Winery investor Charles Banks pleads guilty to fraud charges
Tim Duncan's former financial adviser, Charles Banks, upon turning himself in on federal charges on Friday, September 9, 2016.
Photo: Ron Cortes
Charles Banks, the California winery investor and former financial adviser to NBA player Tim Duncan, plead guilty Monday morning to a count of federal wire fraud.
Banks was indicted in San Antonio in September. Banks allegedly sent misleading text messages inducing Duncan, his longtime advisee, to fund a $7.5 million loan and a separate $6 million line of credit to sports-merchandising company Gameday Entertainment, where Banks was part owner and chairman of the board. That same day, the Securities and Exchange Commission sued Banks on related charges in Atlanta federal court. (The criminal indictment was later amended to four counts.)
These criminal charges followed two lawsuits that Duncan had filed against Banks in 2015, alleging that Banks’ bad advice had cost him $20 million. In those lawsuits, Duncan brought up not only the Gameday investments, but also his investments in Terroir Capital, a fund founded by Banks that invests in hotels and wineries.
Terroir made Banks a celebrity in the California wine industry over the last decade, with stakes worth an estimated $200 million in some of California’s highest-profile wineries, such as Qupé and Wind Gap. Banks himself personally owns half of Napa’s historic Mayacamas Vineyards. (Terroir does not have any ownership in Mayacamas, though the winery contracted with it to do sales and marketing.)
Duncan remains a limited partner in Terroir, and the criminal wire fraud charges do not address any of his holdings in its funds.
Banks might have gone to trial if his lawyers had been able to convince U.S. District Judge Fred Biery that their case deserved a change of venue. San Antonio’s devotion to its star power forward Duncan, who spent his entire 19-year career with the Spurs, would have rendered a jury trial unable to fairly judge the case’s evidence, Banks’ lawyers argued in a motion. “This love and support is understandable and appropriate for a sports star … who consistently gave back to the city of San Antonio,” read the 42-page motion. Biery ruled against them, refusing to move the trial.
Another former NBA player, Kevin Garnett, reportedly invested in Gameday on Banks’ advice, too. The retired Minnesota Timberwolves forward employed Banks as a financial adviser and is known to be an investor in Terroir, though the Gameday indictment identifies him only as “K.G.” Records pertaining to Banks’ plea, filed March 30, refer to “another individual” whom Banks persuaded to guarantee an $8 million loan to Gameday using his NBA deferred compensation package; that money, however, was later returned.
These are felony charges. What effect could Banks’ conviction have on Terroir and its wineries?
Banks announced Monday morning that he had stepped down from “day to day management of Terroir.” Convicted felons cannot manage wineries. They may, however, be partial owners, provided they don’t have management authority. Banks may have to place his shares in its funds — as well as his personal stake in Mayacamas Vineyards and his full ownership of Cultivate Wines — into blind trusts.
Or, of course, he could sell, which is precisely what he’s trying to do with Mayacamas. Following September’s indictment, Banks sued CBSchott, Inc. — the equal partnership between him and the Schottenstein family, of the Columbus, Ohio, retail empire, that jointly owns Mayacamas — in Napa County Superior Court, to dissolve their partnership, which would force a sale of Banks’ share in the winery. The lawsuit was dismissed in January, and has now been moved to Delaware at the Schottensteins’ request, according to Banks’ attorney Thad Davis.
Last May, Terroir sold its share of Sandhi, the Santa Barbara winery that Banks co-founded in 2009, to co-founders Rajat Parr and Sashi Moorman and a new partner, Steve Webster. In a 2016 conversation with The Chronicle, Parr insisted that Banks’ legal troubles played no role in their decision to buy him out.
Kevin McGee, Terroir’s former chief operating officer, has been promoted to chief executive officer. McGee said there “hasn’t really been an impact” on Terroir’s wineries so far. “Sales are up,” he said. “The businesses are doing better than they ever have.”
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