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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Cosentino Winery’s Legal Issues Could Seal Its Fate In Next Few Weeks

Cosentino Winery’s fate could be sealed in the next few weeks if it fails in its current desperate race to find new financing and settle legal debts according to court records, creditors and legal sources.

The winery’s principal owner, Larry Soldinger of Chicago, recently told the Napa Valley Register that the company’s legal problems were “yesterday,” but a Wine Industry Insight investigation has shown that  some steep hurdles and short deadlines stand between it and survival.

Wine Industry Insight has contacted Soldinger and Cosentino Winery for comment more than 20 times over the past six months. But aside from one recent, anonymous email, no one associated with the winery has ever responded.

SLOW SALES, LOSS OF CREDIT LINE TRIGGERED AVALANCHE OF LEGAL & FINANCIAL PROBLEMS

Hit by the recession like the rest of the wine industry, Cosentino had a worse-than-expected 2008 which was compounded by the March 2009 loss of its $18 million credit line after the company’s main lenders indicated that they were unlikely to be able to restructure the finance facilities.

The resulting cash problems resulted in a spate of tax liens and  lawsuits in both Napa and San Joaquin Counties. The company suspended the trading of its stock (L:MCOZ) on June 30 when it was unable to release its fiscal year 2008 financials.

Then, on August 31, Cosentino narrowly avoided having its license to buy 2009 grapes revoked for failing to pay almost $1.2 million to growers from the 2007 and 2008 vintages.

Many more details on what has led up to the winery’s crisis can be found in the links at the bottom of this article.

VIP Subscribers click here to read the complete, un-redacted article.

Also In This Article:

The full text of the following sections is available to VIP Premium Subscribers).

  • SOME COURT CASES ARE “YESTERDAY,” BUT OTHERS REMAIN “TODAY” AND “TOMORROW”
  • CDFA JUDGE INCLINED TO REVOKE LICENSE IF GROWERS UNPAID BY END OF YEAR
  • COSENTINO PUT ON PROBATION IN 2007 FOR GROWER NON-PAYMENTS
  • MUSTARD’S GRILL “WILL ENFORCE” ITS $161,000 JUDGMENT
  • CARPENTER FILES CONTINGENT SETTLEMENT ON $500k+ DEBT

  • SUMMARY: 10 NAPA SUPERIOR COURT CASES AND STATUS

The summary data, below, was compiled from documents on file at Napa Superior Court. Because court documents are not always correct, nor always up top date, Wine Industry Insight emailed the list to Cosentino Winery, Larry Soldinger, and others in winery management requesting comment.

WII did receive a terse reply from the anonymous email address:  “general mailbox” at Cosentino Winery. Because WII’s search could locate only the Carpenter Ranch settlement in the court records, we requested a follow-up, asking for documents to verify the winery’s assertations.

No reply was received. WII then contacted as many of the parties as possible.

The complete Cosentino reply sent by anonymous email is in red.

(The remainder of this section is available to VIP Premium Subscribers)

PREVIOUS WINE INDUSTRY INSIGHT COVERAGE OF COSENTINO WINERY

Cosentino Winery Sued For $500K+ In Latest Legal Battle

Lewis G. Carpenter, Jr., owner of Carpenter Ranches of St. Helena has sued Cosentino Winery in Napa County Superior Court for more than half a million dollars he says is still owed for wine grapes from 2008.
Cosentino’s court papers, “denies each and every allegation.”

Follow-Up On CDFA Cosentino Hearing

While majority stockholder Larry Soldinger and other officials of Cosentino Winery have failed to return any of Wine Industry Insight’s requests for information about this (or any of the previous articles), more details have emerged from participants and observers at the August 31 hearing to revoke the winery’s processor license for non-payment of $1.2 million in wine grape purchases.

Judge Lets Cosentino Dodge $1.2 Million In Grower Payment Demands

An administrative law judge has ruled that Yountville’s Cosentino Winery can buy winegrapes this year despite owing previous growers $1,197,442 for fruit from the 2007 and 2008 vintages.

Cosentino Woes Mount, Stock Trading Suspended

Unable to meet the London Stock Exchange’s deadline for filing its financial statements for 2008, Cosentino Signature Wineries (LSE: MCOZ) asked today that trading in its stock be suspended. The company’s 2006 and 2007 annual reports were filed on May 9, 2007 and May 20, 2008 respectively. The deadline for filing is June 30.

Cosentino’s Strong Consumer Support Not Reflected In Financials

An hour or so at Cosentino Winery’s Yountville tasting room will show the most skeptical observer that the pricey vintner has a strong core of fans and supporters that would be a credit to anyone selling wine.
Unfortunately, that isn’t reflected in the overall company’s financial situation or stock price.

Cosentino Scrambles For Shelter To Stay Ahead Of Lawsuits

Lawsuits in San Joaquin County have forced Cosentino Signature Wines PLC’s (MCOZ.L) to scramble for new venues where it can continue winemaking and tasting room operations.
Multiple sources have confirmed that, after Cosentino hurriedly vacated its Lodi-area wineries, it placed its wine from there — and possibly some equipment — at other area wineries.

Sale/Leaseback Owners Shopping Cosentino’s Lodi, Pope Valley Wineries and Vineyards

Entertainment Properties Trust (NYSE: EPR), is looking for buyers for Cosentino Winery’s Lodi and Pope Valley wineries and vineyards.

Cosentino’s Financial & Legal Woes Gathering Momentum

The recent announcements from Cosentino Winery that it had abandoned most of its vineyards and wineries and defaulted on the interest payments due on $18 million in debt may be just a prelude to a gathering storm of lawsuits and financial crises.

Cosentino Defaults On Loan Interest, Says Current Banks Won’t ReFi

Napa Valley’s Cosentino Signature Wines said it is in talks with third parties over a refinancing of its $18 million debt facility after the company’s main lenders indicated that they were unlikely to be able to restructure the finance facilities.

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Posted by lperdue on Dec 22nd, 2009 and filed under Featured Articles. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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