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From: lewis.perdue@wineindustryinsight.com

Subject: Foley Wine Group Reorganizes; Massive Court Battle Over Proposed Winery - WINE INDUSTRY INSIGHT

Date: 2009-01-29 18:26:25

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PART ONE OF A SERIES: TURNING GOLD INTO LEAD

Who’s On First? Sonoma Valley Winery Saga Combines Falcon Crest, Abbott & Costello

Editor’s note: Please check the web site for updates to this and other articles in the series. There are many views of the situation among all the many parties involved. Not all of them have responded yet.

A set of county-approved use and building permits for a 125,000-case winery and tasting room at the northern end of Sonoma Valley may seem like a gold mine to many in the wine industry. But the decade-long soap opera of  Mobius Painter Winery and Cellars shows how even the best ideas from the best people can go very bad when investors turn on each other.

Mobius Painter’s long trail of lawsuits, fraud accusations, bitter recriminations, jilted buyers and angry, uncooperative investors may now be entering its final episodes in bankruptcy court.

U.S. Bankruptcy Court Judge Alan Jaroslovsky recently sent the quarreling partners back to the drawing board to hammer out an agreement that was not only equitable, but one which the average genius would be able to comprehend.

Click to enlarge.

Click to enlarge.


COURT DOCUMENTS TELL A FRACTURED TALE

In 1998 prominent winemaker Brooks Painter – who was then at Stags Leap Wine Cellars – collaborated with The Mobius Group a Napa-based architect and design group, to create plans for a winery. At this early stage, the fledgling venture teamed up with Orange County developer Bruce Halvax who agreed to raise money for the venture.

With Halvax’s assistance and $100,000 from a group of eleven Arizona investors, the venture purchased 15-acres of vacant land on the eastern side of Highway 12, across from Oakmont at the northern end of Sonoma Valley. The winery parcel is north of, and adjacent to, the NovaVines rootstock nursery.

Then, in January 1999, Halvax filed the winery plans and permit requests with the County of Sonoma.

The first investors received fractional ownership of the land, but other than their $100,000, it is unclear as of this writing where the rest of the original funds came from to purchase the property.

Shortly after the original sale closed, Halvax borrowed $100,000 from Interstate Lumber Profit Share Plan, a Riverside, Calif., corporation. The April 1999 loan was secured by a first trust deed on the 15-acres.

TAPPING ARIZONA

Following that transaction, Halvax raised an additional $500,000 from six more Arizona investors to further develop the winery. This second group, along with Painter, got a 1% interest in a separate LLC.

Again, the timing is unclear, but by the time this flurry of deals had ended,
Halvax had acquired a 36-percent ownership in the land.

LEGAL DOCUMENTS TANGLED & CONFUSING

A number of limited liability companies (LLCs) formed by Halvax to manage the operation and purchase the winery property form a lengthy, confusing and tangled series of companies and agreements that has made understanding the entire debacle a mind-boggling headache that even legal documents have described as “bizarre.”

In that spirit, a recent ruling by U.S. Bankruptcy Court Judge Alan Jaroslovsky reads like an Abbott and Costello, “who’s on first, what’s on second” routine as he tries to summarize the saga’s most recent foray into court.

125,000 CASE WINERY, TASTING ROOM, EVENTS APPROVED

In August 1999, Sonoma County approved Mobius Painter’s use permit for a 27,000-square-foot production facility and another 10,500 square-feet to be split among four buildings to house administration, tasting room, events and other uses.

In addition to the tasting room and approval to produce 125,000 cases of wine, the use permit allows up to 20 public events per year with up to 250 people per event.

Mobius Painter also agreed to CalTrans demands to improve the intersection with Highway 12 to provide safer traffic flow for itself as well as NovaVine and the Annadel Winery and Gardens on the adjacent parcel to the north.

EVENTS GO SOUTH WITH THE ECONOMY

On June 27, 2001, Halvax wrote to the Sonoma County planner in charge of the project to request an extension of time for completing the project.

The Halvax letter stated that, “the financial turmoil in the stock market and in particular the effect on Silicon Valley has hampered our efforts to complete the fundraising process that will allow us to build this facility.”

Sonoma County approved the extension and vested the use permit, effectively making its terms permanent.

FROM RECESSION TO RECESSION, MISSING THE BOOM IN BETWEEN

Despite having a use permit that many in the wine business consider worth millions in its own right, the damage was permanent. An ensuing series of chaotic desperation moves and the resulting discord assured that the fledging venture would leap from one recession to another and entirely miss the boom in between.

NEXT IN PART TWO:

The founder departs. Investor feuds heat up. Fraud charges fly.  Two buyers get jilted. Halvax loses lawsuits, transfers assets to a new company and takes that one into the currently contentious Chapter 11 process.

JUST FOR FUN: WHO’S ON FIRST?

click for video

click for video



Foley Reorganizes, Changes Name

People who lost jobs at Sebastiani Vineyards and Winery are part of an overall reorganization of Foley Wine Group and should result in an “overall increase in job placement opportunities” in Sonoma, according to Tim Matz of Foley Family Wines — the new name for Foley Wine Group.

“SMALL NUMBER OF LAYOFFS” ARE “NATURAL” PART OF RESTRUCTURING

“It’s natural to do some restructuring after a major acquisition,” Matz told Wine Industry Insight yesterday. He said that layoff’s at Sebastiani were “fewer than five,” and needed to be balanced against an increased Foley presence at the Sebastiani facility.

“We’re centralizing finance, administration, marketing, customer service and purchasing in Sonoma,” he said. That process will involve moving positions from the Central Coast to Sebastiani.

He did not specify how many positions would be affected.

TRANSACTION IS “SUBSTANTIALLY COMPLETE”

Foley’s acquisition of Sebastiani Vineyards and Winery — announced to winery staff at a company Christmas party on Dec. 19, 2008 — is “substantially complete” said Matz. Only “minor details” remained, he said.

Sources knowledgeable about details of the acquisition confirmed the state of the  process and noted that, because of the extensive real estate portfolio involved, along with the associated financing, it would take a while to finalize the transfer of deeds, rights and other documents involved.

MATZ APPOINTED PRESIDENT TO OVERSEE GROWING PORTFOLIO

Matz was hired as President of Foley Family Wines in December 2008. He is a 26-year wine industry veteran, having spent four years as President of Jackson Wine Estates International, where he was responsible for  international business. He has also served as Vice President and General Manager for Beringer Blass Wine Estates (imports and Canada) from 2002 to 2004 and was President (Americas) of Southcorp Wines prior to its acquisition by Beringer Blass. Earlier in his career, Matz worked for Brown-Forman.

Thursday, January 29th, 2009, by lperdue,
================= CONTACT DATA ====================
Lewis Perdue
670 W. Napa St., Suite H, Sonoma, CA 95476
Phone: 707-326-4503, fax: 707-940-4146
Email: lewis.perdue@wineindustryinsight.com