Friday, November 4, 2016

Napa winemaker indicted on broad fraud charges

screen-shot-2016-11-04-at-1-48-43-pmA federal grand jury in San Francisco has indicted former winemaker Jeffry Hill in an extensive scheme of alleged mail fraud and wire fraud in connection with his operation of a Napa Valley, CA, wine company.

The indictment was unsealed this week by U.S. Attorney Brian J. Stretch and Alcohol and Tobacco Tax and Trade Bureau official Tom Crone in a case they estimated cost consumers as much as $1.5 million in overpayments.

Hill, 38, formerly of Napa, ran the Hill Wine Company (HWC), a business of making and selling wine and wine inputs, such as pre-fermented grape juice, among other things. It operated a winery and tasting room in Napa County, CA., on the Silverado Trail, and used winemaking equipment at facilities owned by others in Napa and Sonoma counties.

According to the indictment, Hill defrauded HWC’s customers by misrepresenting the geographic origin and grape varietal of the wine and wine products that he sold, thus causing customers to pay more than they otherwise would have, or to buy products they otherwise would not have.

Federal regulations establish American Viticultural Areas (AVAs), geographically delineated regions with particular wine-growing characteristics. The Napa Valley AVA is one such AVA. Under federal regulations, wine can only be labeled as originating from a particular AVA if not less than 85% of the liquid volume of the wine is derived from grapes grown within its boundaries.

Napa Valley wine is seen as premium wine and often sells at a higher price than wine from other parts of California, and grapes grown in the Napa Valley AVA generally are more expensive than those grown in other parts of California.

According to the indictment, Hill allegedly grew or purchased grapes, pre-fermented grape juice or wine grown outside of the Napa Valley then sold bulk grape juice, bulk wine, or bottled wine made from these non-Napa Valley grapes while representing the products to have been made from Napa Valley AVA grapes. Similarly, he allegedly misrepresented as cabernet sauvignon wine that was made from other varietals of grapes. According to the indictment, customers paid over $1,500,000 for fraudulently mislabeled wine, grape juice, or wine products.

Hill also allegedly took steps to conceal and hide his scheme to defraud, using such maneuvers as altering or creating false bills of lading and other records; maintaining false inventory records; falsely stating to his company’s employees that grapes grown outside of Napa Valley were grown there; moving grapes or wine between his company’s three facilities to obscure their origin of the grapes, and instructing employees who picked grapes to mislabel the origin and varietal of grapes that they picked.

Hill was arrested on Tuesday in Clovis, CA, made his initial appearance in federal court, and was released on conditions. His next appearance is scheduled for November 16 in San Francisco. If convicted, he could face a maximum of 20 years in prison and a fine of $250,000 or twice the amount gained or lost as a result of the scheme. The court may also order that the defendant pay restitution, if appropriate.


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