In a blow to the integrity of the Bordeaux futures market, Ronald Wallace, the former owner of online and mail-order retailer Rare Fine Wines LLC, has agreed to plead guilty to a host of federal charges ranging from two counts of mail fraud, four counts of wire fraud and one count of conducting an unlawful monetary transaction. Wallace, who faces a maximum possible sentence of 70 years in federal prison, has already agreed to pay restitution to his former customers. His formal sentencing has yet to be scheduled.
As part of the plea, Wallace, a 47-year-old resident of Basalt, Colo., is admitting that from 2000 through 2003 he operated what was essentially a Ponzi scheme in which he sold wines and futures he never delivered. He has agreed to be held accountable for provable losses of at least $2.5 million.
"The heart of the fraud that Mr. Wallace committed was that he told his customers he would collect 'early deposit' money from them, and then use that money to secure large allocations of wine futures--mostly Bordeaux futures," assistant U.S. attorney Pamela Johnston told Wine Spectator. "Our analysis showed that he wasn't using his customers' money as he promised. He was using it for lots of different purposes, but he wasn't putting deposits down on the futures."
For the highly rated 2000 Bordeaux vintage, Wallace collected $8 million from customers and used some of the money for car payments, remodeling his house and importing a BMW M5 from Europe, among other things, according to the U.S. attorney's office in Los Angeles. By the time the scheme collapsed in March 2003, Rare Fine Wines owed its clients $13 million in wine it had never delivered, according to the indictment that was filed last fall.
Johnston said that her office will probably ask the judge for a prison sentence of "something less than eight years."
Among the Rare Fine Wine customers who reported losses are Guess? executives Paul and Maurice Marciano, Seattle Mariners pitcher Jamie Moyer, several entertainment executives and former Microsoft executive Scott Oki.
"I think it's good that he recognizes and is no longer denying that he did something wrong. It's good that he's taking responsibility for his actions," Oki said when asked for his reaction to Wallace's guilty plea. He added that he is no longer buying wine futures from anyone.