Man accused of running wine Ponzi scheme sentenced to prison

SAN FRANCISCO (BCN) -- The founder of a bankrupt high-end wine store in Berkeley was sentenced in federal court in San Francisco today to six and one-half years in prison for a two-decades-long fraud that cost customers at least $45 million.

John Fox, 66, owner of the now-closed Premier Cru retailer of rare and expensive wines, was given the prison term by U.S. District Judge James Donato.

"This was a long-running empire of deception that Mr. Fox carefully tended to for years," Donato said.

Donato also ordered Fox to pay restitution he estimated at between $45 million and $50 million. The exact amount will be determined at a hearing on Jan. 18. 

Fox pleaded guilty before Donato on Aug. 11 to one count of wire fraud. He admitted during the plea that 4,500 customers had lost at least $45 million in payments for wine they never received.

In a sentencing brief, prosecutors said they now believe the loss to be $50 million.

Fox, who has been in custody since he surrendered to authorities on Aug. 10, was wearing red jail clothing at the sentencing.

"I just want to say that I wish I could go back in time and undo all the damage that I caused," he told the judge.

Fox said he hopes to take courses, possibly in computer science, in prison so that he can earn money to begin paying the restitution after his release.

Premier Cru, which Fox co-founded in Oakland in 1980, sold some wine in its retail store, but gained most of its revenue from selling so-called "pre-arrival" wine or "wine futures" for bottles the company did not yet possess.

Fox admitted during his plea to carrying out the fraud in several ways, beginning in 1994.

One method was to create false purchase orders for non-existent "phantom wine" that he entered into Premier Cru's inventory. He said he sold or attempted to sell $20 million worth of phantom wine between 2010 and 2015.

In other instances, Fox said, he contracted with foreign suppliers for wine, but wasn't able to pay for it, either because he embezzled customers' funds or because he used customers' money to buy wine for earlier clients who demanded their purchases.

When he had to buy wine to satisfy insistent customers, it was usually at prices much higher than the amounts his customers originally paid for the wine, he said.

Premier Cru declared bankruptcy in federal court in Oakland in January 2016.

The maximum possible sentence for the wire fraud conviction was 20 years in prison. Prosecutors and defense attorneys agreed in the plea bargain to recommend the sentence of six years and six months, and Donato accepted the recommendation.

Prosecutors said their calculation of the proposed sentence included credit to Fox for cooperating with prosecutors and investigators beginning in February.

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