Updated on April 4.
Charles Banks, the financial adviser and founder of Terroir Life, which owns or manages nearly a dozen wineries in California, New Zealand and South Africa, pleaded guilty to one count of wire fraud in a federal courthouse in San Antonio today, according to court documents obtained by Wine Spectator. The charge carries a maximum penalty of 20 years in federal prison.
The case stems from allegations made by former NBA star Tim Duncan, a longtime Banks client, who says he was duped out of millions of dollars in various investments Banks made on his behalf. In a “statement of facts” filed March 31, lawyers for Banks admit that he misrepresented the terms of an agreement Duncan signed related to investments in a sports-merchandising company called Gameday. “Charles Banks acted with a knowing intent to deceive Tim Duncan,” states the document.
The case does not involve any of Banks’ wine enterprises, and executives at Terroir Life insist the company is running smoothly. But Banks has been tangling in civil court with his business partners in Mayacamas, the Napa winery he purchased in 2013 with American Eagle Outfitters and DSW chairman Jay Schottenstein and his family.
Terroir Life CEO Kevin McGee issued a statement on the case today. "Despite defending himself and strenuously denying the charges put forth, Charles will be entering a plea to one count of wire fraud in federal court on April 3. In a matter that he sees as constituting a civil case gone wrong, Charles believes that this decision is in the best interests of his family and Terroir, which is not and has never been implicated in any of the charges or allegations."
Banks first met Duncan in 1998, while he worked as a financial adviser for pro athletes at CSI Capital Management. Wine was a hobby, but in 2000 Banks invested in a new Santa Barbara winery called Jonata. In 2006, he and real-estate developer Stan Kroenke bought Napa Valley's Screaming Eagle.
After Banks left both of those wineries, he founded Terroir Capital, inviting a select group to invest in a private-equity fund that would build a portfolio of wine brands that range from South Africa’s Mulderbosch to Santa Barbara pioneer Qupé, along with smaller stakes in hotels and restaurants. Terroir Life is the wine company owned by the fund. (Mayacamas' sales and marketing are handled by Terroir Life, but the winery is separately owned by Banks, his wife, Ali, and the Schottensteins.)
After Banks left CSI, he offered Duncan a stake in several investments he was putting together, including a sports-merchandising company called Gameday Entertainment, for which Banks serves as chairman, and two funds at Terroir Capital.
But in a lawsuit filed in 2015, Duncan alleged that Banks cost him millions through questionable advising and suspect deals. He says Banks persuaded him to make a $7.5 million loan to Gameday in 2012, which would be repaid over five years at 12 percent interest. His lawsuit alleges that Gameday failed to make all the payments. Duncan also claims Banks collected a 20 percent fee that he never agreed to.
Banks told Wine Spectator when the suit was filed that Duncan agreed to certain minimum investment periods but then tried to cash out early. "I knew that Tim was unhappy because he wanted to get out of some of his investments after his divorce," he said. "But we've got some terrific investments and I'm not going to let Tim Duncan or anyone else bully me into changing the fund and possibly hurting other investors."
But on Sept. 20, 2016, Banks walked into a San Antonio courthouse in handcuffs. Federal prosecutors eventually filed four charges of fraud against Banks for his dealings with Duncan in the Gameday investment. According to the indictment, the crux of the charges was that Banks lied to Duncan when he asked him to sign an agreement modifying the terms of his investment in Gameday. Banks "advised [Duncan] that the agreement that he was entering into was a modification of his earlier $7.5 million loan and effectively reduced his exposure by $1.5 million should Gameday default on the loan." In fact, the new agreement created an additional $6 million liability for Duncan.
Attorneys for Banks disputed the charges, and filed a motion to move the trial to Los Angeles, arguing that it would be difficult to find an unbiased jury in San Antonio, where Duncan was a local hero. Federal district judge Fred Biery denied the motion on Jan. 30 and set a trial date of May 30.
Banks pleaded guilty to just one of the four counts of fraud. Each one carried a maximum potential sentence of 20 years in prison. In the statement of facts, Banks’ lawyer John Murphy agreed that Banks sent two text messages to Duncan “that included statements that were untrue or were made with a reckless indifference to their truth or falsity.”
Banks' lawyers could not be reached for comment.
Business continues at Terroir Life, which owns or manages 11 wineries—an estimated $200 million in wine and hospitality assets. McGee, a former attorney who spent eight years as an business adviser to the late Jess Jackson of Jackson Family Wines, was hired as COO and transitioned into the CEO role over the past six months.
"The company is actually doing quite well," McGee told Wine Spectator. "We just had our best January and February ever." Banks was just one investor in Terroir Capital, but he was also the face of the wine company and someone who grabbed attention in the industry. McGee said that not having Banks' help would be a loss, but that the company's brands were strong.
Mayacamas is owned separately from Terroir, and last year Banks got into a civil court battle with his partners at the historic Napa estate. Not long after he was indicted, Banks sued the partnership in Napa County Superior Court to dissolve it. In court documents, Banks claimed he and the Schottensteins had gotten into disputes over how best to invest and restore the winery and that they had refused to let him sell his share of the business. After negotiations by both parties, the suit 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, but corporate records show that both families are still partners in the company that owns the winery.
After Banks plead guilty in the San Antonio court today, Judge Biery scheduled a sentencing hearing for June 27. Banks faces up to 20 years in prison, a fine of up to $250,000 and restitution to the victim. He is currently free on bond.