Basaltine indicted in phony wine futures scheme
A Basalt resident who owned a now-bankrupt online wine business was indicted by a federal grand jury in Los Angeles yesterday for allegedly bilking his customers out of millions of dollars.Ronald Phillip Wallace, 47, is charged with fraud after a number of his customers complained they sent money to his company, Rare LLC, for older wine and wine futures that they never received.Wine futures are what a customer buys when a wine has been fermented but not yet bottled. The 21-count indictment includes charges of mail fraud, wire fraud and money laundering. It claims that with the millions of dollars Wallace took from his customers he remodeled his Basalt home, made payments on his BMW, and paid off past debt from a Beverly Hills wine tasting.The court papers also list a number of well-known customers as victims, including Guess? Inc. co-owner Paul Marciano, who paid nearly $115,000 for bottles of a 1998 Bordeaux that Wallace allegedly never secured from wine vendors.Prosecutors also say Seattle Mariners pitcher Jaime Moyer paid $30,000 for futures on a 2001 vintage, and movie producer Arthur Sarkissian paid $11,700 for two cases of exotic wine of older vintages. Only one of the cases was delivered, according to the government.Wallace collected more than $8 million from customers who wanted to buy futures of a 2000 Bordeaux, known to wine critics as a particularly great vintage. He solicited customers through the Internet and advertisements in publications like Wine Spectator, according to prosecutors.The fraud occurred from 1999 to early 2003, they claimed.The indictment alleges that Wallace operated a “Ponzi scheme” in which he used money from new clients’ purchases of futures to buy on the open market the wines his existing customers believed they had bought as futures. In March 2003, Wallace was sued in Pitkin County District Court three separate times by clients who claimed they paid hundreds of thousands of dollars for wine they never received.Rare LLC was forced into bankruptcy in March 2003, when it owed more than $13 million from purchases of wine futures, according to the indictment. Wallace, appearing disheveled and wearing a sweatshirt and shorts after his arrest at his Basalt home early yesterday, told U.S. Magistrate Judge O. Edward Schlatter that his attorney informed him earlier this week that she had been working with the U.S. attorney’s office on a plea agreement.”This was a surprise,” Wallace said of his arrest.”It’s always a surprise,” Schlatter responded.Wallace’s attorney, Pamela Mackey, was not in the Denver courtroom for the hearing and did not immediately return a call for comment.Schlatter ordered Wallace held on $1 million bond and scheduled a hearing Tuesday in which the government will have to prove Wallace’s identity before he can be sent to Los Angeles, where the case will be prosecuted. Wallace’s company is registered in California.The case against Wallace was investigated by the Los Angeles Field Office of the Federal Bureau of Investigation and the Internal Revenue Service, Criminal Investigation Division in Glenwood Springs. If convicted of all charges, he faces a maximum of 195 years in prison and forfeiture of the money he gained from the scheme. The Associated Press contributed to this report.Naomi Havlen’s e-mail address is firstname.lastname@example.org
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