History of Drinks Investment Fraud

Drinks investment frauds are a relatively new phenomenon, starting in the early 1990s with fraudsters offering young barrels of whiskey as a sure-fire investment.  On the surface the ‘investment’ might have made some sense: buying new-fill barrels of whiskey and selling then on once they were mature. In reality, it made no sense – investors were over-charged and multi-national companies like Diageo have no interest in buying a few barrels from individuals.

I missed the beginning of the whiskey barrel scam, which was initially covered by Andrew Jefford in The Evening Standard. Companies like Marshall Wineries founded in 1993 and soon followed by the likes of James Devereaux, Hamilton Spirit Management, The Napier Spirit Company and Williams Buchanan.

During 1997 most of these companies disappeared: either closed in the public interest or simply vanished. I remember passing James Devereaux’s shop in London’s prestigious Burlington Arcade soon after the cowboys had fled leaving only a few twirls of wood shavings  – small comfort for gulled investors!

The whiskey  scams appear to be largely confined to the English-speaking world, in particular the UK, the US and Australia. More recently they started appearing in the Asia-Pacific. There are only few examples of companies targeting investors in Continental Europe, although some frauds have been based there – in particular in the Netherlands and Spain.

Whiskey barrels were soon followed by the Champagne for the Millennium scam. A fellow wine writer informed me that a number of companies were offering over-priced Champagne on the premise that by Millennium night – 31^st December 1999 – the world would have run out. Such would be the demand in the lead up to the 21^st Century that anyone holding stocks of Champagne was guaranteed to make a killing. Nonsense, of course, but it sparked my interest.

This was clearly another dead duck investment, especially when it was way over-priced cheap Champagne and, in the case of Berkley Champagne Supplies Ltd, never actually bought. Often it was the same cast and again impressively named companies like Connaught Belgravia masked shady boiler room operations.

Wine investment frauds have come in three waves. The first ran from 1998 to around 2004 and involved a relatively small number of companies including Goldman Williams, City Vintners, Ransby Hoare Associates, Liquid Acquisitions and James Hewitt Associates. Fortunately the UK’s Department of Trade & Industry was very active in closing nearly 20 companies in the public interest.

The first wine scam investment company was founded in 1996. Called Lonhroes International Ltd, trading as The House of Lonhroes it had nothing to do, of course, with Tiny Rowlands’s multi-national corporation Lonrho plc, although the similarity and thus confusion was naturally intentional.  It was closed in 1998 for marking up investments

The second wave coincided with the rapid increase in the price of top Bordeaux with the 2005 vintage. The financial crash of 2007-2008 accelerated the interest in alternative assets and gave scammers new opportunities. The DTI was much less active, and thus the number of companies spiraled and several like European Fine Wines – founded 2005 bust in 2014 – were allowed to operate for best part of a decade without impediment. Investors are invariably overcharged for their wines. Furthermore a number of companies such as The Bordeaux Wine Trading Company, failed to buy the wines.

We are now into a third wave with the scam having reversed – victims of previous wine investment scams are contacted by new companies and offered absurdly attractive prices for their overpriced wine portfolio. Frequently they are fed stories about a rich Chinese Hong Kong businessman desperate to have a stash of fine wine for The Chinese Year.

Of course as soon as the victim transfers their wine out of their bonded warehouse account the deal goes sour and their wine disappears leaving them completely cleaned out and hung up to dry.

For some reason Bromley, a town in the southern eastern part of the London conurbation, has become a hotbed of such schemes, to such an extent that many people are now suspicious of any wine or investment company based there. The scam contagion has now spread westward to Croydon, so it is perhaps not too fanciful to think of a ‘scam corridor’ running across South London!

 These scams have attracted some interesting characters.  Although I never met him, Raun Austin was perhaps the most impressive. Astute and a very good organizer Austin might have made a more than good living in financial services if he had chosen to go straight. Austin ran two highly successful wine investment scam companies – City Vintners and Goldman Williams. By the time these two companies were closed in the public interest they had a turnover of £19 million. It was apparently Raun’s ambition to corner the market in 1996 First Growth Bordeaux. He succeeded to the extent that the price which had been pushed up while City Vintners and Goldman Williams were active fell back on their demise.