Monday, 7 January 2013
Elite Advisers: 'general concerns as to the nature and tone of your articles'
Inside Patriarche's cellars in Beaune
On 17th December 2012 I received a 'private and confidential' email letter from Ramona Mehta of solicitors Mischon de Reya, who act for Elite Advisers, whose wine investment fund is Nobles Crus. The letter was not for publication and shouldn't be 'referred to elsewhere' – some similarities with a super-injunction?
I was asked to remove from Jim's Loire the letter that Elite Advisers had sent to their investors on 11th December 2012 on the grounds of confidentiality. This I did, although it is interesting that Elite Advisers had been happy for journalists to see previous communications to their investors. Indeed on 12th December I had a long phone conversation with the Brunswick Group, a PR company representing Elite Advisers, going through points in the letter to investors and at no time was it mentioned that what we were discussing was considered confidential. Following this discussion I posted here on Jim's Loire. Perhaps it is a question of 'nature and tone'.
Brunswick (12.12.12) stressed how transparent Elite Advisers has been with information about their Nobles Crus wine fund, so it would be good if they will now publish the data that showed that there 'were no mid-prices available for 78% of the sample on either Liv-Ex or Cellar watch'. Then it would be possible to reconcile the difference between Ernst & Young's reported findings and the data that was sent to Elite Advisers by Liv-Ex in early November 2012. As it stands, only Nobles Crus investors who visit Luxembourg can see this data once they have signed a confidentiality agreement.
My reply to Ramona Mehta:
24th December 2012
Dear Ramona Mehta,
Thank you for your letter of 17th December 2012.
I note that you have ‘general concerns as to the nature and tone of your articles’. Although I can imagine that your clients, Elite Advisers SA, might prefer a pliant press, I believe that my questions and articles while perhaps searching and robust do not ‘constitute unreasonable conduct’ rather they are fair comment.
As requested I have removed my post of 12.12.12 - the letter to investors dated 11th December 2012. Please note that if Elite Advisers had contacted me I would have removed this post at their request without the need to send me a solicitor's letter. I note, however, that there appear to have been no objections to press quotes from the letters from Elite Advisers to investors dated 3rd and 19th October 2012.
Your clients, Elite Advisers, should be aware that I will not reveal my sources.
Conversation with Brunswick (12th December 2012):
All of the points you raise here in relation to my conversation with Brunswick on 12th December 2012 were covered in my post of 13th December 2012. I was very grateful that Jess Ayres and Alison Dykes came back to me on 12th December 2012 with a detailed response to my questions and my post of 13th December fairly reflected my conversation with Jess Ayres.
The 78% claim
‘There were no mid-prices available for 78% of the sample on either Liv-Ex or Cellar watch’
I quoted the 78% figure in the section ‘Liv-ex data including Cellar-watch?’ and that only 22% of the Liv-Ex mid-prices appear to match wines in the Nobles Crus’ portfolio. As your clients would appear to have overlooked my use of the 78% figure I have now amended that section of the post.
I note that you and your clients continue to refer to Cellar Watch data, although they were informed explicitly by Liv-Ex on two occasions (24.10.12 and 7.11.12) that Cellar Watch data was not suitable for valuing wine funds.
Elite Advisers' assertion that Ernst & Young were unable to find prices for 78% of the Nobles Crus Portfolio is not backed up by any available evidence, although it may be available to investors prepared to travel to Luxembourg and who are willing to sign a confidentiality agreement.
In contrast I do have a copy of the mid-price data that Liv-ex sent to Elite Advisers to assist in the valuation of their wine fund. This data covered 275 different wines in the portfolio and covered 50% of the wines in the Nobles Crus fund. Without knowing how Ernst & Young concluded that they only had Liv-ex data to cover 22% of the fund, it is impossible to reconcile the claim made by Elite Advisers and the data supplied by Liv-ex.
Ernst & Young not an 'audit'.
I did not suggest that it was.
The terms of the payment for Laurent Vialette are a matter between our client and Mr Vialette.
Although I was pleased to learn from Jess Ayres that Laurent Vialette is properly remunerated, the Wine Experts Ltd accounts for 14th October 2010 - 31st December 2011 do not reflect this as the company's turnover for this period was 755€. Elite Advisers’ Les comptes annuels au 31 décembre 2011 states that the ‘Independent valuer for the sub-fund: Elite’s Exclusive Collection – Nobles Crus is Wine Experts Ltd, Dublin.
‘Laurent Vialette, the internationally renowned, independent wine valuer is contracted via the independent company Wine Expert (sic) Limited’, This arrangement was confirmed by Jess Ayres of the well-regarded Brunswick Group told me during our discussion that
Jess Ayres also informed me that Vialette is contracted through Wine Experts Ltd, although Ayres informed me that he did not understand how the arrangement with Wine Experts Ltd works. As the terms of the payment for Laurent Vialette are a matter between your client and Mr Vialette, I would be most grateful if you would ask Elite Advisers why the monthly payments to Mr Vialette do not figure in the accounts for Wine Experts Ltd.
James Miles and the claim that ‘mid-prices are not available for 78% of the Ernest & Young sample'.
No evidence has been provided by Elite Advisers to back this claim. In contrast James Miles' company - Liv-ex - provided data for 275 different wines in the Nobles Crus portfolio. This data covered 50% of the portfolio as of 31st August 2012.
Unanswered questions by Elite Advisers
While I am grateful to Brunswick for replying in detail to my questions of 12th December, there remain a number of questions that I have put to Elite Advisers that remain unanswered, in particular in relation to the provenance of some of the older wines in the Nobles Crus portfolio and to the role of Wine Experts Ltd. These topics were highlighted in my post of 13.12.12. In addition I'm awaiting information that Brunswick undertook to get for me during our conversation in relation to the level of due diligence carried out by Deloitte during their annual audit in respect to the provenance and condition of the older vintages in the fund, which are stored in Switzerland.
‘Ernst & Young Report: open only to investors who visit Luxembourg and who sign a confidentiality/non-disclosure agreement.’
I made this clear in my post of 13th December 2012.
'paperJam article (22.10.12) 'number of inaccuracies'
Please note that my post of 13th December quoted this observation as made to me by Jess Ayres. I’m intrigued to know what these inaccuracies might be apart from referring to the Ernst & Young as a second ‘audit’ and that the report from Ernst & Young would be published in the week of the article from paperJam. Given that the article reported that ‘Elite Advisers l’attend avec impatience’ it is reasonable to assume that the source for this was someone close to Elite Advisers unless this was invented by paperJam. All of the figures quoted in the article came from the letter of 19th October 2012 sent to investors by Elite Advisers.
I would be most grateful if your client would indicate what these 'inaccuracies' are in the paperJam article (22.10.12).
‘As our client has stated, where it has sold wine in more normal market conditions it has achieved prices at above its published valuation levels.’
I covered this in my discussion with Jess Ayres on redemptions in the post. I have now added details of the wines sold by Elite Advisers during 2011, which I had previously included in a post of 11th October 2012. It is still the case that the only time that redemptions exceeded 10% was in March 2009 and that it is not known whether the Nobles Crus valuations would be achieved if Elite Advisers had to sell a significant quantity of wine.