Maureen Downey's Wine Fraud Presentation: May 3rd - 5th 2017

 Maureen Downey surrounded by the evidence 

 Maureen Downey (Chai Consulting)

I have been privileged to spent part of today and yesterday with Maureen Downey at her latest fraud presentation held in the St James's at 67 Pall Mall, London SW1.

Maureen has provided both an overview both of fraud within the wine industry and shared her remarkable and precise expertise in distinguishing between counterfeit and genuine wines. 

Joining her in the presentation were Siobhan Turner, also part of Chai Consulting, Steen Öhman (Winehog blog on Burgundy) and I also contributed on wine investment fraud and will be back tomorrow morning.

 Siobhan Turner (Chai Consulting)

Steen Öhman

(Owner and author of the high respected Winehog)

Maureen believes that in the fine wine market – currently worth around $15 billion – that 20% or $3 billion are fake/ counterfeit wines. Furthermore the majority of the wines that the infamous Rudy Kurniawan faked are still in circulation. Maureen makes it clear that Rudy was part of a circle with a number knowing what the deal was and it seems reasonable to conclude that Rudy will be rewarded when he comes out of jail for keeping his mouth shut. 

I have to conclude that if I bought wine from auction, which I don't, I wouldn't consider buying from John Kapon's Acker Merrall house.

  

The volume of fakes that still turns up in auction is frightening. 

Maureen went through a long and methodical checklist of how to assess whether a wine is genuine or not. This involves not just looking at corks, the glass, the label, capsule, etc. but also knowing the appellation laws, the dates of requirements to include warnings for pregnant women, when printing techniques started and a host of other consideration.         

Assessing the label using 

one of the tools of the trade

1900 Margaux:

'1900 Château Latour'

 Nobles Crus Wine Fund: 404 bottles of 1900 Château Margaux

Inventory August 2012

Nobles Crus Wine Fund: 6 bottles of 1900 Château Margaux

Inventory August 2012 

During her presentation Maureen mentioned false 1900 Château Margaux supposedly from Bartin & Guestier. This brought back memories of the Nobles Crus wine portfolio that in August 2012 included 410 bottles of 1900 Château Margaux. Nobles Crus insisted that they bought their stock from reputable suppliers and that their stock was genuine. 

I trust they are right, even though 410 bottles of 1900 does appear to be an extraordinary quantity of this old wine. Should, however, any of these prove to be fake, I have to wonder what has happened to them now that the wine fund has been liquidation....?  

Noble Crus: larger shareholders benefit, while smaller are disadvantaged?

The controversial Nobles Crus wine fund was suspended by the Luxembourg financial authorities on 28th May 2013. Here is an update on the latest developments that suggests that the larger fund shareholders, who effectively pulled the plug on the fund, have been given preferential treatment to the possible detriment of the smaller investors. It appears that they may have been allowed to cherrypick the wines taken as settlement in kind.

I am indebted to the research and assistance of Jean Walravens, who has long raised pertinent questions about the management of the Nobles Crus fund.

On 1st June 2014 the Financial Times published an article: Luxembourg embroiled in fine wine row. The article covered this transaction and the subsequent complaints made by Albert Biebuyck, managing partner at Investor Protection Europe to Luxembourg’s Ministry of Finance, the CSSF and other European regulatory bodies. Biebuyck claimed 'it was the latest example of “lax and selective” regulation in Luxembourg, the biggest centre for funds in Europe and the second biggest in the world.

    

Letter from Elite Partners to investors: April 2014

For investors only  

Luxembourg, 14 April 2014

Dear investor,  

In our capacity as General Partner of  Elite's Exclusive Collection SCA, SICAV-FIS, we  would  like  to inform you  of  the  following transaction which has been  made  for  the  account  Elite's  Exclusive Collection- Nobles Crus ("Nobles Crus") on 28 March  2014.

As you are aware, we faced during the first quarter 2013 some redemption requests for an aggregate amount of  approximately EUR 37.7 million. In particular, large institutional shareholders related  to the same group (together the  "Redeeming Shareholders") submitted redemption requests  totaling approximately 70% of all pending redemption requests  as of 31December 2013. Liquidity reserves were insufficient  to enable us to honor thredeeming  shares and pay out the Redeeming Shareholders. Therefore, we accepted 10% of the redemption requests as of 31March 2013 NAV and postponed the acceptance  of the  remaining 90% in accordance  with  section  5.4 of Annex 1 of the issuing document.

The  Redeeming  Shareholders  proposed us to  allow  the  transfer   of  its shares  and  claims  toward Nobles Crus to a third party  (the  "Third Party") in the context  of a private  transaction between the Redeeming  Shareholders and the Third Party. The Third Party accepted  to take over the  shares and claims from  the Redeeming Shareholders  under the condition that it would be reimbursed in kind.

Last paragraph  of section 11 of part  A and section  5.5 of annex 1of part  B of the  issuing document allows  reimbursement in  kind, provided that  it  is determined on  a fair  and  reasonable  basis and complies  with  the following conditions:

Bottles   are  selected  upon  the  recommendation of  Vino  &  Finanza  Sri (the "Investment Manager") to  ensure  that  the  structure and  the  level  of diversification of  the  remaining portfolio will not be disturbed by the reimbursement in kind;

Deloitte Sari (the  "Auditor") must  release a special report  on possible findings in relation to the proposed reimbursement in kind (the "Special Report"); and

Costs of the reimbursement in kind must be borne by the requesting party (i.e., in the matter at hand the Third Party once it has acquired  the shares and the claims from  the Redeeming Shareholders).

It is to be noted  that the Redeeming Shareholders were not allowed  by their own rules of governance to directly hold wine. Reimbursement in kind was therefore not an option for the Redeeming Shareholders.

After  we completed the identification process of the Third Party to assess its repute  and eligibility as a possible  shareholder of Nobles Crus, we entered into a negotiation during  several months  on the selection  of bottles to be part of the reimbursement in kind (the "Bottles"). The Investment Manager was actively involved  in this negotiation.  

The price  retained for  the  Bottles  to  be transferred was the  value  retained in  the  accounting of Nobles Crus for the calculation of the net asset value of 31 December 2013.

We obviously informed the Commission de Surveillance du Secteur Financier (CSSF) on the terms  and conditions of the contemplated transaction.

The Auditor delivered the  CSSF and us the  Special Report  on 25 March  2014. As the  price  for  the transaction was based on the  net  asset value of 31 December  2013  (and not  on a privately agreed price different from  that  net asset value), no significant  point  was raised in the Special Report.

This transaction is in the  best interest  of Nobles Crus. It enables Nobles Crus without a discount  on the value of the Bottles  to reimburse a large part of the pending redemption requests. This is a major step  in  restoring the  liquidity of  Nobles  Crus and  a confirmation that  we  did  not  overvalue   the portfolio of Nobles Crus as pretended by some unfounded press releases in 2012.

Therefore we approved the transfer of the shares and the claims from  the Redeeming Shareholders to the  Third Party and the  reimbursement in kind from the Third Party with effect as of the  28th of March  2014.

The remaining portfolio of Nobles Crus as of today is approx. EUR 50.8 million. It has a similar  level of diversification  in   comparison  to   the   portfolio  before   31   December   2013   and   respects   the diversification  ratios   defined   in  the  issuing  document. The  portion of  Burgundy (35%  vs.  48%) respectively Bordeaux  (63% vs. 50%) remains constant. Wine en primeurs increased from  3.5% to 6% of the total portfolio. The average Parker rating  is slightly  higher  (96.97%  vs. 96.71%).  We remain  at your entire disposition if you would  like to receive further information on the current composition of the portfolio of Nobles Crus.

We also remind you that we are open for negotiation if you would like to investigate the possibility of a reimbursement in kind. We draw however your attention to the  fact that  such reimbursement in kind must strictly follow the requirements under the issuing document and we are entitled to refuse it if we have doubt  that the transaction could potentially have an adverse impact on the portfolio.

In addition to the  above mentioned transaction, we inform you that we are currently in negotiation with  some counterparties to directly acquire wine from Nobles Crus enabling to entirely restore the liquidity of Nobles Crus.

We  hope  that  we  will  soon  be in  a position to  request  the  CSSF  to  levy  the  suspension on the redemption and to proceed to the reimbursement of the pending requests.

Yours sincerely,

 

Jean Walravens comments:

I think that, considering the following facts, we can conclude, without a doubt, that small shareholders are harmed in this operation.  

On the one hand, the bottles that were given to major shareholders are not at all representative of the entire stock. According to Elite Partners, the proportion of Burgundy in its stock fell to 35% from 48 % and the proportion of Bordeaux increased from 50 % to 63 %. We can therefore calculate that the major shareholders received bottles with a proportion of 70%  Burgundy / 28 % Bordeaux.   

Nobles Crus price estimates for Burgundy were much less overvalued than price estimates for  Bordeaux. Based on the comparison between the prices (August 31, 2012) provided by Elite Advisers and Liv-Ex for a representative sample, Nobles Crus estimates exceeded those of Liv-Ex by 39.02% for Bordeaux and by 20.72% for Burgundy. It is likely that this difference has increased, as valuations of Nobles Crus appear not to have changed much while Bordeaux prices went down and Burgundy prices rose. Mainly taking Burgundy, large shareholders have got a good deal at the expense of small shareholders.

On the other hand Elite Partners said: "We entered into a negotiation during several months on the selection of bottles to be part of the reimbursement in kind (the Bottles)." Large shareholders have therefore participated in the selection of bottles. Obviously they will have refused any suspicious bottles. However, with the Nobles Crus purchase methods (purchases from individuals, restaurants, etc ...), there may well be a significant number of 'bad' bottles in stock.

The shareholder who completed the transaction is undoubtedly Banca Generali. Not only did they place Nobles Crus shares in their clients' portfolios but they had previously acquired a very large number of parts for nine sub-funds of their Luxembourg SICAV BG Selection Sicav. 

The Nobles Crus shares were acquired by funds that were not supposed to make such investments: China and India Equities, etc. (also including Latin America Equities – Jim). 

In its accounts of 31/12/2013, BG Selection Sicav already accounts for a fixed loss of 15% (haircut) on their Nobles Crus shares compared to the Net Asset Value published by Nobles Crus.'

It is interesting to note that the Generali Fund Management offices are located in the same building as the Elite Advisers offices.

 

Transaction in January 2014 or 28th March 2014?

 

 January 2014: funds under management €52,489,449

The January 2014 Nobles Crus' newsletter shows that the funds under management was €52,489,449. In March 2013 the fund stood at €91 million. This suggests that the completion of the transaction to the larger shareholders  may well have been earlier than 28th March 2014 stated by Elite Partners in their 14th April 2014 letter to investors.       

 

Nobles Crus wine investment fund suspended – treatable or terminal?

One hopes that the odds on investors in Nobles Crus getting 

their money back will be significantly better than those offered by most amusement arcades

My Les 5 du Vin post this week is on Nobles Crus' suspension and liquidity problems. 

Elite Partners, Nobles Crus: Luxembourg, le 31 mai 2013 la lettre aux investisseurs

Chers investisseurs, chers amis,

Beaucoup d'entre vous nous suivent depuis le lancement du Compartiment Elite's Exclusive Collection – Nobles Crus (<<Nobles Crus >>), il ya plus que 5 ans maintenant. Au cours des dernières années, Nobles Crus a réalisé d'excellents performances malgré un contexte marqué par de fortes turbulences. Nobles Crus est par ailleurs le plus grand fond de vins réglementé au monde.

Avec le temps, nous avons se relever les défis que nous imposait notre rôle de pionnier en investissments tangibles, tout en faisant preuve d'une réactivité vis à vis des critiques et d'une intregité inébranlable.

Après les articles diffamatoires apprus dans la presse en septembre 2012, Nobles Crus a dû faire face début 2013 à plusieurs changements dans la réglementation européenne. Ainsi les organismes de placement collectif en valeurs mobilières ("UCITS') ne devront plus détenir à partir du 31 décembre 2013, entre autres, des positions dans les fonds spécialisés tels que Nobles Crus suivant l'interpretation de l'article 50 (2) (a) de la Directive 2009/65/UE (réf. ESMA 2012/721) émise par l'Autorié Européenne des Marchés Financiers.

Nobles Crus se trouvé aujourd'hui confronté à quelques demandes de rachat d'Actions portant sur des montants provenant de quelques grands investisseurs institutionels. Nobles Crus n'a actuallement pas les liquidités nécessaires pour les honorer à très court terme. Nous vous informons que La Commission de Surveiilance du Secteur Financier (CSSF), l'authorité de surveillance du secteur financier au Grand-Duché de Luxembourg, a pris la décision le 27 mai 2013  de suspendre tout rachat et toute souscription de Nobles Crus à titre temporaire sur le base de l'article 45 (3) (j) de la loi de 13 février2007 sur les fonds d'investissements spécialisés, telle que modifiée. 

Nous vous informons que la dernière valeur nette par action de Nobles Crus en date du 30 avril est de 180,25 EUR.

Comme nous vous l'avons toujours indiqué le marche des grands vins est relativement liquide cependant dans les proportions différents de celles des marchés financiers. Nous savons qu'il est important, dans les circonstances présentes, de vendre au prix du marche et non dans l'urgence en vue libérer les liquidités nécessaires pour honorer ces demandes de rachat.

Notre mobilisations, soyez-en assuré, est générale et nous traitons tout ceci avec la plus grande attention et la diligence nécessaire pour servir vos intérêts. Nous en tenons pour preuve la vente faite en février 2013 qui portait sur un montant de 8 782 000 d'euros, et ce, au prix de valorisation du portfeuille de Nobles Crus. Certaines ventes sont actuellement en cours auprèsde contreparties privées et professionnelles et de maisons de ventes aux enchères.

Nous vous tiendrons informés des résultats et des efforts déployés par toutes nos équipes pour rétabilir au plus vite cette situation. Nous nous tenons à votre disposition pour toute précision complémentaire n'hesitez pas à contacter: M. Tamisier (+352 26 25 99 84 50 ou mtamisier@eliteadvisers.com), Mme Wilson (+352 26 25 99 84 30 ou mwilson@eliteadvisers.com) ou Mme Cioli (+352 26 25 99 84 45 ou vcioli@eliteadvisers.com). 

Bien cordialement

Miriam Wilson                      Michel Tamisier
General partner                   General partner     

      
(Jim: Je note que le fond était suspendu le lundi le 27 mai 2013 et les  investisseurs était informé le vendredi le 31 mai 2013.)  

My fellow blogger Hervé Lalau has kindly translated the letter from Miriam Wilson and Michel Tamisier in French:

'J'ai rarement vu un texte à valeur légale avec autant de fautes de français. Si ces gens gèrent leur "portfeuille" aussi bien que leur spelling, c'est alarmant...

Je te met le texte en bon français ci-dessous

Chers investisseurs, chers amis,

Beaucoup d'entre vous nous suivent depuis le lancement du Compartiment Elite's Exclusive Collection – Nobles Crus (<<Nobles Crus >>), il y a plus de 5 ans maintenant. Au cours des dernières années, Nobles Crus a réalisé d'excellentes performances malgré un contexte marqué par de fortes turbulences. Nobles Crus est par ailleurs le plus grand fond de vins réglementé au monde.

Avec le temps, nous avons su relever les défis que nous imposait notre rôle de pionnier en investissements tangibles, tout en faisant preuve d'une réactivité vis à vis des critiques et d'une

Après les articles diffamatoires apparus dans la presse en septembre 2012, Nobles Crus a dû faire face début 2013 à plusieurs changements dans la réglementation européenne. Ainsi les organismes de placement collectif en valeurs mobilières ("UCITS') ne devront plus détenir à partir du 31 décembre 2013, entre autres, des positions dans les fonds spécialisés tels que Nobles Crus suivant l'interprétation de l'article 50 (2) (a) de la Directive 2009/65/UE (réf. ESMA 2012/721) émise par l'Autorité Européenne des Marchés Financiers.

Nobles Crus se trouvé aujourd'hui confronté à quelques demandes de rachat d'Actions portant sur des montants provenant de quelques grands investisseurs institutionnels. Nobles Crus n'a actuellement pas les liquidités nécessaires pour les honorer à très court terme. Nous vous informons que La Commission de Surveiilance du Secteur Financier (CSSF), l'autorité de surveillance du secteur financier au Grand-Duché de Luxembourg, a pris la décision le 27 mai 2013  de suspendre tout rachat et toute souscription de Nobles Crus à titre temporaire sur le base de l'article 45 (3) (j) de la loi de 13 février 2007 sur les fonds d'investissements spécialisés, telle que modifiée.

Nous vous informons que la dernière valeur nette par action de Nobles Crus en date du 30 avril est de 180,25 EUR.

Comme nous vous l'avons toujours indiqué, le marché des grands vins est relativement liquide; cependant, dans les proportions différentes de celles des marchés financiers. Nous savons qu'il est important, dans les circonstances présentes, de vendre au prix du marché et non dans l'urgence en vue libérer les liquidités nécessaires pour honorer ces demandes de rachat.

Notre mobilisation, soyez-en assuré, est générale et nous traitons tout ceci avec la plus grande attention et la diligence nécessaire pour servir vos intérêts. Nous en tenons pour preuve la vente faite en février 2013 qui portait sur un montant de 8 782 000 d'euros, et ce, au prix de valorisation du portefeuille de Nobles Crus. Certaines ventes sont actuellement en cours auprès de contreparties privées et professionnelles et de maisons de ventes aux enchères.

Nous vous tiendrons informés des résultats et des efforts déployés par toutes nos équipes pour rétablir au plus vite cette situation. Nous nous tenons à votre disposition pour toute précision complémentaire, n'hésitez pas à contacter: M. Tamisier (+352 26 25 99 84 50 ou mtamisier@eliteadvisers.com), Mme Wilson (+352 26 25 99 84 30 ou mwilson@eliteadvisers.com) ou Mme Cioli (+352 26 25 99 84 45 ou vcioli@eliteadvisers.com).

Bien cordialement

Miriam Wilson                      Michel Tamisier
General partner                   General partner'    

   
(Jim: Je note que le fond était suspendu le lundi le 27 mai 2013 et que les investisseurs n'ont été informés que le vendredi le 31 mai 2013.)

    

Letter from Elite Partners to its Nobles Crus' investors and friends: Luxembourg 31st May 2013

 

Letter from Elite Partners: Luxembourg 31st  May 2013

Dear investors, dear friends,

Many of you have been following us since we launched the Elite’s Exclusive Collection – Nobles Crus Sub-fund (“Nobles crus”). More than five years ago now. During these years, Nobles Crus has enjoyed superb performance despite the particularly turbulent climate. Furthermore, Nobles Crus is now the largest regulated wine fund in the world.

With time, we have managed to overcome the challenges that have accompanied our pioneering work in tangible investments, while also demonstrating exceptional responsiveness to criticism and unwavering integrity. 

Following the publication of the defamatory articles in the press during September 2012, Nobles Crus has had to contend with several changes in European regulations at the beginning of 2013. Notably as of 31 December 2013, Undertakings for Collective Investment in Transferable Securities (UCITS) are no longer allowed to invest in, among others, specialized investment funds such as Nobles Crus, as defined in article 50(2) (a) of Directive 2009/65/EC (ref. ESMA 2012/721), issued by the European Securities and Markets Authority.

Nobles Crus now finds itself confronted with a few requests from some large institutional for redemptions involving considerable sums of money. Currently, Nobles Crus does not have the necessary liquidity to honour these request in the very short term. We there fore wish to inform you that the Commission de Surveillance du Secteur Financier (CSSF), the financial supervisory authority in the Grand-Duchy of Luxembourg, decided on 27 May 2013 to temporarily suspend all redemptions and subscriptions of Nobles Crus, under article 45(3)(j) of the law of 13 February 2007 on specialised investments funds, as amended.
For your information, the last net value per share for Nobles Crus on 30th April is EUR 180.25.

As we have always emphasised, the fine wine market is relatively liquid, however, in different proportions to those of the financial markets. We are well aware of the importance, in the current circumstances, to sell at market price and not too hastily sell in order to free up the necessary liquidity to honour these redemption requests.

Rest assured that we are all doing our utmost in managing this matter with the greatest care and attention to serve your best interests. The best proof of course is in practice, the sale undertaken in February 2013 amounting to EUR 8,782,000, was done at the valuation price of Nobles Crus’ portfolio. Furthermore some sales are currently taking place with private and professional counterparts and auction houses.

We will keep you informed of the results and of the efforts undertaken by all our team to rectify this situation as quickly as possible. Should you require an further information, please do not hesitate to contact Mr Tamisier (+352 26 25 99 84 50 or mtamisier@eliteadvisers.com) , Ms Wilson (+352 26 25 99 84 30 or mwilson@eliteadvisers.com ) or Ms Cioli (+352 26 25 99 84 45 or vcioli@eliteadvisers.com.

Best regards

Miriam Wilson                        Michel Tamisier

General Partner                     General Partner  

(Jim: I note that the CSSF suspended the fund on Monday 27th May; investors were informed on Friday 31st May.)

Elite Advisers' Nobles Crus wine fund suspended by CSSF – Luxembourg's financial authority

from Elite Advisers' website

The Belgian daily – Lalibre.be – is reporting that Elite Advisers' Nobles Crus wine fund has been 'temporaily suspended' by the Luxembourg CSSF (Commission de Surveillance du Secteur Financier) because of liquidity problems.   

 

'Nobles Crus en panne de cash
I. de L. 
Mis en ligne le 06/06/2013

Le fonds spécialisé en grands crus fait face à une situation délicate.'

‘Il en résulte que la CSSF (Autorité de Surveillance du secteur Financier au Grand-Duché de Luxembourg) a suspendu, à titre temporaire, les rachats et les souscriptions dans ce fonds. "Il s’agit d’une mesure de sauvegarde que prend la CSSF. L’impact de cette mesure sur les investisseurs privés est qu’ils doivent, dans ces circonstances, attendre la liquidation pour sortir du fonds ou du moins attendre la prochaine étape", relève-t-on à la FSMA (autorité de contrôle belge).’

Lalibre reports that because of a recent directive by l'ESMA a number of large institutional investors in the Nobles Crus wine fund are needing to exit the fund before the end of this year. Nobles Crus currently does not have sufficient cash to meet these redemption demands and is apprently trying to sell some of the wines in the fund to raise the necessary capital.

Read the rest here.   

Update: 12.00 
The CSSF decided to suspend the Nobles Crus wine fund on 27th May 2013 because it coud not meet the requested redemptions. On 31st May Miriam Wilson and Michel Tamisier, general partners in Elite Advisers/Elite Partners, informed their investors of the suspension. It may be significant that it would appear that it was the CSSF who stepped in rather than at the request of Elite Advisers/Elite Partners.   

Wilson and Tamisier report that in February 2013 they managed to sell 8,782,000€ of stock at ‘valuation price of Nobles Crus portfolio’. It will be interesting to see if the valuation of the stock they now need to sell will continue to be at their 'valuation price'. 

Unlike other wine funds Nobles Crus has significant holdings of old wines, mainly from Bordeaux and Burgundy. It will be interesting to see if their various provenances are sufficiently robust to stand up to the scrutiny now expected in the current climate.

Le Vif/L'Express is also reporting on the Nobles Crus suspension here.They report that the fund's valuation for the month of April has yet to be published. Normally this is available some three weeks after the end of the month. Furthermore the assets under the fund's managment have declined by 23% between October 2012 and March 2013. 

Back in January 2010 the Vinum Fine Wine Fund was suspended by the Guernsey financial authorities. It was unable to resolve its valuation problems and closed in April 2010.
  
In their letter to investors Wilson and Tamisier claim to have demonstrated 'exceptional responsiveness to criticism'. I assume this refers to the hiring last year of the services Mischon de Reya, the very distinguished and, I assume, expensive firm of lawyers to assist Elite Partners/Elite Advisers in its dealing with the press and their critics. See here: Elite Advisers: 'general concerns as to the nature and tone of your articles'. In the light of their current liquidity problems Nobles Crus investors may wish to reflect whether this was money well spent...  

8.6.2013: Now a detailed article here from the FT, another of the recipients of missives from Mischon de Reya.  

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.      

Yours faithfully,

Jim Budd