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Trails & Trials

Still awaiting appeal on Dean's confiscation order
(Posted 22nd March 2004)

On 24th June 2002 Craig Dean (convicted of fraud for his part in the House of Delacroix Champagne scam) was ordered to pay £133,692 under a confiscation order. Dean has appealed against this order. investdrinks understands that Dean's new solicitors, Bankside, are preparing papers for the appeal and, at present, it is impossible to know when the appeal will be heard. Dean's previous solicitors were Charles Russell.

The introduction of confiscation orders has been praised as an effective way of preventing convicted criminals benefiting from their crimes. Although it is clearly right that criminals should have the opportunity to appeal against an order, it does seem very odd that nearly two years after the order was made the matter still has not been resolved. It is also well over a year since the money was supposed to have been paid with Dean facing a further 18 months in jail if the order was not met.

Craig Dean to pay £133,692
Evidence - not credible
Cavendish/Hamilton/ Delacroix: The final act?
(Posted 25th June 2002)

The long legal process that began with Lewis Daulby's arrest at Luton Airport in December 1998 ended just after midday on Monday 24th June 2002 at Southwark Crown Court. Her honour Judge Pearlman ordered Craig Dean, convicted for his part in the Delacroix fraud, to pay £133,692. Dean, released from prison under licence on April 12th, has six months in which to pay otherwise he faces a further 18 months in jail. The money will be shared out pro rata to the victims of the Delacroix fraud. The whole process has been a success for the Serious Fraud office in securing both convictions and confiscation orders.

 

During the confiscation hearing on Friday June 21st and Monday 24th Dean sought to convince the Judge that he had no control over Helmsley Sprl which was set up in Brussels in 1998, even though he held 99% of the shares. Dean claimed that Mr Ing Yang Oei, who he appointed as manager of the Belgian operation, had sole control and that Dean, especially once the renovation of the shop and offices was complete by January 1999, had no involvement in the Belgian operation. Helmsley (Belgium) ceased trading soon after Dean's arrest in Madeira.

Helmsley (Belgium) had a number of bank accounts. During the company's short life £133,692 of unexplained cash withdrawals were made. As the company's turnover was around £450.000, this represented 30% of turnover. Oei was the sole signatory for a City Bank account from which most of the cash withdrawals were made. Dean and Mark Bert, the Belgian bookkeeper for Helsmsley (Belgium), maintained that Oei had stolen the money. Dean claimed that he had never seen a penny.

In her judgement Judge Pearlman declared bluntly that that both sets of evidence (Dean's and Bert's) were 'unbelievable and not credible. Mr Dean failed to satisfy on the balance of probability that he does not have the £133,692..'

It is not surprising that the judge found Dean's tale hard to swallow. On a number of counts the story just did not add up.

In his evidence Dean maintained that he did not know Oei well and did not know how old he was. (Dean thought he was between 25 and 27.) Dean first met Oei when Oei was employed by Lee Rosser and Julian Blee at Delacroix to set up a website and install a sales computer program. Dean maintained that he had little contact with Oei at Delacroix - curious that someone installing a sales program had virtually no contact with the floor manager. Around March 1997, when Dean officially took over the running of Delacroix, he met Oei several times during a trip to the Far East. Later Oei was in Madeira, presumably working for Helmsley Trading Lda. Dean said that Oei was not happy in Madiera, so he offered him the job in Brussels. According to Dean's website (www.helmsley.com) his ambition and vision was to make Helmsley a global brand. On Friday he said that Helmsley was to be "a globally renowned company like Davidoff cigars". As Oei was heading up the first subsidiary of the Helmsley Group, it seems extraordinary that he would appoint someone he says he hardly knew and give them total control, especially as Dean admitted that Oei had little business experience. Hardly the way to build a global brand.

On 17th November 1998 Dean wrote to me complaining about an article in Circle Update, the newsletter of the Circle of Wine Writers. He signed himself Chief Executive Officer, The Helmsley Group. He invited me to visit 'my offices and shop in Bruxelles' before writing another article about Helmsley. 'A simple phone call will confirm my attendance for your arrival and please accept this as an open invitation to make that call and visit at your convenience'. No indication here that Dean was to be a hands-off owner of Helmsley (Belgium).

In his evidence Dean waxed lyrical about the wonderful cigar humidor -' absolutely superb'- that they installed at the Brussels premises, so would he really take no significant further interest in the Brussels operation after January 1999?

Bert claimed that when he first started doing the books for Helmsley in the latter half of 1998 he had anxieties over 'the extraction of money' from the company. Although he said he raised these anxieties with Oei, Bert said he never received a satisfactory reply. He did not, however, raise his concerns with Dean until July 1999.

Mark Bert said that he wrote a letter in August 1999 to the Belgian national police in Brussels about the cash withdrawals by Oei from Helmsley's accounts. The letter alleged that Oei had helped himself to the money. No record of that complaint has been found. The Belgian Police told the SFO that they had no record of a complaint. Bert was unable to produce a copy of the letter. Dean claimed that he had received a copy of Bert's letter to the police and had passed it onto his solicitors, Charles Russell. His solicitors were unable to find this copy.

Dean said that Oei left Belgium around about the time of Dean's extradition from Portugal in July 1999. In fact Oei left Belgium in January 2000.

Her honour Judge Pearlman was admirably brisk. When David Aaronberg, the defence barrister, gave a decidedly contorted answer as to whether he could be present if the hearing went over into Monday she remarked that she did not favour "Delphic" comments and asked him straight whether, given certain circumstances, he could be present on Monday. When Aaronberg said yes, she crisply remarked "Splendid." The defence barrister was left looking like a small boy in short trousers twiddling awkwardly with his cap.

Blee to cough up £45,000
(Posted 11/2/02)

Julian Blee, convicted of fraud for his part in the Hamilton Spirit Management whisky fraud and the House of Delacroix Champagne fraud, was ordered in Southwark Court to repay £47,000 following an SFO confiscation action. This has to be paid during 2002, otherwise Blee faces an additional 15 months in jail.

The website (whiskyscam.co.uk) of the Malt Whisky Buyers Helpline carries the following warning on:

Glennstewart International Ltd

A warning

This is a company that specialises in dealing with people who live abroad. They have been selling casks of whisky for £2400 and we have received complaints from investors living in Italy, Canada, Bermuda, the Far East and Sweden. The Directors of the company are Antony Evans and Dennis Edward O'Connor and they operate from 11 Berkeley Street, Mayfair, London. They are still trading since they do not target people in this country so the D.T.I. have not received any complaints.

One investor purchased 15 hogsheads from Glennstewart at an average price of £2405. In 1997 Evans wrote to him 'I would expect to achieve a minimum price of £2000 per cask including the bottling is and would hope to have disposed of them by the end of March next year'. One year and a half later he had still not disposed of them and eventually we offered the casks for sale by tender and the highest bid we receive was under £700 per cask.

Another investor paid £5040 for two cask of 1988 malt but hasn't been advised what whisky he has bought or where it has been bonded. Again he was advised last year that the whisky could be sold for £2000 per cask but has heard nothing from Glennstewart since. Unfortunately in May 1999 they sold him one of the infamous hogsheads of Grand Champagne Cognac 1993 stored at Speyside Bonding Company for over £3000. Bristol Spirits a reputable spirit merchant advise us that it is extremely difficult to find a buyer because of the tremendous glut of cognac and in their opinion it is only worth between £500 and £1000.

Craig Dean gets 3 years

Millennium Champagne has left Craig Dean with a nasty hangover. At Southwark Crown Court on Friday 23rd March Southwark Crown Court he received three years for his part in the House of Delacroix Champagne fraud.

Except for the confiscation hearings, this brings the first series of drinks investments trials to a close. The four defendants in the first two drinks investment trials have been put inside for a total of 21 years, the two frauds having grossed around £9 million.

In mitigation Dean was praised for his charitable work since he returned to the UK in 1999. There was also a letter from an American customer of the House of Delacroix, a Gino Jardino. He purchased 198 bottles of Champagne from Delacroix in July 1996. Later, after he had set up Helmsley Trading and Marketing LDA, Dean arranged the sale of this Champagne along with some Champagne that Jardino had bought from Forrester & Lamego. Jardino bought a 100 litre 'cask' of Cognac from Dean. It was not clear whether this Cognac, currently stored at Angeac just south of the town of Cognac, was purchased in exchange for this Champagne. Jardino and his wife visited Dean in Helmsley shop in Brussels and they have grown to like Dean. In his letter to the Court Jardino described Dean as a 'kind and loving man'.

It wasn't clear whether Craig had ever taken the opportunity to explain to them that they had actually bought a 100 litres of Cognac slopping about with another 250 litres in a cask and not 100 litre cask. So grateful were the American couple for Craig's kindness that they had invited him to stay with them in the States and he had reciprocated by having them to stay in Warwickshire. If they bought the 100 litres of Cognac as an investment, it is highly probable that they will discover that it is has negligible investment potential.

In 1990 Dean changed his name by deed poll from Gregory Michael Violet. He had two convictions under his birth name. In 1982 he received 150 hours of community service from Bournmouth Magistrates Court for obtaining by deception and two thefts. In 1987 in Richmond he was ordered to pay £646 in compensation with a three month suspended sentence for 10 charges of obtaining property by deception.

Although Dean was careful to have the word investment removed from the last brochure produced by the House of Delacoix was found guilty despite this. The difference between the word investment and financial opportunity is one of semantics not meaning.

Cavendish/ Hamilton Spirit Management + House of Delacroix trial results

Success for the SFO

Cavendish/Hamilton Spirit Management: 4th September - October 18th 2000

Conspiracy to defraud involving the sale of casks of whisky and Cognac

Lee Rosser (31) Guilty - sentenced to seven years. Is seeking leave to appeal against conviction and sentence.

Julian Blee (32) Guilty - sentenced to four years.

Lewis Daulby (41) pleaded guilty July - sentenced to five years.

Sales of over £6 million for the two companies - £2m Cavendish; Hamilton £4m.

The inter-linked nature of these two trials has meant that it has not been possible to report on this trial until now.

House of Delacroix: 22nd January - 8th February 2001

Conspiracy to defraud involving the sale of Champagne as a millennium investment.

Lee Rosser pleaded guilty January - sentenced to an additional 18 months

Julian Blee pleaded guilty November - sentenced to an additional year

Craig Dean Found guilty. To be sentenced on 23rd March 2001.

These two cases arise from a three year investigation carried out by the Serious Fraud Office. The result is both a real success for the SFO and a warning to drinks investment fraudsters that ripping off the public is not risk free as it must have appeared to be. Those running companies offering grossly overpriced Bordeaux would be wise to read the third particular of the indictment of conspiracy to defraud in both cases with care:

'by falsely pretending that the prices at which the companies offered to sell whisky and other spirits were fair and reasonable, and offered reasonable prospects of substantial profits resulting from future increases in value' (substitute Champagne in Delacroix).

Intro

The successful conclusion of the Cavendish Wine Merchants/Hamilton Spirit Management and House of Delacroix fraud trials has shown up the links between a number of the drinks investment scams. The trials have been a triumph for the UK Serious Fraud Office who have been investigating, with the assistance of the Metropolitan Police Fraud Squad (London), drinks investment scams since February 1997. Even before Dean is sentenced (23rd March) for his part in Delacroix, Blee, Daulby and Rosser have been sentenced to a total of eighteen and half years for fraud. Investigations continue into various drinks investment companies. Given the success of the SFO in these trials, further arrests and prosecutions must be quite likely.

Early days - Fox Milton

One important thread in the drinks investment trail starts back in the 1980s at City firm Fox Milton (Stockbrokers) Ltd, which was closed by The Securities Association (TSA) in January 1989 and dissolved on 16th May that year. Some £1,452,000 was paid out in compensation to investors. It is not known whether this was where Stephen Jupe (DOB: 16.10.53) and Lewis Daulby (DOB: 9.4.59) first met but they certainly worked for Fox Milton. At one time Fox Milton employed 30 people.

Fox Milton was closed because it did not had insufficient capital to satisfy TSA rules and that their clients' money was not properly segregated from that of the company's. There were three arrests and Philip Raisey, chairman, and Stephen Wright, company secretary, were jailed for six months at the Old Bailey on August 16th 1990 for defrauding the Inland Revenue of over £130,000. Ironically they were evangelical Christians who held prayers before board meetings at their offices in Carter Lane, close to St. Paul's Cathedral. They also held religious sessions with songs and loud music. The court were told that Fox Milton donated over £125,000 to the Ichthus Christian Fellowship in Forest Hill, South London, and the Evangelical Alliance in Kennington. Jupe is also an evangelical Christian.

Marshall Wineries

Daulby and Jupe went on to found Marshall Wineries, the trading name for Securitized Syndicated Investments (SSI) Ltd, on 5th August 1993. It was based in Wandsworth in south west London. Marshall was one of the first companies to offer casks of whisky as an investment. It was certainly the first company in the field whose directors had little or no experience of the whisky industry. It was to be the first of many. Marshall Wineries offered casks of new fill new-fill hogsheads (£930) and butts (£1,750) of Grandtully. Investors might have been put off if they had realised that the average cost to Marshall was £330 a hogshead and £600 for a butt. In 1994 Marshall Wineries' turnover was £551,402, in 1995: £1,541,260 and £1,738,653 in 1997.

Investors might also have been hesitant had they realised that there wasn't a Grandtully distillery. Instead Grandtully Distillery Ltd was incorporated in July 1993 and initially its two directors were Daulby and Jupe. The company's registered office was 3 Hill Street, Edinburgh. There had indeed once been a Grandtully Distillery in Perthshire but it had closed down around 1910. A spirited version of the dead man's passport trick! Grandtully generously appointed Marshall Wineries to act as brokers for Grandtully and gave them exclusive access to 'Grandtully Single Malt Whisky'.

In fact Grandtully came from the Speyside Distillery close to Kingussie on the banks of the River Tromie just before it joins the Spey. The distillery is the youngest in Speyside being completed in 1976 with the first spirit drawn off in January 1991. It was owned by the Christie family, who also had the Speyside Bonding Company in Glasgow. During the second half of 2000 there was a management buy-in to the company. The buy-in was led by an international team of high profile businessmen including Ricky Christie who had previously been managing director of Speyside.

The flimsy 18% hook

It seems amazing that the whole £60 million whisky investment scam was based a quick calculation. Incredible but true. There was absolutely no solid research to back it up.

The whisky investment bubble was founded on the idea that as whisky matures it increases in value. Although mature whisky certainly sells for more than new fill (raw spirit), it is not as simple as that. The whisky industry is cyclical often moving from shortage to over-capacity and back again. The large number of distilleries that have been mothballed in their history testify to that as do the number that have long disappeared. Production can be increased or decreased relatively easily - grain and water are unlikely to run short. Furthermore, although whisky companies swap and trade casks amongst themselves for the purposes of blending, large companies are highly unlikely to be interested in the odd cask held by a private investor.

From a high point of £5 in January 1991 the price in the bulk trade for third class malts such as Tobermory fell progressively to £2 a litre in January 1995 before picking up a little to £2.25 in January 1996.

Unfortunately investors were led to believe by both the Press and the scamsters that returns of 18% a year on casks of whisky were perfectly possible. This apparently authoritative prediction was ascribed to Stephen Williams of J.P. Morgan. It made its first appearance on 6th December 1992 in the Independent on Sunday. Dip into the malt for rare returns declared Conal Gregory MW. Williams had bought a cask of Springbank through the first whisky cask scheme run by Mark Reynier of La Reserve, a well established wine merchant in Walton Street just behind Harrods in Londo2n's Knightsbridge. Unlike Daulby, Rosser and the later infestation of scamsters, Reynier had considerable experience of the drinks industry. Springbank, a Campbeltown malt, is one of Scotland's top whiskies and rare old bottles fetch top prices at auctions.

One afternoon, while with Reynier in La Reserve's cellar, Williams did a few quick sums on his calculator and came up with the suggestion that a return of 16%-18% per annum on his cask of Springbank was possible over a ten year period. This was a 'back of an envelope calculation' for himself and applied solely to Springbank. It was never intended for wider circulation. Williams was not a drinks analyst and never publ2ished this prediction.

Soon after Reynier was at a dinner party where Gregory was also present. Reynier told Gregory of Williams' prediction and, as Gregory writes about the drinks business, the story went from there. There is some dispute over whether Gregory spoke to Williams about the prediction. Whether he did or didn't, the damage was done. Although Gregory's article was specifically about Reynier's scheme and one run by Tanners of Shrewsbury, it was upbeat about malts' prospects - 'the future for premium malts is very stron indeed'. This coupled with the 18% prediction meant that whisky investment became the received wisdom, spawning further articles in newspapers including the Financial Times and magazines lik2e Country Life (November 1994) which cited Morgan Stanley in addition to JP Morgan.

Whatever the truth, the damage was done. Although Gregory's article was specifically about Reynier's scheme and one run by Tanners of Shrewsbury, it was upbeat about malts' prospects - 'the future for premium malts is very strong indeed' and 'two schemes have been launched to allow individuals to buy into the lucrative malt market'. The 18% prediction became received wisdom and whisky investment a topic for financial journalists, spawning further articles in newspapers including the Financial Times and magazines like Country Life (November 1994) which cited Morgan Stanley in addition to J.P. Morgan.

During the Cavendish/ Hamilton trial, Gregory attracted considerable flak from the Prosecution and Defence alike. In his closing speech for the Crown, Jeremy Roberts QC described Gregory's IOS article as "not an edifying part of the story". In his summing up His Honour Judge Rivlin remarked that Gregory "had been roundly criticised for the article and the trouble that it caused".

Certainly the Press has a responsibility for the growth of the whisky investment bubble and failed to check the claims being made properly before publishing. Perhaps one of the most grotesque examples was an article by Stewart Dalby in the Guardian (31st August 1996) entitled Raise a glass to the money is malt whisky. Although Dalby did include cautionary paragraphs at the end of the article about a Fraud Squad investigations and warnings from The Scotch Whisky Association, he concentrated on a William Beasley, managing director of William Buchanan & Company Ltd of Mayfair. Within a few months Beasley and his company had disappeared into the Scotch mist.

Cavendish Wine Merchants

Soon after Marshall Wineries was established, Daulby set up Cavendish Wine Merchants, the trading name of Pearldene Ltd which was incorporated on 27.9.93. Daulby and Rosser were appointed directors on 27.9.93 and commenced trading in February 1994 from premises in Wimbledon. Daulby resigned as a director of Marshall Wineries on 19th January 1994.

Although Lee Rosser was just 24 when Cavendish was established, he had already been a director of three companies: The Consolidated Diamond Corporation plc (16.6.1992 - 26.10.92), Doreyn Management Ltd (9.6.92) and City Investment Exchange Ltd (21.2.92 - 5.3.93). None of the these companies were long lived. The Consolidated Diamond Corporation plc was dissolved on 1.3.94, Doreyn Management dissolved 28.12.94 and City Investment Exchange, which sold rare bullion coins as an investment, was dissolved on 1.2.94.

The coins were claimed to be a safe investment offering the prospect of substantial gain. as an investment without the volatility of the stockmarket. But the coins, which were bought at Spinks, were sold to clients with a mark-up of between 100%-200%. Rosser was arrested in April 1994. He admitted the offence and on 2nd November 1995 Rosser was sentenced at Snaresbrook Court in East London for intent to defraud clients of City Investment Exchange. He was fined £1,000, ordered to do community service and to pay compensation to nine clients.

Cavendish offered various casks from Burn Stewart plc - Deanston (Perthshire), and Ledaig and Tobermory from the Isle of Mull. The two Mull whiskies come from the same distillery - Tobermory being lightly peated and Ledaig heavily peated. As at Marshall Wineries' the mark up was to be so excessive to make this a completely worthless investment. Typically Cavendish were buying new fill Tobermory hogsheads for £300 - £330 and selling at £980.

20 years experience!

The company claimed 20 years experience in the whisky industry but actually knew virtually nothing about whisky. Investors were fooled into thinking they were dealing with experts. Rosser certainly had no previous experience in the drinks industry. Daulby had set up a company called Vintage Heritage Ltd, which was dissolved in October 1994. Although it appears to have dealt in wines and spirits, the nature of the business remains unclear.

John Grant, managing director of J & G Grant owners of the Glenfarclas distillery, remembers a brief meeting at his distillery in July 1993 with the principals of Marshall Wineries - Daulby, Len Bayliss, the company secretary, and probably Stephen Jupe. Grant concluded that the three were not knowledgeable about the whisky industry and declined to supply the new company with whisky. Grant wrote to Daulby on 30th July 1993 that 'he did not wish to sell Glenfarclas for investment purposes'. In December 1994 Grant discovered that some casks of Glenfarclas were being offered by the investment companies, who had acquired them from whisky brokers. Grant contacted the Scotch Whisky Association, the industry body, over his concern about the damage such investment schemes could cause the Scotch whisky industry. He also wrote to investors advising them of the market value of their whisky for insurance purposes.

Burn Stewart agreed to supply Cavendish on the condition that the proper names for the whisky were used. The company had previously refused to supply Marshall Wineries with whisky for their Grandtully casks. John McMillan, distillery manager for Deanston and Tobermory, also recalls that when he met Daulby for the first time in the summer of 1993 that Daulby knew very little about whisky. Burn Stewart went on to supply Cavendish/Hamilton with 1,896 hogsheads of new fill whisky as well as some semi-mature casks.

Touting for business

Cavendish and later Hamilton advertised in glossy, frequently using inserts with a reply card. Cavendish's sales team then telephoned the prospective investor. Cavendish presented whisky as a rock solid investment better than a building society or stocks and shares. Investors were told that whisky had a 'high return potential' and that its financial appreciation was unrelated to general economic trends.

Investors were told that those running Cavendish had forged friendships and contacts during their 20 years in the market, while guarding their rigorous independence. The company could offer a complete management service on whisky and Cognac.

Glossy brochures were designed and dispatched to putative investors. A newsletter purporting to be put together by Cavendish was sent out to investors. The newsletter was from Sutherland & Partners, stockbrokers in Scotland specialising in whisky. Without permission Cavendish topped and tailed it replacing Sutherland's logo and heading with their own. Sutherland's Issue 119 became 111 for Cavendish and subsequently 112 for Hamilton.

Clients, who asked about being able to sell their cask, were pointed to a letter of thanks from a satisfied customer, a Joseph Schafer. What clients were not told was that Schafer was a friend of Lewis Daulby who may have worked at Cavendish and certainly, if Rosser is correct, worked for Hamilton and was in charge of stock control. It is not known whether this Joseph Schafer is related to Joseph Karel Schafer (DOB: 20.10.1956), one of the directors of Maybury Cellars, a now deceased Champagne investment company founded in August 1996. It is possible that his fellow director Matthew Newman (DOB: 30.12.1971) was also a Hamilton graduate.

Unfortunately the business thrived and many people were persuaded to invest in casks of whisky. Between July 1994 and July 1995 the company banked £1,869,000. Cavendish was so successful that Daulby and Rosser started looking to move the business off-shore. During the trial Rosser explained that Patrick Daulby, Lewis' brother who was a solicitor had advised that this would make the business more tax-efficient. Initially they looked at Jersey but the difficulty of obtaining residency ruled that option out.

The move to Gibraltar

In autumn 1994 Daulby and Rosser paid a brief visit to Gibraltar where they met Benjamin and Isaac Marrache of solicitors Marrache & Co. According to Rosser, they explained the whisky investment to the Marraches and told of the phenomenal success of their business. "Think these guys could be a perfect business for Gibraltar,' Issac is alleged to have said. Apparently the benefits of Gibraltar as a place to do business were extolled. Under the Gibraltar High Net Worth Individual Scheme they could have relocated executive status. Then no matter how much they earned, they would only pay a maximum of £10,000 in tax and the company would only pay corporation tax at 3-4% of the turnover. Rosser told how during their brief visit they had a half hour meeting with Brian Feetham, the Minister of Trade and Industry. It must be highly likely that the Marraches and the Gibraltar authorities had no inkling of the fraudulent nature of Cavendishes' business.

They decided to move the operation to Gibraltar. The name Hamilton Spirit Management was chosen because of the Nelsonian connotations with Gibraltar and his mistress Lady Hamilton. Rosser claimed that they were given a print of Lady Hamilton by the Marraches. Hamilton was incorporated on 24th November 1994 with Daulby and Rosser appointed as directors on April 3rd 1995. Bernard Linares, a local dignitary, was appointed non-executive chairman. Offices were rented at the Cornwalls Centre for £668 per month from 1st February 1995. Additional offices in the centre were rented within weeks of starting up.

Off-shore companies

As part of the move, a number of off-shore companies were set up for Daulby and Rosser. These included Rhone Investment, for Rosser's flat in Gibraltar, Liquid Asset Ltd for monthly payments, and Global Capital Ltd for monthly payments for Daulby. Shanghai Holdings was used to pay the employees salaries.

Hamilton expanded into Cognac and Armagnac and, then later, Champagne and Port. Investors were told that the demand for Cognac was unrelated to economic trends and that there was a growing demand which made it ideal for the private investor. 'There is no need to become an expert in Cognac,' potential investors were assured. Hamilton would provide the specialist service. 'In a highly specialist and lucrative market, one name stands out - Hamilton Spirit Management. As usual the mark-up was considerable. Hamilton bought casks of Cognac for 13,300 FF and sold to investors for 50,000 FF - a mark-up of 275%.

Blee recruited

The move to Gibraltar proved to be more expensive and problematic than anticipated. Overheads, especially telephone charges, were much higher than in the UK. Many of the sales force that came out to Gibraltar with Daulby and Rosser soon headed home. Hamilton tried recruiting locally but their new staff proved to be less adept at this type of sales and initially sales were disappointing. Rosser estimated that they needed to take £200,000 a month to break even and they were not achieving that. In the first month they took £100,000 and £120,000 in the second, while at Cavendish they had been taking £250,000 regularly. The price of the new fill hogsheads from Burn Stewart were raised to £1,145.

But Hamilton needed a more professional sales approach, so it was agreed that Rosser would approach Julian Blee to become sales manager. At that time Blee was involved in currency trading in Denmark. Blee had been Rosser's manager at Financial Management International that sold equities in the UK. Rosser had been impressed by Blee's ability to motivate a team.

Blee joined in May or June 1995 and Axis Holdings Ltd was formed for him. He wrote a sales manual and a number of new sales staff were recruited from the UK. Among them was Craig Dean, who joined the company in August. Sales soon increased dramatically. They doubled in Blee's firsst month and by October had risen to £473,000. In November they reached £513,000 and hit the million mark in December. In January and February 1996, Blee's last two months with Hamilton, £582,000 and £678,000 were taken.

False names

The use of false names was prevalent. Lewis Daulby chose the rather grand Charles Hampstead moniker. Blee was Jason Burns while Rosser also answered to James Hammond. It was James Hammond, who corresponded with the Advertising Standards Authority following a complaint in the autumn of 1995. Despite Mr Hammond's best efforts the complaint was upheld.

The victims

The Cavendish/ Hamilton fraud grossed £6.2 million - approximately £2 million from Cavendish and the rest Hamilton. A Mr L was the biggest loser with £85,000. About two thirds of the victims paid out between £3,000 - £4,000. Many were retired people looking to boost their retirement funds. Fortunately many paid by credit card, so were able to claim refunds through the consumer Credit Act. Barclaycard alone paid out £1.34 million to investors and were only able to recoup £120,000 from the sale of these casks. It is believed that a one time Barclaycard were the largest holders of whisky casks outside the industry.

Scam exposed

The first critical article 'Have you paid too much for a cask of malt whisky' appeared in the Evening Standard on November 7th 1995. Written by Andrew Jefford, it looked at the claims and offers being made by a number of companies as well as the assumptions behind whisky investment. ' Jefford looked at five companies and only recommended two: La Reserve and Milroy.'s, who dealt only in Springbank. Of the other companies, Foursquare Spirit Supplies (later called James Devereaux), Hamilton Spirit Management and Marshall Wineries either offered whisky with 'doubtful investment prospect' at 'extremely poor value' or more highly rated whiskies at equally poor value. Jefford warned. 'Casks of malt whisky, in conclusion may offer good investment prospects but potential purchasers should exercise extreme caution before writing out cheques for multiple thousands of pounds. Many of the prices being asked are way above their current broking price.'

Strangled at birth?

During the trial the defence claimed that Hamilton had been strangled at birth by an unholy alliance between the whisky industry and the Serious Fraud Office. Given the medium to long term nature of the investment, Hamilton would have been able through innovative marketing techniques to sell the casks or bottle the whisky creating new brands and realise a profit for their clients. However, there was not the slightest shred of evidence to show that Daulby or Rosser had started to prepare for this apart from choosing a rather mundane brand name, Highland Reserve. Nor is likely that Hamilton, despite the success and size of the fraud, would have had the financial resources to create a successful brand of whisky. Instead the evidence points to the fraudsters spending the fruits of their success on cars, apartments with substantial amounts paid regularly into their accounts rather than reinvesting in the business.

Lewis Daulby bought a £150,000 apartment in Gibraltar at Queensway Quay. Rosser bought two apartments in Gibraltar for a total of £210,000 and a series of high performance cars. A £39,000 Ferrari bought in September 1995 was swapped four months later for a £100,000 Porsche 911 Turbo.

The split with Daulby

Relations between Rosser and Daulby progressively broke down in Gibraltar. By early 1996 it was clear that the two could not continue together. It was agreed that Rosser would leave Hamilton at the end of February and he resigned as a director on 26th February. Bernard Linares had resigned on 5th February. Rosser sold his shares to Daulby for £100,000. Blee left at the same time as Rosser as did Dean or very soon after. With the approach of the new millennium it was time for a new scam (see House of Delacroix).

Less than three months later Daulby sold Hamilton to a Captain Bright, who lived in Cadiz, drove a gold coloured Rolls Royce and apparently had interests in golf courses in Southern Spain. The price was £100,000 and was to be paid as land in southern Spain. It turned out, however, that Bright did not have the rights to this land.

Millennium Champagne

Blee, Rosser and Dean moved to London to form the House of Delacroix, which was to deal in Champagne investments.

For some reason it was imagined that the whole world would demand a glass of Champagne when 1999 turned to 2000. The enormous surge in demand would rapidly exhaust existing Champagne stocks in the lead up to 2000 and anyone holding Champagne would making a killing. The premise was fatally flawed. Champagne investment fraudsters made a killing but not the duped investor.

The Champenoise had a stock over over 1.1 billion bottles, With the exception of 1997, production of Champagne has exceeded sales every year since 1988. Even in 1999 which saw record sales of 327 million bottles, 332 million bottles were made. There was also the flawed Gallic and Francophile assumption that everyone would want a glass of Champagne at midnight on 31st December 1999. Many, who toasted the new millennium, will have done so with other sparkling wine and many more will have preferred other drinks.

Once again the investment hype appeared to be underpinned by a leading financial institution, in this case Morgan Stanley, and the financial Press clambered abroad the bubbly bandwagon. Unlike for whisky, there was research published into the potential shortage of Champagne. Sylvain Massot, a drinks analyst for Morgan Stanley, produced a number of reports into the possible levels of demand and supply of Champagne in the lead up to the millennium. Unfortunately, although I requested a copy of Massot's most quoted report in 1996, this was refused. Morgan Stanley said that he had been misquoted. In the Sunday Times in June 1995 in Rupert Steiner 'Sober thoughts as champagne runs dry' quoted Massot as saying that total consumption will be more than 380 million bottles by 2000 and that the Champagne region's maximum capacity is only 325 million. Like the erroneous 18% a year on whisky, it became received wisdom that there could well be a shortage of 45 million bottles by the end o f 1999.

The House of Delacroix

Initially the House of Delacroix was based in Clarence Road in Wimbledon, the home of Rosser's girlfriend. Rosser was in charge of setting up the new company and getting brochures and promotional material written. Blee wrote the staff training manual and would be responsible for training and motivating the staff. Dean's role was in recruiting staff and later on to become head of the sales floor. Chirico, an off-shore company, was set up for Dean. Chirico was described as a personal investment company. "A very personal investment company' commented Jonathan Fisher for the Crown. Blee and Rosser continued to use Access Holding Ltd and Liquid Asset Ltd respectively.

Delacroix was incorporated on 26th March 1996 in the Dutch Antilles. It had two nominee directors: Princes International and Royal Estate Company. These companies were registered in Panama and were front companies for Blee and Rosser, who were effectively directors of Delacroix.

Delacroix soon moved to 433 Herrengracht in Amsterdam, although they claimed that their head office was at 72 Rue Honoré in Paris. Clients were told that 'most of the administrative work was done from Paris because Champagne is France's national product. However as overheads are astronomical in Paris, the sales force are based in a secondary office in Amsterdam as profit margins on Champagne are not big enough to justify basing the workforce in Paris. In fact the Paris office was just a service office as was one in Singapore.

Around 1000 investors were enticed by a raft of false representations into investing in Champagne at £15 a bottle ex cellars*. Delacroix claimed that the Champagne retailed at £30 but actually could be bought in the UK at £12 including all taxes. Delacroix made a gross profit of around £2.1 million; selling £2.5 million worth of Champagne that cost company just £450,000. On average Delacroix paid the equivalent of £5 a bottle for the Champagne. Delacroix principally sold Champagne Lantz from Debruyne in Sézanne but also Michel Arnould from Verzenay. Blee, Dean and Rosser shared £711,000 from the Delacroix fraud. Of the sums traced to individuals, Blee made £167,000, Rosser - £160,000 and Dean - £110,000. However, there were large cash drawings from the company's account, so there is a further £275,000 that was shared by the threesome.

The Millennium packages

Delacroix offered a number of Champagne packages. The most popular were the Millennium Investors Pack - 96 bottles of Lantz Champagne for £1,400; the Grand Millennium pack - 198 bottles of Lantz Champagne for £2,800; and the Methuselah pack - 2 Methuselahs for £1,700.

There were frequent claims that a special bespoke millennium auction would be held at Christie's or Sotheby's. No arrangements were ever made and it is most unlikely that either of these auction houses would ever have agreed to hold such a sale. Investors were told that they could make 35% a year. They also received a letter in October 1996 from a Lucy Hunter telling them that the prices of the investment packs had increased. No investor ever made a profit on their Champagne.

The victims

As in the Cavendish/ Hamilton trial many of the victims were retired Their ex-professions included deputy-head of a London school, a bus driver, the diplomatic service, insurance salesman and a geologist. None made a profit and certainly none had their Champagne entered into the promised 'bespoke millennium Champagne auction'. Typical is the experience of one investor from East Yorkshire who paid £2,880 for a 'Grand Millennium pack of 192 bottles of Lantz Champagne in June 1996. Once Delacroix disappeared he had to pay a further £1,319.67 to Champagne Debruyne to have the tax paid and his Champagne delivered, raising the price £21.87 a bottle.

TV recruitment drive

In June a number of staff were recruited during a bizarre interview at the Mayfair Hotel during Euro 1996. Rosser, Blee, Dean and Spencer Pibworth, a senior salesman, all faced a television showing the Spain v England match while those being interviewed had their backs to the screen. One salesman had sold sewage treatment plants prior to joining Delacroix.

New set of false names

As at Hamilton the leading figures in the company all had false names. Rosser was a Mr Carlton and Blee Simon Hunter. Craig Dean chose Oliver Portman. Whether this was an ironic reference to his substantial girth is not known. One former employee estimated that 50% of the sales force used false names. Other examples included David Cornell (aka Spencer Pibworth), Peter Wiseman (Neil Kenyon) and Peter Tay (Philip Tillman). Lucy Hunter was a collective name used for the office administration. There never was such a person.

Dean takes over

For a time the sales force of around 20 were split into two: one headed initially by Spencer Pibworth and the other by Dean. When Pibworth left, his place was taken by Neil Kenyon However, this was short lived as Dean's team's success swamped the other and they were amalgamated. Kenyon became a loader (persuading existing clients to buy more), while Dean became floor manager.

During the autumn of 1996 Dean increasingly came to run Delacroix. Rosser disliked the Dutch climate and was only in the office for 20-35% of the time and, furthermore, kept to himself in an office that was fitted with reflective glass making it impossible to see in. He had fallen in love with an American woman and had plans to move to America. Blee had increasing drink and drug problems. In court Tillman described Blee as being "drunk from the start" of his acquaintance (June 1996) and on "two bottles of vodka a day". Blee spent less and less time in the office and towards Christmas was admitted to a clinic" said Tillman.

It was agreed that Dean would buy Delacroix for £120,000 with Rosser and Blee receiving 3% of future profits. Dean took over on 18th March 1997. Rosser signed the agreement but not Blee. In the event Dean came up with £15,000. In August 1997 the last orders for Champagne were placed with Debruyne by this time Dean was planning to set up a new company: Helmsley Trading & Marketing. Philip Hackett, counsel for Blee said that "Dean simply walked away". Blee returned. Sacked Dean and transferred funds to Braunstein, a firm of solicitors in Sutton, to wind up the company as to give the company 'a decent burial'.

Helmsley and Coubert

Dean borrowed £20,000 from Rosser to set up Helmsley on Madeira. Although there was a Helmsley Champagne, the main focus of the operation was casks of Cognac as a financial opportunity. Both the Cognac and Champagne was supplied by Debruyne. The Cognac was offered in 'casks' of 50 and 100 litres and certificates where issued by Debruyne for casks of Cognac maturing in Angeac, just south of Cognac. Unfortunately what clients did not know was that there weren't any casks of this size. The average size used in Cognac is 350 litres. They were misled by both Helmsley and Debruyne. Both Dean and Debruyne has said "Of course, if any clients wantedtheir 100 litres we could always put it into a plastic jerrican.' This, of course, would have been by no means satisfactory as Cognac will not mature in plastic. Furthermore, if both companies ceased trading or went bankrupt, investors could not have identified their Cognac. Around June 1998 Helmsley stopped selling casks and ins tead sold bottles of Cognac and opened a shop in Brussels.

Blee also moved to Madeira in autumn 1997 setting up the Coubert Group, which also sold 'casks' of Cognac. It ceased trading at end of 1998. The company's 400,000 shares were held by Lime Light - Marketing & Services, Lda. The Coubert Group claimed to 'fall under the umbrella of the vastly expanding partnership of companies designed to supply its clients with a catalogue of the finest luxury goods at the lowest possible prices.' They offered VSOP and Napoleon Cognac as an investment in 25, 50 and 100 litre 'casks'. Like Helmsley the 'casks' were purely nominal. Both Coubert and Helmsley were yet another drinks investment scam.

Other graduate entrepreneurs from Hamilton/ Delacroix

Alastair Miller, one of the sales team at Hamilton and who was married to Rebecca Marrache, set up Berkley Champagne Supplies Ltd in London's Docklands. His fellow directors were Steven Plumb and Mark Shephard. They offered 'premier prix' (the cheapest Champagne available), such as Charles Coubert, Champagne as an investment. Furthermore it emerged in the High Court in London that they only bought a fraction of the Champagne they sold. They were the first Champagne investment company to be closed by the DTI. Berkley were closed in the public interest in the High Court (London) on 19th February 1997. It was stated in court that there was a deficiency of over £900,000, that between August 1996 and January 10th 1997 orders for £1.3 million worth of Champagne were taken, company assets were estimated to be £190,000. Some 24,000 bottles were traced to a warehouse near Calais. Alistair Miller (resident in Malaga) and Mark Shephard are disqualified from being UK di rectors from 5th July 1999 until 13th June 2011.

Spencer Pibworth, one of the two senior salesmen at Delacroix left the company around June/July 1996. Returning to the UK he set up the House of Bouvier (founded 26th July 1996) offering Alain Thienot Champagne as an investment. When in 1997 Thienot discovered what was going, he objected. Bouvier was dissolved in February 2000, never having filed any accounts.

The bubbles start to burst

Despite various articles, mainly written by wine journalists, warning of the dangers of investment in both casks of whisky and millennium Champagne the number of scam companies continued to grow during 1996.

At the end of November 1996, however, James Devereaux Ltd, a whisky investment company, collapsed and went into liquidation with an estimated deficiency of £1.9 million including £1.3 million in unfulfilled orders. Gary Eldridge, a Canadian and the man behind Devereaux, drew £247,000 from the company shortly before it collapsed. Eldridge, born Gary Anderson, is wanted by a number of police forces around the world including those in Canada, UK and USA.

The Devereaux collapse seems to have been a catalyst. On 12th December the Department of Trade and Industry petitioned to close James Devereaux in the public interest. On the 18th they petitioned to close Napier Spirit Company (also whisky). This was followed by Berkley Champagne Supplies Ltd on 10th January 1997. Throughout 1997 the DTI petitioned successfully to close a number of drinks investment companies including Forrester & Lamego (Champagne and Port), Millennium Spirits Investments Ltd (whisky), Chelsea Wines & Spirits (Champagne) and Hamilton Spirit Management.

In early March 1997 a Stuart Dalby did report in the Guardian on the DTIclosing a number of companies down in the public interest and he commented. 'It is true that well-known malts, like McCallan (sic), Glenfiddich and Glenfarglas (sic) do appreciate greatly if laid down.'

Serious Fraud Office investigation and arrests

In February 1997 as the full extent of the whisky cask and Champagne for the millennium frauds became apparent the Serious Fraud Office set up an investigation into a number of the companies. Officers from the Metropolitan Fraud Squad were seconded to assist the investigation. In late March the SFO held a briefing for the Press. It was explained that the whisky scam could be worth £60 million. This generated a large number ofarticles

Hamilton Spirit Management was closed down in London and Gibraltar in a joint operation between the SFO and the Gibraltar authorities in the autumn of 1997. The Gibraltar offices were searched and the evidence found was used in the subsequent trial

It was not until 2nd December 1998 that the first arrest was made. Lewis Daulby was detained at Luton Airport on his way back from America to Gibraltar. He had been previously arrested in Gibraltar in November 1997 but was released without charge. Blee followed in February 1999: he gave himself up and returned voluntarily to the UK. In May 1999 Dean was arrested in Madeira and was extradited to the UK in July. Lastly Rosser was arrested in Spain on 12th July 1999 and was returned to the UK in February 2000.

@ investdrinks 2001