While prospects for insolvency have captured the attention of those following the W. J. Deutsch's lawsuit against Ascentia Wine Estates (AWE), the process has unleashed a series of corporate mismanagement allegations against CEO Jim DeBonis.
"Eight Estates [a former name for AWE] may or may not be insolvent in a purely technical sense," said one source associated with the process. "But there is no denying that it has serious sales and financial problems, most of which result from executive mismanagement. That said, the company's only way out of its financial jam may be to file Chapter 11 in order to force debtors to restructure its debt."
That source, along with 17 others interviewed by Wine Industry Insight, spoke only upon a guarantee of confidentiality, some because they were not authorized to speak with the media and others fearful of "blowback."
"This is messy and going to get a lot messier before it's over," explained one source. "There will be collateral damage. People are going to get shot in the crossfire."
ALL SOURCES GIVEN OPPORTUNITY TO CORRECT & COMMENT
On Sunday evening, Wine Industry Insight emailed a draft of this article to DeBonis, Peter Deutsch and to all sources requesting corrections and additions by noon Monday. While not a standard WII practice, the shortcomings inherent in articles that rely heavily on unnamed sources demand an extra effort to insure a fair, accurate, complete and contextually accurate article.
Information from anonymous sources is never used by Wine Industry Insider unless it is corroborated by legitimate documents or by two or more independent sources.
Neither Deutsch nor anyone from his organization had any comment.
An email from DeBonis read, "Thanks for the opportunity, you definitely have your facts all wrong. I cannot get back to you by noon, but I will later on."
WIN had not received anything from DeBonis by 4:30 p.m. when this article was sent to subscribers,
In addition to its sources, Wine Industry Insight also relied upon W. J. Deutsch's legal complaint filed in Delaware Chancery Court.
DEUTSCH RAN OUT OF PATIENCE, FILED SUIT
"Bill Deutsch got tired of being ignored," said a source familiar with the controversy. "He felt stonewalled, lied to and believed that his legitimate concerns had been ignored. But you have to remember that he's also in litigation with another investment, Renwood Winery. I think he pulled the legal trigger so quickly on this one because he felt his patience with Renwood had been taken advantage of and he was not going to let that happen again."
"Even though WJD has a 27-percent interest, the rest is in the hands of Jim's allies, with GESD holding a whopping majority," said the source.
Ascentia acquired eight orphan Constellation Brands in June of 2008 as part of the $208,770,900 million deal that created AWE.
In that deal, all of AWE's land and wineries were acquired for $115 million by SBV VinREIT, an LLC operated by Kansas-City-based, Entertainment Properties Trust (NYSE:EPR). All the wineries and vineyards were then leased back to Ascentia.
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Also In This Article:
The full text of the following sections is available to
VIP Premium Subscribers).
- GESD PROVIDED BULK OF FUNDING, GOT HEFTY FEES
- GIRAUDO ONLY INVESTOR NOT SUED
- AGREEMENT KEPT DEUTSCH FROM PROPER DUE DILIGENCE
- IMPOSSIBLE FOR ASCENTIA TO MAINTAIN PREVIOUS SALES LEVELS
- DEBONIS SHOULD HAVE KNOWN ABOUT "INFLATED FINANCIAL PROJECTIONS"
- GESD THREATENED TO SUE IF DEUTSCH INVESTIGATED
- MEDIA GIVEN WILDLY CONFLICTING ASCENTIA SALES FIGURES
- ASCENTIA: NO STRATEGIC PLAN + INABILITY TO MOVE QUICKLY
- DEBONIS NO "FREDDIE FRANZIA"
- FINANCIAL WOES PROMPTED ATTEMPT TO SELL BUENA VISTA WINERY
- VINREIT NIXED BUENA VISTA SALE
- BUENA VISTA "LAME" BRAND HURT POTENTIAL SALE
- BUENA VISTA NOW MOTHBALLED, HOPING FOR CUSTOM CRUSH
- BARGAIN BASEMENT SALES OF WINE TO INVESTORS & INSIDERS PROVIDED STOPGAP CASH, DEPLETIONS
- ASCENTIA TOO "BIG CORPORATE" FOR OWN GOOD
- TOP EXECS FAILED TO HALT "TOXIC ENVIRONMENT"
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None of Your Damned Business! Get Lost!
EDITORIAL
Getting any sort of accurate news from many wine companies is like trying to figure out who’s running the Kremlin by watching who is standing next to whom at the Mayday parade. But the old Kremlin apparatchiks have nothing on Jackson Family Wines.
The Santa Rosa Press-Democrat’s Kevin McCallum did the best he could when reporting on the massive layoffs at Jess Jackson’s empire last week. But at every turn, he came up against a dissembling, fact-impoverished stone wall from spokeswoman Caroline Shaw. She did an uncanny impersonation of Nixon press secretary Ron Ziegler during Watergate.
Nixonian arrogance ran through her every statement that cried, “None of your damned business! Get lost! We’re PRIVATE, so go away.”
Yes, Jackson Family Wines is a private company. But when your private company is the largest winery in the county and one of the largest employers, your private business becomes public concern. This holds especially true when you sack 170 of your 800 workers.
The secrecy of huge private financial institutions, the lack of transparency at public ones and the government’s refusal to regulate them have plunged us into a worldwide recession. K-J and other private wine companies are way, way too puny to have a global impact, but their private power exerts enough public influence to ruin lives or make them better.
I’ve run corporations. I have had to lay off employees. If you have any humanity at all, it’s a gut-wrenching, heart-rending process. Like other economic segments, the wine industry will need to lay off even more people. Honest, straight-forward information will serve companies and employees far better than misleading the public.
– Lewis Perdue, Editor, Wine Industry Insight
NEWS UPDATE, Feb. 2, 2009, K-J Layoffs Forwarded to Labor Commission For Investigation
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Lou,
Congratulations on another correct and well written comment.
We are all in very dificult times and need to be very open and straigh forward, particularly with our employees and their families.
Michael
Thanks Michael. The saying that “honesty is the best policy” is as true now as it always has been. Respect grows from that.
Lou,You are completely correct in your comments here, but this democracy is a tough thing. KJ is a private company and regardless of size they have a right to hire and fire employees and a right not to talk about it.
As a community leader they should be setting an example but maybe they don’t feel it’s in their best interests to accept that role. They probably feel that they are doing the community a favor by employing 500 people in this economy instead of the 800 they usually have.
Frankly, this is a time for everyone to grow, not shrink. From this economic disaster will come a greater America and those who lead the charge will be the real heroes of this time. It other times like this people have risen above the greed of doing business at a profit and adjusted their business to help the community survive. Instead of firing 300 people or 37% of their work force it might have been nice for everyone at KJ to elect to take a 20% reduction in pay. At the end of the day people without jobs can’t buy wine!
Lew,
Jess Jackson was a practicing attorney when he launched a small winery in Lake County. Jed Steele, his winemaker, made a “mistake” crafting the Vintner’s Reserve Chardonnay, and the rest is history. Mr. Jackson helped launched Family Winemakers and has been supportive of many other worthwhile causes. And not only did he take on the Wine Institute when it was a vehicle for the Gallos he’s taken on the corrupt horse racing establishment.
The wine industry owes so much to this individual, however he chooses to run his operation. He’s kept it a family business when others have sold out.
Your comment was too self serving. The media doesn’t need to know more than the basics.
TOM
P.S. How does one email the editor. The link didn’t jum out at me.
Tom,
I do need to put my email in a prominent place. On the other hand, the comments area here serves as an instant \letters to the editor.\
I don’t quite see how my comment was \self serving.\ I don’t deny that Jess Jackson has been good for the industry in many ways. But like all humans, he’s not perfect, as this shows.
Basics? Sure, but no one knew ANY of the basics until Kevin McCallum dug them out. This sort of sub rosa attempt at hiding things just brews rumors and bad will.
Just my humble opinion. I’m sure there are others who also disagree with me.
Lewis, Jess Jackson and his companies have contributed enormously to the California wine industry, in both quality and forward-thinking practices. It’s unfair for you to attack them. They’re private employers, and the press has reported as much of the insider information as anyone needs to know. What more do you want from them — the names of those fired? Come on.
Steve, The employees involved are certainly upset at the way they were treated. And trying to hide the layoffs is just a PR attempt to make the winery look better than it really is. Shouldn’t people who might be thinking of doing business or forming a partnership with K-J be aware of the company realities?
The company knew there were layoffs. The employees knew there were layoffs.
But people whose lives are affected by K-J’s large operation and managers running other wineries and wine-related businesses who DIDN’T know may have made incorrect decisions based on a false view of the industry’s economic realities.
I come down on the side of transparency.
And it’s absurd to suggest that I would somehow want the names of people fired.
I don’t know all of the specifics of the exchange between the newspaper reporter and the K-J spokeswoman, but I can tell you from personal experience, when a PR person starts to spin and obfuscate, reporters will more often than not pin their ears back and find out the information they’re seeking anyway, through alternative means. And the company involved usually doesn’t like the end result, because those alternative sources usually have a few other things to say as they provide the information. Media relations 101. As Lew said, transparency and full disclosure are best in the long run, and usually make the story last one news cycle rather than several.
I not sure what exactly the writer was expecting.The answer would be thee same regardless of industry and probably with publicly traded firms also. With a public firm you would have to wait until the next 10Q was filed to see exactly how many were laid off.
I just don’t get your borderline outrage, Lew. Jackson Family Wines, the preponderance of which are ultra premium, is taking a major hit and it will only get worse. As Jon Frederickson noted, of course the layoffs would be severe. What more “transparency” is needed; it’s just common sense. Why probe further? What would be gained? It’s an extremely unsettling time for wineries and winery personnel. This is news?
How about a story on some entity, winery or not, that handled the situation in a more “enlightened” way.
“Self serving”, because you are not disinterested in the enterprises you cover offering up buckets of information. It is your bread and butter. Some third party that didn’t have skin in the game, like an academic or analyst on how private companies reveal bad news would be much less so.
Yes, Lew , it sames like you are trying to kick up a story. I don’t see what the enterprise did wrong.
I see two issues.
One is how the fired employees were treated. The other is a PR and brand management issue.
On both fronts, the order of the day is authenticity and transparency.
Of course, Jackson can run his business however he sees fit, but no company, especially in the current climate, wants to leave a stink trail in their wake.
Paul: I am trying to report the news. They are trying to keep the news from being reported.
You may have noticed that I didn’t break this story, the Press Democrat did. I just shed some light on how tough it was for Kevin McCallum to do his reporting.
Like Kevin, my job is to ask questions and get answers. Some of us just try harder to get the answers.
Lew,
As with all privately held companies, the freedom from shareholder demands is a two edged sword; on one hand the winery can take risks that publicly held companies can’t, but they can also take unnecessary risks to satisfy the whims of the owner.
I don’t know which scenario is in play here, but it is certainly counterintuitive to take a price increase that costs huge amounts of business on the day it goes into effect, and then release 170 employees.
Good reporting though.
Lew, I’ve been traveling a lot and missed this debate. Far be it from me to criticize Jess Jackson or his operation, but since I’ve known you (from my records, you’ve been you’ve been involved in Sonoma County wine politics since November 1990, via your letter to PD managing editor Kyse), you’ve never backed away from a fight or a story, and the industry is the better for it. Keep digging, writing and bringing issues into the open that the powerful don’t want to hear, partner!