A Basalt wine dealer accused of bilking rich and famous clients out of $13 million for rare wine he never delivered pleaded guilty Tuesday to federal fraud charges.
Ronald Phillip Wallace, 47, faces a maximum of 70 years in prison, a fine of $1.75 million and orders to repay his former customers. However, his plea agreement contemplates a sentence of around five to six years.
Wallace specifically pleaded guilty to defrauding customers of more than $2.5 million in “provable losses” and to using customers’ payments to import a BMW M5 car from Germany for himself.
A grand jury indicted Wallace on 21 fraud counts in September, alleging he squandered much of his customers’ payments by using payments from new customers to fill orders for earlier customers. According to the indictment, he also used the money to pay for the BMW, a membership at the Roaring Forks Country Club, renovations to his Basalt home and to host a wine tasting in Beverly Hills, Calif.
“Unfortunately, in most fraud cases, this is exactly what we see happen: The money has been squandered along the way,” said Pamela Johnston, deputy chief of the major crimes section of the U.S. attorney’s office in Los Angeles. “And, in the end, all we have left is the body. So, we ask the judge to put the person in jail.”
A federal judge in Los Angeles will sentence Wallace in the coming months. Wallace posted bond after his arrest in September, pledging as collateral a $1 million-plus beachfront home in Santa Barbara, Calif., owned by his in-laws.
The federal investigation of Wallace began in Southern California because customers there were the first to go to authorities.
Wallace’s court-appointed attorney declined to comment on Tuesday. Wallace could not be reached for comment.
Wallace’s customers have little hope of seeing their money returned. Most creditors received no repayment in the nearly resolved bankruptcy of his wine dealership, Rare Fine Wines, also known as Rare LLC.
Among Wallace’s jilted customers are the Marciano brothers – Paul, Armand and Maurice – of Guess? apparel fame, with a combined $2.3 million claim; early Microsoft employee Scott Oki, $510,266; Seattle Mariners pitcher Jamie Moyer, $13,257; ESPN college-football analyst Chris Fowler, $22,388; and Arthur Sarkissian, producer of the Rush Hour movies, $15,288.
Several clients have filed civil lawsuits against Wallace and his wife.
Doug Jessop, a Denver bankruptcy lawyer representing many of Wallace’s creditors, said Wallace has either hid his money well or wasted it.
“They could have made (the restitution) $500 million. What’s the difference?” Jessop said Tuesday. “It was my perception that he had not spent all of the money that he claims. There’s a thought that it is somewhere, but someone’s going to have to be really motivated to track down where it went.”
Wallace’s Rare Fine Wines catered to well-heeled aficionados by selling wine futures – a tool for allowing customers to buy rare wine years before it is delivered.
In particular, Wallace placed orders for wines produced by France’s celebrated Bordeaux region. He paid French chateaus and vintners for wine still aging in wooden casks and delivered it to customers after it was bottled two years later. But Wallace overextended himself when it came to the so-called wine of the millennium.
Bordeaux’s 2000 vintage of merlots and cabernets won worldwide acclaim as one of the region’s best-ever crops. Wallace accepted payments – mostly in cash – for $8 million of the 2000 vintage.
However, he delivered little of it, federal investigators charge.
Robert Schleinkofer, a doctor in Fort Wayne, Ind., who paid Wallace $271,639 for 100 cases of 2000 Bordeaux that he never received, said federal prosecutors should have done more to require Wallace to repay his customers.
“They should have given him a time limit and said, ‘If you do not do this in five years, you go back to jail,”‘ Schleinkofer said Tuesday.
Staff writer Kris Hudson can be reached at 303-820-1593 or at khudson@denverpost.com.
