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.

VIP Subscribers click here to read the complete, un-redacted, 2,617-word original article.

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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New Book, “Water, ” Flawed By Factual Errors

My review of Water; The Epic Struggle for Wealth, Power, and Civilization by Steven Solomon appeared in the Feb. 1, 2010 issue of Barrons.

That review noted mistakes in the book, but the review ran long and the editors needed to cut a lot of the detail in order to fit the available space.

The following includes the out-takes that concern just a sampling of the errors as regards water in California.

FLAWED DATA, EMOTIONALLY LOADED VERBIAGE

This book’s biggest flaw lies in the use of old, often second-hand, irrelevant and incorrect data.

And while this is bad enough, the prose is littered with constant overstatements and emotionally loaded verbiage that  steadily corrode the book’s credibility.

In one egregious example, Solomon wrote about “privileged farming businesses that were still guzzling from the trough of socialized irrigation water,” and noted that, “The same volume of water–250 million gallons per year–could support 10 agricultural workers or 100,000 high-tech jobs….” and that “California’s agribusinesses were using 80 percent of the state’s scarce available freshwater but producing just 3 percent of its economic output.”

Disregarding the reality that those 100,000 workers still have to eat, giving Intel more water won’t prompt it to create more jobs, the gallons per worker seemed out of whack.

As it turns out, every part of that statement was incorrect.

U.C. DAVIS STUDY EXPOSES BOOK’S FACTUAL ERRORS

Indeed, Current data from the University of California, Davis (http://aic.ucdavis.edu/publications/moca/mocamenu.htm) indicates that California agriculture uses about 11.14 billion gallons per year (p. 3-25, table 3.21) and has approximately 744,920 (p. 5-7) workers directly involved, that works out to 15 million gallons instead of the 25 million in Solomon’s book.

If one accepts the U.C. Davis contention that another 700,437 workers have jobs that depend on agriculture (p. 5-7), that works out to 7.7 million gallons per worker.

It is also significant that, just as silicon is part of a semiconductor, water is raw material for and a substantial part of the ultimate, edible products.

GREATER EFFICIENCY MAKES NUMBERS LOOK BAD

Significantly that report shows that the number of workers per gallon has been going down as farmers begin to use water more efficiently. The UC Davis study indicates that ag production per unit of applied water increased 38 percent from 1980 to 2000 (p. 2-1).

Thus, Solomon’s number is not only inaccurate but ultimately irrelevant because the better that farmers get at using water, the “worse” his comparison appears.

NUMBERS MEANINGLESS WITHOUT CONTEXT

But there are more errors. California Department of Water Resources figures show that agriculture uses approximately 41 percent of water, not 80 percent. (UCDavis, p. 3-25, table 3.21). As for Solomon’s statement that ag accounts for “just 3 percent of its economic output,” that may or may not be correct. Depending on which specific indicator is selected, the UC Davis study puts cites several specific measurements ranging from 7.3 to 1.2 percent (p. 5-8).Without a definition Solomon’s 3 percent is meaningless.

These are just one small subset of numbers that were fact-checked. Indeed, a book reviewer is not usually in the position or re-researching an author’s work. But when the language is slanted, it indicates there may be an axe to grind. And grinding axes often times means the assertions may not be as reliable as presented.

All of this leads this reviewer to wonder: If these easily checked facts cannot be trusted, what else between the covers might be as questionable?

Water; The Epic Struggle for Wealth, Power, and Civilization by Steven Solomon, HarperCollins, New York, (January 5, 2010), ISBN-10: 0060548304, Hardcover, 608 pages, $27.99

Posted by lperdue on Feb 8th, 2010 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.

2 Responses for “New Book, “Water, ” Flawed By Factual Errors”

  1. Dave Hamel says:

    Again, thanks for the detailed analysis. Wonder how many classes will use Mr. Solomon’s textbook?

  2. lperdue says:

    Hard to tell, but the entire book needs to be fact-checked.

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