FAMILY SECRETS : TODAY, THEY PRODUCE 25% OF THE WINE SOLD IN THIS COUNTRY. BUT THE GALLOS’ CLIMB TO THE TOP WAS ANYTHING BUT SMOOTH. THEIR HISTORY INCLUDES ALLEGATIONS OF BOOTLEGGING, FAMILY VIOLENCE AND A BITTER FIGHT OVER ASSETS.
One foggy morning in May, 1986, wine barons Ernest and Julio Gallo seated themselves side by side in the conference room of the Gallo Winery in Modesto, California. On the other side of the table sat their younger brother, Joseph Jr.--the unknown Gallo--a grape grower, rancher and dairyman who had started his own cheese company in 1983.
Ernest and Julio, born a year apart, looked like twins: Their gray, thinning hair was swept back from their faces; thick glasses framed their dark brown eyes and both wore two hearing aids. Ten years younger than they, Joe Jr. resembled his brothers, although he seemed sturdier. His light-green eyes squinted behind his horn-rimmed glasses.
The air was filled with tension because the Gallo brothers were now barely speaking. In April, Ernest and Julio had filed a trademark infringement suit against Joe to try to stop him from marketing his cheese under a Joseph Gallo label.
In preparing his defense for the trademark suit, Joe’s lawyer, John Whiting, discovered much more: the probate court records of the Gallo family estate and the guardianship filings regarding Joe Jr.'s interests. Whiting believed that the Gallo wineries had not originated with Ernest and Julio, as they had always maintained, but with their father, Joseph Sr. Whiting came to the conclusion that Joe Jr. had been maneuvered out of an equal interest in both the family business and the family trade name.
Joe Jr. was disbelieving at first. But after listening for days to Whiting’s analysis, he came to the same conclusion. Hoping for a reasonable explanation, Joe Jr. says that he demanded “a private meeting, alone,” with his brothers.
Ernest and Julio remained silent that morning, waiting for Joe to initiate the discussion. It was just the three brothers.
“Shouldn’t we get to the matter of my one-third interest in the winery before I get much older?” Joe began abruptly.
“Wha . . . what?” Ernest sputtered. “You mean, you want"--Ernest gestured to the winery’s grounds and acres of holding tanks outside the window--"a piece of this? “
“A piece of this” would have been something: a one-third share of the largest winery in the world. Over the course of nearly 60 years in the wine business,Ernest and Julio Gallo had built one of the biggest privately owned consumer-product companies in America. Last year, Gallo outsold its two closest competitors (Heublein and the Wine Group) combined--48 million cases of wine out of an industry total of 173 million cases. Ernest and Julio, at 83 and 82 respectively, show no interest in retiring. They still go regularly to their Modesto office, known as “Parthenon West.” They are in the process of buying and re-landscaping thousands of acres in the Sonoma Valley.
Most of their sales came from their inexpensive brands: jug wines such as Hearty Burgundy and Carlo Rossi; their “pop,” fruit-flavored wines--Boone’s Farm and Bartles & James wine coolers; sparkling wines--Andre and Tott’s; and fortified wines--Thunderbird and Night Train Express.
The Gallo name has been considered synonymous with the lower end of the wine spectrum. During the last decade, however, the winery has been trying to overcome the stigma of screw-top caps and pint bottles, of low-end wines for unsophisticated tastes. Gallo is now moving aggressively into the premium market with its varietals, wines produced from a predominant variety of grape, such as Chardonnay or Cabernet Sauvignon. Having mounted a long-term multimillion-dollar advertising campaign to improve their image, Ernest and Julio intend to persuade you to “change the way you think about Gallo.”
Their passionate desire for respectability is matched by their penchant for secrecy about their past and their family; indeed, the two abiding themes of their career seem inextricably connected. Little has been previously revealed about the California wine barons’ history; Ernest and Julio rarely grant interviews. There’s the famous Gallo legend instead: a Horatio Alger, rags-to-riches American success story; the sons of poor Italian immigrants, who started their winery in 1933 with only $5,900 to their name and a small knowledge of winemaking gleaned from a library pamphlet. From this meager beginning they built the wine company that makes more than one out of four bottles of wine sold in the United States, with 1992 sales totaling more than $849 million. But there’s much more to the story, according to more than 100 sources contacted for this project.
Missing from the authorized legend is Joseph Jr., who shared in neither his brothers’ winery partnership nor their celebrity and personal fortune. Ten years younger than Ernest, Joe was raised by his two brothers from the age of 13 after their parents died in a murder-suicide. As a teen-ager Joe worked for the winery, and in 1946, after serving in the Army, he returned to manage Ernest and Julio’s vineyards in Livingston, half an hour south of Modesto. In 1967, his brothers terminated his employment, and over the ensuing years, Joe began his own businesses. In 1983, he opened the Joseph Gallo Cheese Co. In 1984, he and Mike, his son and business partner, began to market consumer-size packages under the label “Joseph Gallo Cheese.”
The label provoked the wrath of Ernest and Julio. They insisted that their brother intended to trade on the winery’s reputation and confuse consumers. Moreover, they believed that despite the awards that the cheese had won, the Joseph Gallo name on “commodity cheese” undermined the winery’s attempt to improve the Gallo image and reputation. There were attempts to reach a compromise--to no avail. Ernest and Julio sued. And in response to Whiting’s investigations of the Gallo parents’ estates, Joe and his son Mike countersued for a one-third, $200-million interest in the Gallo wineries.
The legal conflict unleashed long-simmmering resentments and jealousies. It reopened old wounds and brought to light the tragedies and mysteries of the Gallos that had been shrouded in secrecy for over half a century. The past that had long been concealed from public scrutiny, as well as from Joe, would finally be revealed.
GIUSEPPE GALLO--ERNEST, JULIO AND JOE’S FATHER--WAS BORN ON JULY 15, 1882, in Fossano, a village in Piedmont, the vineyard-rich area of northwest Italy. He had five brothers and one sister; his father was a wholesale butcher and horse trader, and his mother ran the family’s pensione . At the turn of the century, Giuseppe and his younger brother Michelo immigrated to Oakland to seek their fortune in America. Giuseppe, who soon began to call himself Joe, first dug ditches for the municipal sewer system, and Mike, as Michelo now came to call himself, tended bar until he devised a scheme to make quick money.
Mike took a job in a mine in Amador County in the Sierra Nevada foothills. According to court records of the time, he met a woman with whom he lived for several months in Jackson, the county seat, and together they ran a badger game: She enticed men into her hotel room, then Mike arrived on the scene to shake them down at gunpoint. One night, a local businessman went to the police, and Mike had to high-tail it back to Oakland. But with his victim’s $1,000 payoff still in his pocket, he now could stake his and Joe’s first business venture.
In their Oakland neighborhood and in San Francisco’s North Beach section, the pensioni that catered to Italians usually had small saloons where locals gathered at night to drink the red wine so reminiscent of home--what many called “dago red.” The wine was served from five-gallon kegs that stood on the bar, each barrel stenciled with either the name of a winery, such as Italian Swiss Colony, or the “distributor,” who bought wine in bulk from wineries and barreled it to sell it to the pensioni .
Growing up in the Piedmont, Joe and Mike knew something about vineyards and winemaking, and the wine business seemed a natural opportunity for them: Joe would buy the wine in bulk from smaller wineries and winemakers in the Central Valley; Mike would solicit orders from pensioni and saloons. The two brothers purchased a secondhand truck, stocked a supply of barrels on which they stenciled GALLO in red, rented a small office in Oakland and put up a sign reading “The Gallo Wine Company.” (By 1907, they had founded a wine company in the Gallo name--listed in telephone directories as such--a fact that would later figure in the dispute among Ernest, Julio and Joe Jr.).
The maternal side of the Gallo family also was steeped in the wine tradition. Battista Bianco was a third-generation vineyard worker and winemaker from Allessandria, in the Asti district of Italy. Emigrating in 1893, he and his wife and four children settled in Hanford, Calif., a railroad town south of Fresno. Bianco worked in a flour mill until he had saved enough money to buy a vineyard and start a winery. By 1901, the Bianco Winery was producing enough wine to sell to local wine drinkers and distributors in Northern California and by tank car to Little Italy in New York.
Assunta Bianco, now calling herself Susie, was 18 when Joe Gallo began to buy wine from her father’s winery. She wore her long, dark hair swept back in a chignon, and her eyes were dark and lively. She was somewhat shy but had a gentle voice and spontaneous laugh, and Joe was quite taken with her. He began to visit Hanford often, more to see her than to replenish his supply.
Although two years younger than her sister, Celia was taller and more outspoken and flirtatious. Having accompanied Joe to Hanford to be introduced to the Biancos, Mike became infatuated with Celia.
Battista Bianco was a plain and honest man, even a puritan, and he wasn’t convinced that he could trust these two young city slickers with their black fedoras and starched white shirts. Despite parental disapproval, Susie married Joe in 1908, and Celia married Mike in 1909.
While Mike ran the business in Oakland (renamed Gallo and Co. and expanded to a saloon), Joe and Susie managed a hotel in Jackson--Susie single-handedly cooking and cleaning for the guests, and Joe tending bar. Frustrated by the hotel’s poor profits, Joe began to rage at Susie, who was then pregnant with Ernest. One night, according to the divorce filings, he shouted at her: “You goddamned bitch! You goddamned whore!” Then he beat her with his fists until her arms and breasts were black and blue.
After Ernest’s birth on March 18, 1909, Joe began to abuse Susie again, and she filed for divorce on Jan. 27, 1910. In her petition, she claimed that the beatings had begun only two months after their wedding, continued at intervals for two years and culminated in the even more vicious attacks of the previous month. She concluded that she now was “in fear of her life.”
However real her fears, a month later she joined Joe in Oakland, where he had established the Joe Gallo Saloon and hotel. For the time being, she left Ernest with her parents, and on March 21, 1910, she gave birth to their second son, Julio Robert. Almost immediately, Joe’s mood turned ugly again, and Susie fled back to her parents in Hanford, where she again filed for divorce.
Their parents’ separation, the beatings and the two divorce filings became the first of Ernest and Julio’s family secrets.
After reconciling with Susie for the second time, Joe Gallo closed his saloon and wine-distribution company in anticipation of state and national Prohibition laws. There had already been talk that when wine sales were banned, wine-grape growing and shipping would become the legal way of staying in the wine business. Although liquor and brandy production would be outlawed, proposed Prohibition regulations would allow people to make 200 gallons of wine a year for personal use. The wine industry was already predicting a rapidly expanded market for wine grapes in Eastern cities with large European-immigrant populations. And if, as rumored, many of these “home winemakers” would be making more than their 200-gallon allotment for illegal distributors, the demand for California wine grapes would become even greater.
Hence Joe Gallo, like many of his colleagues, went into grape growing and shipping. He moved the family to a swampy vineyard in Antioch on the Sacramento River delta. If anything seemed to harden Ernest and Julio’s hearts against their father, it was the years in Antioch when, as young boys, they were forced to work long hours and were whipped if they fell down on the job. Then, as if to stoke the fires of their resentment, a brother was born on Sept. 11, 1919, and honored with his father’s name: Joseph Jr. The baby was tended and cared for while the brothers were treated like slave labor. And in subsequent years, the sibling rivalry, according to testimony given in depositions, seemed to deepen when the family’s money worries abated and Joe Jr. could be permitted the childhood denied his older brothers.
The Antioch vineyard was such a failure, however, that Joe decided to give it up for another business venture.
It was Joe’s brother Mike who offered a new possibility. From 1913 to 1918, Mike had served five years in San Quentin for running a “bunko ring” and paying bribes to 15 San Francisco bunko squad cops. But after his parole, he came up with another lucrative scheme--he would turn a profit from Prohibition. By 1921, California was already called “the wettest state in the union.” Mike opened his San Pablo Bottling Shop in Oakland, which provided a useful cover, and he established a network of brandy and wine suppliers, then distributed the wine and brandy throughout the East Bay.
While Mike had become wealthy enough to build a lavish home for Celia and their children in Oakland, he had retained a farmhouse in Livermore, where he kept a still in the barn. He invited his brother Joe to live there in exchange for supervising the production of brandy as well as making deliveries to the local “soft drink” parlors that bought brandy and wine from Mike’s operation.
When Joe and his family moved to Livermore, Mike was already a legend. He seemed above the law, since he was known to pay off local cops and politicians. “To us,” recalls the son of one of Mike’s customers, " Mike Gallo was as powerful and notorious as Al Capone was in Chicago. We heard he had served time in San Quentin, carried a gun and had a lot of friends in high places.”
Mike’s clout came in handy on July 5, 1922, when federal marshals raided the Livermore ranch and arrested Joe. When Joe was arraigned the next morning in municipal court on charges of illegally operating a brandy still, Mike arrived to “fix” everything up. The case was never prosecuted, and five months later the charge against Joe was dropped. The story of the raid and Mike’s riding to the rescue became part of Gallo family lore. But it was a closely guarded secret withheld from outsiders.
By 1925 Joe had accumulated enough money to buy 70 acres of vineyards in Modesto and build an $8,000 home on the property. He also was able to establish a grape-shipping business of his own, joining other grape growers in what had become the most lucrative legal form of the wine business during Prohibition. As many had predicted, wine grapes were in great demand by home winemakers in Chicago, New York and New Jersey. By 1926, Joe was shipping thousands of lug boxes of grapes to Chicago, each stenciled boldly with the Gallo name, just as he had done before Prohibition.
With their new vineyards, home and business in Modesto, the Gallos achieved the outward signs of financial comfort and respectability. Nevertheless, the town’s conservatism fostered a rigid social hierarchy. Founding families considered immigrants as outsiders and at the bottom of the social ladder. Because of mob bootleggers and Al Capone’s notoriety, Italians were especially stigmatized, and Mike Gallo’s reputation as a “kingpin bootlegger” seemed to taint the Joe Gallo family as well.
Ernest and Julio may have felt the corrosive effects of these attitudes for years, perhaps accounting for both their secrecy about their past and their yearning for respectability. Winery employees noticed it in Ernest especially: His sense of being from the wrong side of the tracks coupled with an angry “I’ll show them” attitude seemed to fuel his ambition.
Early one morning in October, 1929, Joe Jr. recalls that he was awakened by the sound of a tractor outside his bedroom window at the house in Modesto. He looked out and saw that his father was digging a wide, deep hole. The son dressed quickly and ran into the kitchen.
“What’s Father doing out there?” he asked his mother. “Why is he digging such a big trench?”
“It’s for underground tanks,” Susie explained. “Your father and Mike need it for the business.”
What their father was intending to do with these massive underground tanks became a matter of dispute between Joe Jr. and Ernest and Julio in their 1986 litigation. Whether Mike’s coincidental bootlegging indictment and the sale of his shares in a winery to his former partner, Samuele Sebastiani, had forced him to find a new place for wine storage tanks was a matter of speculation. Ernest and Julio claimed in their 1988 depositions that their father had been crushing grapes into pomace, a mash only a few feet deep in the bottom of the tanks, from which he and Mike planned to make brandy. Neither Ernest nor Julio explained, however, why their father would have built tanks with a 32,000-gallon capacity just to crush a few feet of pomace. Nevertheless, they insisted that they had rushed home from the Eastern grape markets where they were overseeing Gallo grape shipments, to put a stop to what they recalled was their father’s proposed illegal production of brandy. Joe Jr. and his lawyers claimed in 1988 that the construction of these capacious tanks marked Joe Sr.'s first step toward establishing a winery. Indeed, if Joe Sr. had intended to store wine in them (and not brandy), as Joe Jr. maintained, it would not have been illegal. Because of the stock market crash and plummeting grape prices in October, 1929, the Prohibition administration had removed the 200-gallon limit on home storage. Growers were allowed to salvage their harvest by crushing grapes into “juice,” a euphemism for wine in those days.
IN THE WINTER OF 1929, JOE GALLO WAS DOING WELL ENOUGH TO BUY the 160-acre vineyard across from his Modesto home for $25,000. He and Susie had also bought more than 2,000 shares of Transamerica stock. After graduation from high school, Ernest and Julio had continued to work for their father, tending his vineyards and working as his agents in the grape markets. Ernest and Julio tended to distrust their father’s decisions and considered him ignorant and stubborn. When their father refused to either raise their $30-a-month salaries or give them a share of the business, their resentment grew even stronger. One day, Joe became so irate with their demands that he chased Ernest and Julio through the vineyards, waving his shotgun. The two brothers took off, and as Ernest later told one of his Southern California distributors: “We didn’t stop running until we got to El Centro.”
Several months later, however, Ernest and Julio reconciled with their father and returned home. In the autumn of 1931, Ernest married Amelia Franzia, the daughter of the founder of the Franzia Winery. The young couple moved into the Gallo home, but by the spring of 1932, family tensions were running high again. Joe and Susie abruptly left their Modesto home and and moved to an overgrown vineyard and dilapidated farmhouse in Fresno. Perhaps Joe Sr. was fed up with Ernest’s demands to form a partnership and start a winery, perhaps he was frightened by continuing investigations into Mike’s bootlegging operations, but none of the sons could explain the mysterious departure.
Joe Jr. had stayed behind in Modesto to finish his school term in 1932, then joined his parents in Fresno that summer. He was mystified by the barely furnished home without electricity or telephone and by the unpacked boxes and suitcases. But he asked no questions and received no explanations. As he recalled, over the next year Julio visited them only a few times in Fresno, and Ernest not at all.
In 1933, Ernest, anticipating the repeal of Prohibition, proceeded with his own plans. On June 14, he filed an application with the Prohibition administration to open a bonded wine storeroom in San Francisco. On June 20, his application was rejected. He was advised that in order to open a storeroom, he had to own a bonded winery. And in order to be bonded as a winery, he had to own vineyards. But everything was in Joe Sr.'s name, and the father wouldn’t budge.
That same day, Julio and his new bride, the former Aileen Lowe, came to the Fresno ranch to pick up Joe Jr. to take him back to Modesto for the summer vacation. Neither brother could later say why Julio arrived unannounced on that particular day. And while their recollections differed as to what happened during the visit, both brothers remembered the departure.
Susie hugged her youngest son, then grasped Julio by his shoulders and gazed into his eyes.
“I don’t care what happens to me,” she said in a quavering voice. “All I want is for you boys to work together and get along. . . .”
Joe hugged little Joe. “Be good and mind your brothers,” he said in Italian. The words would have the lasting effect of a biblical commandment to the youngest Gallo son.
The following day, just past noon, two sheriff’s deputies arrived at the Gallos’ farmhouse, summoned by Joe’s farmhand. They found Susie outside by the hog pen. She lay face down in a pool of blood. There was a wound at the back of her head. Her straw sun hat had fallen nearby, a bullet hole through its blood-soaked brim.
Joe was in the dining room, sprawled on his back beneath the mirror on the side wall, a bullet hole through his right temple. His blood-spattered black fedora lay on the floor near his feet. A yard away from the curled fingers of his right hand was a .32-caliber Smith & Wesson revolver.
The Fresno deputy coroner conducted a brief inquest that same afternoon. Ernest was the only Gallo son to testify. When asked if he knew a motive for the shooting, he tersely replied: “Possible financial reverses.” Questions about why there was no suicide note, why someone supposedly financially strapped would leave a check in his mailbox to pay his tax bill in advance and within hours of his suicide were not asked.
The deputy coroner returned a verdict of murder-suicide. From that day forward, the family rarely discussed the tragedy and only obliquely referred to it as “the troubles” or “the accident.” The mystery of how and why Joe and Susie had died was buried with them.
While his two brothers mourned, Ernest maneuvered. The three brothers were to inherit equally according to Susie’s will (Joe Sr. died intestate). Ernest was appointed executor of his father’s intestate estate, which included property, vineyards, Transamerica stock and substantial cash assets. Ernest received permission from the probate court to continue his father’s business, which, however, according to court documents, did not list any wine business or assets of a wine business.
Ernest and Julio then took steps to bond a winery in the name of their newly formed partnership, E. & J. Gallo. They had stationery printed that included two designations next to their name: “winery” and “grape growers and shippers.” Although it was their father’s estate that owned both the grape growing and shipping businesses as well as the vineyards required to establish a winery, Ernest applied on this letterhead to the Board of Alcohol for approval. He wrote that he and Julio were “grape growers with over 400 acres of grapes.” By the fall of 1933, the two brothers were given government approval to build a winery in Modesto.
Despite his one-third interest in the Gallo estates, 13-year-old Joe Jr. was not included in the initial partnership. Ernest maintains to this day that he and Julio are the sole owners of the winery. When questioned about the estate during a 1983 lawsuit, Ernest replied without hesitation: “My brother and I inherited our father’s property and business.”
DESPITE ERNEST AND JULIO’S INTENSIVE EFFORTS IN THE TWO DECADES following World War II, including Ernest’s marketing programs that changed the structure of wine distribution and sales and Julio’s advances in winemaking technology, the Gallo Winery still lagged behind Italian Swiss Colony and Guild in table wine sales. Even though table wines were becoming more popular than the previously favored sweet or dessert wine, Gallo’s Vin Rose still couldn’t entice consumers away from its two main competitors. Gallo’s answer to the problem was to develop a wine that would attract a different population of wine drinkers. Albion (Al) Fenderson, one of Ernest’s first and most trusted marketing and advertising executives, was charged with this important task.
Fenderson and Gallo sales manager Harry Bleiweiss noticed that liquor stores in predominantly black urban communities routinely kept bottles of lemon juice or packets of lemon Kool-Aid next to their white port. Customers bought the lemon juice to mix with the wine, they were told. One day during one of their tours of an Oakland store, Bleiweiss remarked, “What we ought to do is mix white port and lemon juice in the bottle and sell the mixture.”
Bleiweiss’ remark was “the lightning flash” that in 1957 led to the invention of Gallo’s best-selling product.
Julio and his winemakers developed a mixture of lemon juice and Gallo white port with an alcohol content of 21% to give drinkers the desired “buzz.” Ernest wanted to market the product immediately. First they had to choose a name. Fenderson suggested many; Ernest nixed them all, including Fenderson’s idea of calling the wine “Cockade.” It was on a flight back from Texas that Fenderson announced to Ernest that he had found a name that would suggest power and convey an image of contemporary styling: “Thunderbird!”
Gallo salesmen recalled that “street sampling” was perfected for Thunderbird in the ghetto. Bottles of Thunderbird were left on the back seats of salesmen’s cars or were handed out. The idea was to saturate the neighborhood. Empty bottles of Thunderbird were thrown in gutters to increase product awareness.
According to Fenderson’s summary, written later, the distributor in Houston who was handing out samples in the black community reported an amazing sight--people running through the streets yelling about Thunderbird. New York City had an even bigger promotional draw. The Gallo distributor in Brooklyn, Fenderson wrote, had hired “a local black PR guy” who selected “a beautiful white model, attired her in a skimpy Indian costume, and presented her to black retailers as Princess Thunderbird.” Fenderson added: “The retailers loved her, or would have liked to--and bought Thunderbird accordingly.”
Ernest and his representatives would later deny that they had so specifically targeted African-Americans. But Fenderson’s written report suggested otherwise. Even today, Gallo salesmen’s inventories designate certain retail stores as “ethnic,” the winery’s euphemism for stores in predominantly poor black neighborhoods where Thunderbird and their later fortified wine, Night Train Express, are distributed in greater quantity than in other areas, and often in pint bottles.
At 60 cents a quart, Thunderbird caught on across the country. Ernest took special delight in telling his salesmen about the time he stopped at an intersection in Atlanta: “I called out to this black guy walking down the street, ‘What’s the word?’ He yelled back, ‘Thunderbird,’ and I practically fell down laughing.”
Ernest laughed all the way to the bank. With the invention of Thunderbird, Gallo sales finally equaled those of Italian Swiss Colony and Guild.
In the decade following the invention of Thunderbird, Gallo promotional methods changed the way wine was sold in this country. Gallo foot soldiers were taught the three R’s of Gallo salesmanship--rigorousness, relentlessness and ruthlessness. They were trained in the Gallo point-of-sale techniques, which required them to make regular and frequent visits to retailers. According to former salesmen, they were given a strict schematic for stocking shelves: The most popular brands were placed at eye level, impulse buys just above belt level, jug bottles to the right of small bottles. The aim was “total merchandising,” to make Gallo visually dominant in every store.
Gallo’s sales manual--the secret “Big Red Book"--did not include the guerrilla tactics that dozens of former salesmen admitted to having used. If Gallo brands did not have enough shelf space, salesmen moved or removed competitors’ merchandise. Gallo salesmen also reportedly tampered with competitive merchandise. They punctured aluminum caps so that the wine would go bad. They “back-spinned” twist-off caps, making it difficult to open the bottles, enraging customers. Salesmen routinely carried oil that they would apply to competitors’ bottles so that dust would cling. And when Gallo salesmen arranged comparative tastings in retail stores, they sometimes unscrewed bottle caps of competitors’ brands and squeezed in heads of dead mice, mice feces and cigarette butts. The message was clear: Gallo was the only winery the consumer could trust for quality and hygienic bottling.
In the mid-1970s, the Federal Trade Commission had received enough complaints about the winery’s sales tactics and Gallo’s attempts to control independent distributors that it launched an investigation. In 1978, the Gallos signed a consent order banning many of the alleged practices, although they also asserted that this was not an admission of guilt. Since the FTC order required monthly inspections of certain of the winery’s correspondence and transactions with distributors and sales staff, Gallo sales managers were instructed to keep nothing in writing for more than 30 days. According to former Gallo employees, their national sales manager, Kenneth Bertsch, gained the nickname “Ken the Torch.” Later, they said, he added a portable shredder to his repertoire, and issued “burn bags” to his managers.
IN 1972, ERNEST AND JULIO WERE CROWNED THE KINGS OF WINE IN A TIME magazine cover story. Over the years, the wine barons had revolutionized the wine industry and altered public taste by attracting new groups of wine drinkers with inexpensive generic and lighter blends of table wines. Critics called them bland, yet the number of wine buyers across the country swelled.
Few leaders in American business had achieved the dominance over an industry that the Gallos had. Their individual personal fortunes are estimated to be in excess of $500 million each. They established enormous political influence over the years. Citizen Action, a public interest group based in Washington, D.C., reported that the Gallos contributed more money to federal candidates from 1989-1990 than any other American family and more than all but 93 of the more than 4,000 registered political action committees.
The leading recipient of the Gallo largess, Citizen Action reported, was former California Sen. Alan Cranston. In one day, for example, he received 20 checks, each for $1,000, from Gallo family members. Cranston was an old friend of the Gallos. Although he insisted that Gallo campaign contributions were not a factor in his support, in 1978, Cranston assisted in the passage of a tax bill that became known as the “Gallo Wine Amendment.” Essentially, the bill extended tax breaks to the Gallo heirs, allowing them to spread their estate taxes over 10 years.
In 1979, Cranston was expected to recommend a new federal judge for the Eastern District of California. Cranston’s aides say that it would have been surprising if Cranston hadn’t consulted an old friend of his, attorney Frank Damrell Jr., on the nomination. Damrell is a friend of the Gallos and has represented the winery; his sister Marie is married to Julio’s son Bob. In November, Cranston recommended Edward Dean Price, a Modesto attorney, to the judgeship. Shortly thereafter, Damrell gave Cranston a fund-raiser, and the following morning Price met with Cranston at Damrell’s house. In 1986, when Ernest and Julio sued Joe Jr. for trademark infringement, the lawsuit was assigned to Judge Edward Dean Price.
During the pretrial investigations before the case went to trial in 1988, even more of the hidden history of the Gallos came to light: Ernest’s 1933 affidavit to federal authorities in which he denied being related to “kingpin bootlegger” Mike Gallo; the actual value of the Gallo parents’ estate (the equivalent of more than $800,000 today) and a missing $31,000 from the estate coffers; Ernest’s repeated statements to the United States Patent Office and others that the Gallo trademark “has been used continuously . . . since 1909"; and Ernest and Julio’s offer (later rescinded) to Joe to settle the lawsuit for $20 million “to avoid publicity.”
Joe Jr.'s lawyer, Whiting, admits that he “nearly fell off” his chair when he finally saw the guardianship estate file from 1941. Whiting believed that the file proved that Joe Jr. still owned a one-third interest in the winery and that the records proved that neither Ernest nor Julio, Joe Jr.'s legal guardians, could have attended the 1941 court’s closing of the guardianship estate, for which Joe Jr. supposedly had a lawyer present. Joe denied that he had been present at the hearing, much less hired a lawyer. The probate judge, noting that Ernest and Julio did not conduct a model guardianship,simply ordered Ernest and Julio to pay their brother $20,000 for the use of his interest in their parents’ Transamerica stock, which had been “commingled with the capital of said guardians” in the form of a loan to the Gallo winery. Joe Jr. maintains that he never received the $20,000.
Judge Price issued a summary judgment on Aug. 29, 1988, dismissing Joe Jr.'s $200-million countersuit. Price maintained in his ruling that the winery began with Ernest and Julio, not Joe Sr., and that Ernest’s sworn testimony about the use of the Gallo name on wines since 1909 was “post-facto puffing.” Price also ruled that the guardianship could not be reopened, that the matter had already been settled legally. The U.S. 9th Circuit Court of Appeals later affirmed Price’s ruling.
Then, only a few days before the trademark-infringement trial in November, 1988, Judge Price disqualified himself. Questions had been raised about his prior professional and social associations with Ernest and Julio’s family and friends. The case was then assigned to Judge Robert Coyle, who had been a partner in the Fresno law firm that often represented Gallo interests. Indeed, one of Coyle’s old partners was counsel to the Gallos in this trademark-infringement case against Joe Jr. Objections to Coyle’s hearing the case were finally raised on appeal to the 9th Circuit, but the court ruled that the challenge was too late.
The trademark trial went ahead as scheduled. During one of the court recesses, the usually press-shy Ernest Gallo surprised reporters in the hallway outside the courtroom. He stopped them to announce that his brother’s cheese was of such poor quality that it posed a health risk. “Now do you see why I can’t have my name on that cheese?” he growled. The vehemence was shocking. No fraternal feelings restrained him. He referred to Joseph Gallo Cheese as “garbage.”
When nearly all was lost in the case and Mike Gallo, Joe Jr.'s son, heard his uncle’s callous remarks, he was forced to reassess the legendary loyalties of the Gallo family. “Ernest always told us, ‘Blood is thicker than water.’ What he really believes is that wine is thicker than blood.”