Single-serving wine cups seem like a great idea. Wine industry business seminars have been touting them for years, first as wine's answer to craft beer, then as its answer to hard seltzer.
The idea makes so much sense that a man with a prior securities fraud conviction was able to leverage it to bilk investors out of more than $500,000 – and he didn't even make or sell the product! He got a huge boost from the TV reality show Shark Tank – the show's "sharks" couldn't make a deal for a single-serving cup of Moscato, but Joseph Falcone did. Maybe now he wishes he didn't.
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Falcone is going to federal prison for two years and has been ordered to pay $1.8 million in restitution. The producer of Copa di Vino, the wine product that got him sent away, has not been implicated in any way; it was just the bait for Falcone's scheme.
Copa di Vino is a 187ml single-serve wine cup with a lid made by a winery in Oregon. James Martin, who developed Copa di Vino, went on Shark Tank in 2011 to try to raise money to expand distribution.
I don't watch Shark Tank, so I've had to piece together what happened from the website for ABC TV network. On the show, an arrogant rich guy named Kevin O'Leary – a "shark" – tried to get Martin to sell him the patent for the container. But Martin wanted investment to expand his wine business, so Martin said no. Did I mention the sharks are arrogant? The ABC story says: "Despite walking away from the sharks' offers twice and being known as one of the sharks' most disliked inventors, Martin's product is one of Shark Tank's most successful."
And O'Leary told ABC: "[The container] that's never been done in wine before, and I grant him that was a good move. The problem with him … is he tried to sell me … on a winery."
Nobody tells a shark what to do! The following year, O'Leary launched his own online wine business, and in many ways it resembles Martin's – wine varieties of nebulous origin, in an unusual packaging size (1.5 liters in this case.)
To be fair, it's more than Martin tells you about the Copa di Vino wines. Copa di Vino comes in seven flavors: Pinot Grigio, Chardonnay, Cabernet Sauvignon, Merlot, Moscato, White Zinfandel and Riesling. The label probably tells you where the grapes are from, but the website does not. Does anyone care about grape origin in a 187ml single-serving cup? Probably not; you can see how O'Leary got the idea. Sharks! They'll eat you alive and we worship them for it.
So, Martin goes on Shark Tank to raise investment for Copa di Vino and walks away without any money, plus the "sharks" now dislike him. But other types of investors – perhaps starfish and moray eels – give him some money, and he increases sales from $600,000 to $5 million. So ABC invites him back on the show.
Once again, Martin sticks to his principles and doesn't let the sharks browbeat him. Here's how those captains of capitalism reacted to that:
"He forgot his place," shark Robert Herjavec told ABC. "He is not the shark. We're the sharks."
But Falcone – a piranha with barracuda dreams – was watching the show from another reef, in Long Island. The sharks have chutzpah but Falcone took it to another level.
Back in 1999, Falcone was found guilty of 13 counts of securities fraud. He was a broker for Prudential Securities and he managed to get an early copy of Business Week magazine from one of the magazine's distributors. Companies mentioned in the magazine's Inside Wall Street column tend to go up in value; the Securities and Exchange Commission noticed when their stocks went up before the magazine hit newsstands.
Afterwards, Falcone went into the doughnut business, owning nine Dunkin Donuts franchise stores in Nassau County, according to a letter his wife sent to the judge in charge of sentencing, but he gave them up to move to Pennsylvania to be with her.
At some point Falcone moved back to Long Island and began watching Shark Tank. He loved the Copa di Vino wine concept and, unlike the sharks, didn't bother to try cutting a deal with Martin. Instead, he started a wine distribution business called 3G's Vino LLC with a plan of selling Copa di Vino. And he solicited investments to grow the distribution business.
But instead of putting the money he raised into the company, Falcone used $527,000 of his investors' money to buy a home in Florida and to fund some online trading, because some people never learn.
In a letter to US District Judge Sandra J. Feuerstein, Falcone wrote: "So, how did I get into this mess? The answer is simple: I took investors' money for the purpose of investing it into a start up wine business. Then, I wound up co-mingling funds with personal funds, and using some of the investors' money for my own ends. As the business grew, so did the expenses, and I wound up not being able to pay all of the investors back.
"Why did I do this? It was because I rationalized what I was doing by telling myself that because many of the investors had given me carte blanche to spend their money as I saw fit."
Falcone pled guilty to one count of wire fraud and was sentenced to two years in prison, with a reporting date in January 2021. He was also fined $10,000 and ordered to pay restitution of $1.822m
Martin declined to respond to a call seeking comment.
It makes you wonder if Falcone should maybe have just taken the investors' money and invested it in Copa di Vino. According to ABC, in 2016 Copa di Vino sold $12m worth of wine in venues including sports arenas, hotels and convenience stores. In 2016 there was definitely a market thirsty for single-serving wines.
Then wineries discovered young consumers would buy wines in cans. And these wines can even state where the grapes come from. Uh oh, I see fins in the water.