Premier Cru Bankruptcy

originally posted by Jonathan Loesberg:
originally posted by VLM:
There are two things I'm curious about. One philosophical, one practical.

Is anyone who kept buying from PC when they were warned/should have known that the business model was fraudulent and received wines ethically on the hook to those who didn't? I guess it's complicated, but everyone I know ITB has known for at least a decade that PC wasn't in the securing wine business. Sure, they got some great stuff back when it was easy to arbitrage wine prices, but for a long time they'd just float prices and take years to deliver because they never had the wines. I don't know that this was a Ponzi scheme exactly, but they were definitely filing orders with new money to old money. People were warned and didn't care because they "got their wines". But did they, really? Didn't they just get others wines, etc?

The practical question is about fakes. Given where and how they were sourcing wines, I've always believed that there were a lot of fake wines tucked in there. People would talk about how wines "looked perfect" and "were cold to the touch" (one of my faves) with spinning capsules. If I were sitting on a lot of high end PC wines, I'd be nervous. Also, there is no idea about unbroken chains of custody and I definitely had heat damaged bottles back in the day.

Anyway, not going to wade into the berserkers morass since I am semi-ITB and have a devious agenda.
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You are making a basic error, which is that you are assuming that because you knew x to be true, so must everybody else and so if they didn't act that way, they must have had some ulterior motive. I think a lot of people, I for one, just disagreed with you. The question of whether I ought to have is separable from the question of whether I did.
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To be fair, I didn't know the way I know the square root of 9. There wasn't "concrete evidence". It was accepted fact at least in circles that I ran in and the information was out there for anyone.

My point is about more than people acting in nefarious ways but rather if willful disbelief has it's own ethical ramifications. "I'm getting such good deals and they've always delivered my wines."

Further, at some level or another, in an obvious flatfooted way, people who did get their wine (virtually all of them for a lot of years, after all) were getting the wines they paid for. The fact that PC's mode of doing business didn't entail (or in some cases didn't entail) using the money in the way they contracted PC to use it does not mean that they were engaged in PC's fraud.
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I'm not so sure, I think it raises some thorny questions that are interesting to think about. If deals are too good to be true, does that mean that someone is getting hurt somewhere? How do we apportion blame for things like that?

I have nothing to say about the second question.
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Using the same type of thought process that leads to suspecting a "Ponzi-like" scheme, it seems that there must be more fakes in the PC channel than in traditional channels.
 
originally posted by Arjun Mendiratta:
I ordered on and off from PC from about 2006-2009 and received everything I ordered. Like most people, I'd imagine, I started ordering from them because the prices were good. I stopped when I finally learned that bad wine at a good price is still bad wine. A couple things:

1) I'm not the most connected guy when it comes to the wine business, but I'm also not the least. If it is true that "everyone" ITB knew about Premier Cru's business model for "at least a decade", all I can say is nobody told me nor anyone I talked to.
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mark e, certainly at least as connected as I, stated the same above. I guess there were many people that didn't think of PC as a fraudulent business. By fraudulent I just mean to say that they represented themselves as having secured wines that they did not secure. FWIW, this was going on long before your buying period.

Good point about bad wine.

2) I think we need to be a bit more specific about PC's business model if we're going to toss around words like fraud. It seems quite clear that they were (sometimes) selling wine that they had yet to source. This may be illegal (and was certainly contrary to what they claimed on their website), but I wouldn't call it fraudulent or inherently unethical.
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I think that they were absolutely being unethical by offering wines that they had not secured and

Sure, you could argue that my wines were paid for with someone else's money, but it is just as true that "my" money paid for someone else's wine. Money is fungible. Plenty of businesses operate this way. When you say "I don't know that this was a Ponzi scheme exactly," you are hedging on what is in fact the crux of the matter.
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I hedged on the Ponzi scheme because that may be specific to finance. I'll call it Ponzi-like. It became exactly this as soon as they were in arrears more than their operating capital (or some mutltiple of that or turnover or something, but some finite number much less than their final outstanding amount).

Perhaps a better way to think about this is to divide the wine that PC was selling into three categories:

A: Wine that they owned
B: Wine that they did not own, that they could source profitably on the open market
C: Wine that they did not own, that they could only source at a loss
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I think there was some A, but there was no distinction between B and C. They offered a wine and figured out how to get it later.
 
Willful disbelief doesn't really distinguish itself from disbelief in ethics unless the willfullness rises to the standard of negligence. By your own account, given that ITB people were not uniform, I don't think it even comes close. Even if ITB people were uniform, I doubt it would rise to that standard for non-ITB people, precisely because they were non-ITB. As I say, the fact that the people who felt this way got there wine, and heard lots of reports of other people getting their wine, provided good, normal, seat of the pants affirmation that PC was operating honestly. The fact that seat of your pants evidence is frequently pretty lousy evidence would hardly be sufficient to prove that those who followed it were negligent.

The same argument follows with regard to the money chain. How you contract for your money to be used and how a business uses it are two different things. If they are using it at some level to secure wine (which they manifestly did and not in the minority of cases)makes your argument rest on knowing which cases that did not happen in and, again, having some basis for separating customers whose money was used to secure wine from customers whose money wasn't as the basis for some sort of clawback.

This is even more complicated by the fact that many of PC's largest creditors were not individual wine buyers but 1)suppliers of wine to whom PC did not pay their bills and 2)other retail operations that bought from PC and resold (ITB people therefore). Making clawback under that circumstance I would think near impossible.
 
By the way, I completely disagree that a wine-buying transaction says anything about how the vendor uses the money. A wine-buying transaction simply says I will give you these dollars and you will give me that wine. They don't tell me how to drink it and I don't tell them how to spend it. It's a better world that way, you know.
 
originally posted by Jonathan Loesberg:
Willful disbelief doesn't really distinguish itself from disbelief in ethics unless the willfullness rises to the standard of negligence. By your own account, given that ITB people were not uniform, I don't think it even comes close. Even if ITB people were uniform, I doubt it would rise to that standard for non-ITB people, precisely because they were non-ITB. As I say, the fact that the people who felt this way got there wine, and heard lots of reports of other people getting their wine, provided good, normal, seat of the pants affirmation that PC was operating honestly. The fact that seat of your pants evidence is frequently pretty lousy evidence would hardly be sufficient to prove that those who followed it were negligent.

The same argument follows with regard to the money chain. How you contract for your money to be used and how a business uses it are two different things. If they are using it at some level to secure wine (which they manifestly did and not in the minority of cases)makes your argument rest on knowing which cases that did not happen in and, again, having some basis for separating customers whose money was used to secure wine from customers whose money wasn't as the basis for some sort of clawback.

This is even more complicated by the fact that many of PC's largest creditors were not individual wine buyers but 1)suppliers of wine to whom PC did not pay their bills and 2)other retail operations that bought from PC and resold (ITB people therefore). Making clawback under that circumstance I would think near impossible.
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cash, well money, would work for a clawback. The court is going to settle competing financial claims and not worry about filling orders.
 
I had wondered what was going on there for years, but I sold them wine late last year (with a post-dated check), as did some of my colleagues. If I had paid attention to the exact prices they were offering I suppose it would have been clearly wrong, but I didn't; I don't know what '02 Drouhin Musigny should cost, or '02 Dom Perignon.
 
I heard that the Clos Centeilles futures, also paid-for with a post-dated check, were on back-order with a just-in-time negociant who was, himself, in arrears for a retroactive shipment sent C.O.D.
 
originally posted by Jeff Grossman:
I heard that the Clos Centeilles futures, also paid-for with a post-dated check, were on back-order with a just-in-time negociant who was, himself, in arrears for a retroactive shipment sent C.O.D.
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So you're saying I WON'T be getting my $60 mags of Clos des Goisses?
 
originally posted by VLM:
originally posted by Ian Fitzsimmons:
originally posted by VLM:
[...]

Ian, I was bummed and surprised to see your posts on that thread. What made you order after I advised you not to? Not trying to pick on you, just trying to understand the reasoning from someone I actually know.

[...]
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Between hand-washing and vaccination, I think the board has established that people often act irrationally: emotion trumps reason, generally speaking.

My personal loss comprises half a case of moderately-priced Jadot, ordered in 2013-2014, and I embrace this cost as tuition for a lesson in focus and self-discipline, which may yet yield a decent return over the years remaining to me. Harkening back to Daniel Kahneman, in Thinking: Fast and Slow, I exhibited affect bias and a planning fallacy when confronted with a halo effect.

I can't explain the commitments by individuals of hundreds of thousands of dollars - even Khaneman's prospect theory doesn't appear to shed light here.

Cheers.
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Ian, I'm glad it wasn't a lot of money and I'm glad you're enjoying mathematical psychology. On a side note, I'm not sure if you know that I overlapped in graduate school with Dan Ariely (speaking of predictable irrationality) and mathematical psychology (otherwise known as behavioral economics) was one of my hobbies.
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I'd not heard behavioral economics called mathematical psychology before reading it here; I suppose you could call economics in general mathematical sociology. Anyway, you have to figure out what to count in a system, and then count those things, before you can hope to build model and predict with it reliably.

Kahneman's book is like a kind of Rosetta stone for many common behaviors. One thing I like about the book is the thoughtful graduation of concepts, from the very simple to the more advanced - which may seem a bit like spoon-feeding to readers already steeped in the subject matter, but is skillfully done from the point of view of the general reader. Another is that nearly everything discussed is linked to specific names and experiments, so the fabric of presentation and argument is refreshingly specific.

I don't agree with everything Kahneman says, but I admire the overall effort, and find many of the ideas very useful. In fact, they help make sense some of the behaviors this board has held extended discussions on - vaccine-phobia, washing hands.

Do you recommend Ariely's books?
 
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