Cru is still holding 80 bottles of his wine in the warehouse on University Avenue. “He looks awful. He always had this ‘master of the universe’ look when you would see him at the store.”
The only words Fox said were: “On the advice of counsel I invoke my right under the Fifth Amendment not to answer on the grounds it might incriminate myself.”
Despite Fox’s refusal to answer questions, the creditors at the meeting did glean new information about the Chapter 7 bankruptcy proceedings, both through Kasolas’ questions and those of people who lost wine or their attorneys. Here are some of the revelations:
- In 2013, Premier Cru listed $45.7 million in wine future contracts on its tax returns and a similar amount in 2014, Kasolas said. No wine future contracts were listed on bank schedules, he said.
- In 2013, there was a $350,000 loan made to shareholders listed on the tax return. Kasolas asked Fox to whom the loan was made and whether it was ever repaid. He did not get an answer.
- Many of the 71,000 bottles still sitting in the warehouse were “oversubscribed,” meaning that there were more orders than bottles available.
- The trustee has not yet determined if Premier Cru has wine sitting in warehouses overseas. There are not a lot of records tracking these purchases. Kasolas has asked Premier Cru’s bank to send him copies of wire orders of international sales so he can learn the names of the négociants who made the sale. “They are waiting for our phone calls,” said Kasolas. “We just have to figure out who to call.”
- California Attorney General Kamala Harris has sent a letter of inquiry to Kasolas about the case.
- The trustee has not talked to any of the former employees. But they may have known the business was spiraling downward because in December they kept calling customers to tell them to pick up their wines. “It seems like there was a concerted effort to get people their wines,” said Bostick.
- There may not be any equity left in the complex on University Avenue after it is sold and broker’s fees are paid. 1011 University Ave. LLC (formed by Fox and Ortega) owes 60% of the property and Saul Gevertz, owner of Eden Jewelry and Loan Co. in Hayward, owes 40% of the property. The company owes $133,000 to Alameda County in back taxes and there are other liens on the property. County records show that 1011 University Ave. LLC borrowed $3.8 million against the property from the Taylor Family Trust in 2013. The property is for sale for $6.8 million.
- The trustee hopes to have the Premier Cru website restarted this week. Kasolas will put FAQ on the site, court documents, and other information. Those who want to participate in the distribution from the dissolution of the business must file a claim by May 24. The trustees hope to resolve title issues for the wines at the Premier Cru warehouse within six to eight weeks, although they hope to do it even sooner.
- Hector Ortega, the other half of Fox-Ortega Enterprises, which owns Premier Cru, played a smaller role in the partnership than Fox, and concentrated his attention on warehouse operations, according to Kasolas. Ortega and Fox have been friends for decades and Ortega owned the building that Premier Cru first occupied in 1980 on Piedmont Avenue in Oakland, he said. Ortega loaned Fox money. “Hector was never a decision maker,” said Kasolas. “John called the shots.”
Some of Kasolas’ questions revealed areas he is investigating. For example, he asked Fox if he used corporate funds to buy personal autos. (Fox was quite a car collector, according to a number of the creditors at the hearing. He owned a purple Corvette, a Viper, a muscle car, and had two Mercedes at some point. Often, there was a Ferrari and a Lamborghini in the Premier Cru parking lot. On Feb. 25, Wells Fargo filed documents in Fox’s personal bankruptcy case to repossess a $90,000 Corvette.) Kasolas asked if Fox ever received payments other than a salary from Premier Cru or if the company ever transferred funds to Fox.
“I appreciate you stood up to [Paik],” said Don O’Leary, a creditor who lives in South San Francisco, after Fox and his attorneys left the room.
FBI investigating whether Premier Cru ran a Ponzi scheme (02.22.16)
Troubles mount for Premier Cru as FBI steps in (02.11.16)
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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