The chief executive of Ascentia Wine Estates on Thursday said his company is not failing and called "phony" a lawsuit that claims the business is insolvent.
In response to a story about the lawsuit in The Press Democrat on Thursday, Ascentia CEO Jim DeBonis issued a statement defending his company and put the blame for its troubles squarely on the former sales and marketing partner that filed the suit, W.J. Deutsch & Sons.
"Their claim that Ascentia is a failing business is false: the only thing that failed was our reliance on Deutsch to effectively distribute our wine," DeBonis said.
Healdsburg-based Ascentia Wine Estates was formed in 2008 to purchase Geyser Peak, Buena Vista Carneros and six other wine brands for $209 million with funding from Deutsch and a group of other investors.
W.J. Deutsch & Sons, a wine marketing firm based in White Plains, N.Y., invested $16 million in Ascentia and was responsible for selling and marketing the company's wine brands around the nation. The partnership fell apart two weeks ago, and Deutsch sued the company and its financial backers May 5.
The Delaware suit accuses Ascentia of inflating revenue projections to induce Deutsch to invest in the company. It also alleges Ascentia management hid the company's true financial condition from investors and creditors.
It states the company is overleveraged, is behind on payments to Deutsch and other creditors, and must be restructured.
DeBonis said the relationship with Deutsch is over and the company is moving forward with building its own in-house sales and marketing team.
"We have entered into direct distribution relationships with major wine distributors in every part of the country. We have complete confidence in our growth strategy, which we are already executing," DeBonis said.
He accused Deutsch of using the lawsuit as "pretext" to "launch a publicity campaign" against the company.
"Deutsch has its own agenda — and apparently thinks that spreading negative information about us will further that scheme," DeBonis wrote. "It is disappointing to see how quickly Deutsch can transform itself from a business partner with a stake in our success to an adversary that seems to be hoping for our failure."
DeBonis' statement provided no details of the company's current financial condition. He did not respond to a call for comment.
A spokesman said neither DeBonis nor other members of Ascentia would speak further about the litigation.
"Our attorneys will deal with Deutsch's lawsuit," spokesman Toby Baird said. "Our focus is on taking our wine business to the next level, something that Deutsch did not do."
Deutsch has previously defended its work for Ascentia, claiming to have increased the revenue of the portfolio, including sales of the flagship Geyser Peak brand
by 47 percent by volume.
Deutsch's attorney, Howard Graff, late Thursday denied Deutsch was seeking publicity to hurt Ascentia.
"That notion is false," Graff said. "There was no press release. There was no effort to engage the press in any way."
The Press Democrat contacted chairman William Deutsch last week to discuss his firm's break-up with Ascentia. He declined to discuss the matter, citing pending litigation. The newspaper later obtained a copy of the lawsuit from the Delaware Court of the Chancery and interviewed Graff.
Graff also took issue with the notion that Deutsch was responsible for the poor performance of the company's brands in the marketplace. That is at odds with what Ascentia said just six months ago as it sought an additional $16 million in working capital, Graff said. Ascentia's investment prospectuses cited a number of reasons for the company's underperformance, including "the ownership transition, distributor de-stocking, lack of holiday programming and general economic trends," according to the suit.
"You would have thought that, if Deutsch was doing a poor job at that point, they would have been obligated to tell people who were investing money," Graff said.
Deutsch is a powerful wine distributor that markets Yellow Tail from Australia, Kunde Family Estate from Sonoma County and numerous other imported wine brands.
Ascentia owns Geyser Peak in Geyserville, Buena Vista Carneros in Sonoma, Gary Farrell in Healdsburg, Sonoma County zinfandel producer XYZin and Atlas Peak, a Napa cabernet sauvignon. The company also owns Covey Run and Columbia wineries in Washington and Ste. Chapelle in Idaho.
Locally, many cheered the return of such respected Sonoma County wine brands to local ownership after years of bouncing between various corporate owners.
Ascentia employs 250 people and last year sold 760,000 cases of wine, according to DeBonis.
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