Courtwatch: Charles Banks Sued His Mayacamas Vineyards Partners After He Was Indicted in Texas
March 27, 2017
Wine investor Charles Banks created a stir in 2013 when he purchased iconic Mayacamas Vineyards, as a personal investment, in partnership with members of the Schottenstein family—Columbus, Ohio-based retail giants. However, the partnership, CBSchott Inc., sailed through rough waters after Banks was indicted last September in federal court in San Antonio, Texas, in a fraud case involving multi-million dollar deals in a sports apparel company. The next hearing in that case will be held Monday, April 3 and a trial is expected sometime in May.
As the results of the San Antonio indictment loomed, Banks sued the winery partnership in Napa County Superior Court last fall to dissolve it—apparently to force a sale of Mayacamas Vineyards— according to court documents. Court documents show “internal dissention” as one reason why. Banks also accused the Schottensteins of resisting any attempt to sell the company or allowing Banks to “explore sale of his shares, threatening legal action to stop such process,” according to the complaint.
His CBSchott Inc. partners fought back.
“Simply stated, Mayacamas is not for sale, notwithstanding Charles’ claims to the contrary,” attorney John Zeiger wrote in a December letter addressed to Banks that Cc’d Mayacamas’ investors, including, among others, Jay Schottenstein, chairman of the board at American Eagle Outfitters and DSW. The letter, which is now part of a court filing, asked Banks to “cease all efforts to market and sell Mayacamas.”
In the letter Zeiger also demanded Banks pay $467,497.95 to cover his share of “past and current period operating losses.” In addition, the attorney wanted assurance Banks would continue to cover his 50 percent of all operating loss expenses and demanded he cease to disclose proprietary information about the partnership to third parties.
Roughly 50-plus acres are planted on the 460-acre Mount Veeder property, located 1,800 to 2,400 feet above the Napa Valley floor. Banks and others spoke about their intention to replant and improve the property after the purchase.
In his legal complaint, Banks alleged his Schottenstein partners “have refused on multiple occasions to permit Mayacamas to benefit from and have access to lines of credit extended by Silicon Valley Bank to Mayacamas.” He also accused the Schottenstein family of either purchasing or trying to buy unnecessary items and of blocking payments to Banks and preventing “hundreds of thousands of dollars in owed external sales team fees, which in turn negatively impact the company’s sales revenues,” according to the lawsuit.
According to court records, Banks and ‘All Js’ own 50 percent each of CBSchott, a company incorporated in Delaware in 2013. As of mid-March, the company had not been dissolved and was in good standing, according to Doug Denison, spokesman for Delaware’s Department of State.
Banks’ lawsuit in Napa was dismissed in January. The terms of the dismissal were not made public and attorneys involved in the case could not be reached for comment.
Kevin McGee, chief operating officer at Terroir Capital, of which Banks is founder and 90 percent owner, said Terroir’s wine sales are up “significantly” since last fall. He referred questions about Mayacamas to attorney Thad Davis of San Francisco. Davis, who filed the lawsuit on behalf of Banks in Napa County Superior Court, could not be reached to comment. Neither could a representative for the Schottenstein family.
Jury Trial in San Antonio Set for May 30
Banks faces a May 30 jury trial for four criminal fraud wire charges in San Antonio, where one witness could be the alleged victim, retired NBA star Tim Duncan.
Banks unsuccessfully tried to have a change of venue, citing—among other arguments— Duncan’s 19-year-career in San Antonio. In a motion to move the trial to Los Angeles, Banks said he had counsel in California. “The indictment has caused damage to many of my unrelated business ventures, and in at least one instance, I have been forced to retain California lawyer Thad Davis of the Gibson Dunn law firm to deal with such post-indictment issues,” Banks said. Davis has been asked to represent Banks in the criminal proceedings.
The next hearing in the federal case is April 3 in San Antonio.
Federal officials allege Banks misrepresented the terms of a $7.5 million loan Tim Duncan made to a sports clothing company named Gameday Entertainment LLC. Prosecutors allege Banks duped Banks into backing another $6 million line of credit in 2013 that further increased the basketball star’s potential liability.
Banks, who served as chairman of the board of Gameday, allegedly collected unauthorized commissions and payments based on these loans for his personal use. He pleaded not guilty to four counts of wire fraud, each of which carries a potential sentence of up to 20 years.
Banks faces other court challenges. In a civil federal lawsuit filed in Atlanta in September, the SEC sued him for fraud over Duncan’s $7.5 million loan and subsequent $6 million loan guarantee to Gameday. The SEC’s allegations include that Banks ordered Gameday pay him a $225,000 commission for arranging the $7.5 million loan and another $180,000 fee for the $6 million loan guarantee, according to court records. Federal officials also allege that for about two years, Banks pocketed $15,000 from each $75,000 monthly interest payment on investments owed to Duncan. Settlement discussions in the federal civil case between the SEC and Banks have been under way in that case since January 12.
Duncan, who first met Banks in 1998 when the NBA star was a rookie, has sued Banks in state and federal courts. Duncan invested more than $23 million into funds and other ventures that Banks had financial interests between 2000 and 2012, according to court records. These investments included Terroir Winery and Terroir Hotel and Resort Fund. Not all were profitable. Duncan had “carry-over losses of $5.1 million,” according to a 2015 federal civil lawsuit Duncan has filed against Banks.
That case was stayed after Banks was indicted.
Duncan alleged in his federal lawsuit Banks steered him into poor investments in wine ventures Banks controlled, according to court records. “Banks also encouraged, promoted, hustled and advised Duncan to invest in several wineries and investment funds that he controls,” according to the lawsuit. “Banks has used these wineries and funds to secure substantial income for himself, but they have yet to return much, if anything to Duncan. Needless to say, Duncan would not have invested his family’s financial future in these wineries and funds if Banks had advised him that they would be operated for Banks’ benefit and to the detriment of Duncan and other investors.”