Wine Executive Charles Banks Sentenced To Four Years For Fraud

Posted: Jun 29, 2017



The former financial adviser pleaded guilty to defrauding retired NBA star Tim Duncan; his partnership at Mayacamas Vineyards is also in jeopardy

Wine executive Charles Banks was sentenced to four years in federal prison yesterday for defrauding retired NBA star Tim Duncan of millions of dollars. U.S. District Judge Fred Biery also ordered Banks, a financial adviser and the founder of Terroir Life, which owns or manages nearly a dozen wineries in California, New Zealand and South Africa, to pay Duncan $7.5 million in restitution and serve three years of supervised release after he finishes his prison time.

In a statement in the San Antonio courtroom before the judge handed down the sentence, Banks apologized to his family and told his former client, “Tim, I'm sorry.” Banks pleaded guilty to one charge of wire fraud in April.

The case stems from allegations made by former NBA star Tim Duncan, a longtime Banks client, who says he was duped out of millions of dollars in various investments Banks made on his behalf. In a “statement of facts” filed March 31, lawyers for Banks admitted that he misrepresented the terms of an agreement Duncan signed related to investments in a sports-merchandising company called Gameday. “Charles Banks acted with a knowing intent to deceive Tim Duncan,” read the document.

In a hearing before sentencing yesterday, Duncan said Banks could have settled this without lawyers. “I just wanted you to own up, pay up and we'd move on,” said Duncan. “You wouldn't, so now we're here with this in front of a judge.” In a statement filed with the court, Duncan stated, “[Banks] earned my trust as my financial adviser and friend.”

Uncertainty at Mayacamas
Banks' legal troubles are far from over. He also faces a civil lawsuit by Duncan over the investments as well as allegations that he diverted some of that money to himself. The case does not involve any of Banks' wine enterprises, and executives at Terroir Life insist the company is running smoothly. "Our thoughts are with Charles and his family,” CEO Kevin McGee told Wine Spectator. “Since the case was separate from Terroir, we were all reading about it as it was going on, and we feel truly bad for him and his family.” Banks stepped down as CEO after his plea bargain.

But Banks has been tangling in civil court with his business partners at Mayacamas, the Napa winery he and his wife purchased in 2013 with American Eagle Outfitters and DSW chairman Jay Schottenstein and his family.

The Schottensteins are suing Banks for breach of fiduciary duty, and asking him to step down as winery president. It is their belief that Banks' status as a convicted felon puts Mayacamas' licenses and permits at serious risk.

According to documents filed in Napa County Superior Court, the Schottensteins contend that following the Banks indictment, he diverted funds from Mayacamas to help pay for his costly legal fees. Additionally, they believe he directed more than $500,000 of Mayacamas' wine sales to his own company, Terroir, to supposedly pay for marketing commissions which have not been invoiced. The purchase of Mayacamas was a personal investment for Banks; Terroir simply provides marketing and sales support for the brand.

Additionally, the Schottensteins allege that Banks marketed Mayacamas for sale without consent and refused to disclose the names of interested buyers. And they claim that Banks stopped paying his share of the winery's operating costs.

Neither attorneys for Banks nor the Schottensteins have responded to requests for comment.

This is the second lawsuit between Mayacamas' owners. Banks filed suit against the Schottensteins last year in an attempt to dissolve their partnership. He alleged that the family refused, on multiple occasions, to allow Mayacamas to benefit from and have access to lines of credit. Banks also asserted that they purchased unnecessary items with the company's money and blocked payment owed to Terroir. That lawsuit was dismissed in January 2017 after the parties settled out of court.

Before filing their suit, the Schottensteins called a special meeting of the board of directors of Mayacamas for April 7, with the agenda of replacing Banks as director and removing him as president. Banks was a no-show. Next they filed suit. The Schottensteins are seeking Banks' removal, as well as compensation for damages and legal fees.

Banks is potentially facing more fallout from his conviction overseas. Due to his ties to New Zealand–based Trinity Hill Winery, of which Terroir acquired a controlling share in 2014, New Zealand's Overseas Investment Office, a government agency responsible for regulating foreign direct investment, is questioning Banks' “good character.”

The agency issued a release stating, “In light of Mr. Banks' guilty plea, the OIO is considering whether Mr. Banks remains of good character, and has met Terroir Winery Fund's representatives to make it clear that in our view, Mr. Banks is unlikely to meet his ongoing obligation of good character.” The statement concludes that if Banks is deemed not of good character, they will seek to remove him from his partnership with Trinity Hills.

The next scheduled hearing for the Mayacamas case is Sept. 19 in Napa, but Banks will not be attending in person. He is scheduled to report to federal prison Aug. 28.

By Aaron Romano, Mitch Frank
June 28, 2017
Source: Wine Spectator




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