A friend of mine and I were exchanging e-mails a few weeks ago about the mounting financial difficulties of Robert Dahl, the winery owner who became famous last week for murdering one of his investors in a vineyard just south of where I am sitting. My comment then about the people who create these types of financial disasters was, “it’s sometimes hard to distinguish between the stupid and the corrupt.” I think we have our answer now with regard to Mr. Dahl.
There is no shortage of crooks and con artists in the American business landscape, (see CNBC’s ‘American Greed’ – Napa Valley addition coming soon) but I do think that there are some special aspects of the wine industry that make it particularly attractive to the type of person who prefers to take money from others rather than trying to earn it. First, these are communities with a lot of wealth, populated by many people who have come from other places. A stranger showing up with a story of financial success is not unusual here. Then there is the allure of owning a winery. For a con artist to separate experienced investors from their money, they need to have (or create) a circumstance where normal caution might be set aside. A beautiful winery in a bucolic setting, alcohol and good food can certainly set the stage.
As an advisor to winery owners selling their companies, I have developed an instinct for identifying a con, in order to dismiss them as a prospective buyer. Here are some of the hallmarks of a person not to be trusted:
- Name dropping
- Comes with a story of success and spins a tale of fantastic opportunity
- Appears wealthy
- Wants to use other people’s money (or property)
In the world we live in today, avoiding being taken in really only requires a healthy skepticism about the stories strangers tell us and access to the internet.
For example, in the depths of the wine industry downturn caused by the financial crisis, I was working with the owner of a winery and vineyard that had been on the market for some time. He called me one day to say that he had been approached by some “investors” interested in leasing the property. A simple Google search turned up an SEC indictment of one of the parties for investor fraud. Tellingly, they had perpetrated a scheme involving a leased property. Conversations with real estate brokers throughout wine country revealed that these investors were talking with everyone who had a property that had been sitting on the market.
We usually think of a con artist as someone who operates on a personal level with small targets like little old ladies, not sophisticated business people like ourselves. The truth is that sometimes a crook can engineer a multi-million dollar fraud. For winery owners and investors alike, the old adage, “if it sounds too good to be true, it probably is,” should always stay at the back of our minds.