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Ted Hall
 
November 18, 2009 | Ted Hall

Jail Time

We have bittersweet feelings today.  The man who destroyed our entire wine inventory in 2005 is going to stay in jail.

Mark Anderson pleaded guilty on Monday afternoon in federal court in Sacramento to 18 counts ranging from arson to wire fraud to income tax evasion. After more than four years of our anxious waiting, he admitted to all of the alleged crimes. In a plea bargain, he agreed to exchange a guilty plea for a sentence of about 15 years in jail instead of the possibility of life in prison following a trial.

On October 13, 2005, Anderson changed our lives forever. He set a warehouse fire to cover up a Ponzi scheme in which he was stealing wines from clients who had entrusted their collections to him for safekeeping. He lived a fancy lifestyle in tony Sausalito using the proceeds of wines stolen from collections belonging to his clients.

He has now admitted that he torched the Wine Central Warehouse where we and 90+ other wineries had recently moved our bottled wine inventories. (We thought the former Navy submarine torpedo repair facility represented the securest possible location to store our wine prior to shipment to our distributors.)

Destroyed LMR winesThe total losses are estimated to be between $250 and $450 million. Luckily, no one died in the fire, but this event forever changed the lives of many people in the Napa Valley wine industry, including our own.

We lost our entire wine library,  from our first vintage in 1994 through 2002, and every bottle of wine we held in inventory (with the exception of a few large format bottles). Only wines aging in barrel in our cave were left.

We lost millions of dollars (even with an insurance settlement) from our small family business.

Picking through the ruined LMR winesWe also were left without any product to sell for many months (the 2001 and 2002 vintages of LMR Cabernet Sauvignon were totally lost). At that riveting moment, we had 19 employees and had lost our principal source of revenue, our wines. (While we had some revenue from beef and olive oil sales, we had not yet fully developed these components of our business.)

Everyone was stunned – including me. Despite a long, successful professional career, I feared that we would be overwhelmed financially.

In the face of adversity, my father used to say: “When you have lemons, make lemonade.” So, we did.

Looking for ways to keep our identity in the marketplace, we introduced two new products. We used nine tons of Cabernet Sauvignon pomace remaining in the last fermentation tank of the vintage to make grappa - with the gracious help of the folks at St. George Spirits in Alameda.

Next, we took advantage of four small experimental lots of Sauvignon Blanc wine that we had in the winery. We blended these lots, bottled the resulting cuvee, and then released our first commercial white wine - even though it was only about 500 cases.

These steps helped us sustain a dialogue with some of our most important customers. Nevertheless, we were not able to return to the market until the early release of our 2003 Cabernet Sauvignon - more than a year after the fire.

As a result, we lost many placements with restaurants and retailers that we had spent more than 7 years developing. Buyers come and go and our identity was often lost in the transition: no wine, no visits, no listings on wine lists.

Thankfully, today, we are on the verge of recovering our momentum. “Lemonade is flowing,” as my father would say.

We took advantage of the hiatus to trim our distributor network to the focus on the most attractive markets and on distributors with whom we had truly productive relationships. We fired more than 10 distributors - and we are better off as a result.

In addition, we acquired (with the help of family and friends investors) the 42-acre San Mateo Vineyard and now have a rapidly growing Sauvignon Blanc wine offering. At the same time, we built meaningful grass-fed beef and olive oil businesses and successfully introduced our first reserve wine, 2005 E.J. Church Cabernet Sauvignon Reserve.

We also repositioned our wines to more attractive prices, which has helped us significantly in the current economic climate. (For example, we reduced our Cabernet Sauvignon bottle price from $55 to $39 to aid the reintroduction of our brand).

Most significantly, we have created the new destination location in St. Helena, Long Meadow Ranch Winery & Farmstead, which will open soon. Ironically, we probably would not have taken on this major challenge had it not been for the fire.

Nevertheless, we plan to testify at Anderson’s sentencing hearing. His actions destroyed our winemaking history, severely impaired us financially, and put at risk the livelihood of nearly two-dozen employees who had given significant portions of their lives to create our wines.

For others in the industry, sadly, the negative impact was even greater. Many will not recover.

Bernie Madoff has made international headlines because of the far-reaching impact of his Ponzi scheme. Anderson’s version has had equally devastating impact on our Napa Valley community. These men have stolen the fruits of the labor of countless workers.  

Sadly, the wines - which contain the prideful efforts of so many - can never be recovered.

We will be sure that the judge understands.
 

Comments

Brian Moran's Gravatar
 
Brian Moran
@ Apr 12, 2011 at 11:35 AM
I am sickened to hear this story, I had no idea this had happened! You and your employees deserve much appreciation for your perserverance. This just goes to show that greed is NOT good, and you CAN make "lemons from lemonade". Thanks for sharing. Brian Moran, Orlando, Fl.

Mark's Gravatar
 
Mark
@ Apr 12, 2011 at 11:36 AM
Ted,

I have met you and your family of business associates quite a few years back. Your wine rocks and yourpassion for this really rocks.

Thanks for keeping us in good company with your wine, oil and Beef.

Good luck and I look forward to many new experiences with LMR

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