NEWS : When Wine’s a Crime

He is an agent for classical music artists and a dedicated wine collector, known in Los Angeles-area wine circles as “Joe Montrachet.” He buys a lot of wine locally . . . but also from retail shops in other states.

“I buy from 50 different vendors,” he said recently. “It’s legal, isn’t it?”

In some cases, yes--for instance, when the wine is ordered from one of the 12 states that have reciprocal trade agreements with California. But otherwise, “Joe Montrachet” is breaking the law.

“I am?” he asked, incredulous. After a moment, he added, “So who’s gonna arrest me?”

Probably no one. Most authorities believe that such shipments are nearly impossible to intercept, so they generally don’t pay much attention. And since few people know it’s illegal to ship (or even carry) wine across state lines unless it’s to a reciprocal trade state, it happens routinely.

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Sonoma County winemaker Phyllis Zouzounis tells a different story. She gets many calls for her Deux Amis Zinfandel, an acclaimed wine of which she makes 1,600 cases a year. She’ll ship it anywhere in California, but declines most out-of-state requests.

“If it costs me more than $200 for the license to sell in another state, I can’t afford to do it,” she says. “Besides, with the forms galore you have to fill out, the licenses are so expensive it doesn’t make any sense for me to sell to a lot of states.”

“Joe Montrachet,” who asked that his real name not be used in case a zealous lawman decides to track him down, is one of thousands of Americans who unknowingly break the law by buying wine direct from wineries or shops in another state. Zouzounis is one of hundreds of small, family-run California wineries faced with a confusing web of 50 different state regulations that leaves them with a dilemma: Either turn down a sale or ship the wine illegally. Many small operators in need of cash have chosen the latter option, thus far without much risk of being caught.

“It’s absolutely restraint of trade,” says Sara Schorske, president of Compliance Specialists, a Sonoma County-based company that aids wineries in dealing with local, state and federal regulation of licensed beverages. “It’s easier to ship overseas than to ship within the country.”

Interstate wine shipments, by retailers, wineries and consumers, became a hot issue in December when New Jersey, Maryland and Pennsylvania authorities seized about 900 cases of wine illegally shipped to warehouses in their states by a small California trucking company. The wine was headed for consumers all over the Eastern seaboard, most of it to states that have regulations against such shipments.

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Then there is this story, told recently by Patrick Campbell, owner of Laurel Glen Vineyards in Sonoma Valley:

“We shipped 100 cases of Terra Rosa (Cabernet Sauvignon) to Russia. I didn’t have to fill out one piece of paperwork. Did we need a license? No. Did I pay tax on it? No. Did I need trucking and shipping forms? No. The commissariat didn’t say I had to jump through these myriad of hoops.”

The problem of interstate shipping of wine stems from the passage in 1933 of the 21st Amendment, repealing Prohibition. The 21st Amendment gave regulation over alcoholic beverages to each state.

As a way to collect taxes and monitor distribution (to avoid pressure-tactic sales), most states set up a three-tier distribution system in which a wholesaler physically takes possession of wine, beer and spirits shipped into the state. The 21st Amendment set no guidelines for how this might be handled, so each state set up its own regulations.

With no uniformity in the way alcoholic beverages are handled from state to state, small wineries today face a dilemma. But with risk of being caught fairly low, many have chosen to ignore the regulations and ship wine illegally.

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Daily, thousands of packages of foam-encased bottles are shipped from Napa, Sonoma and other wine meccas to states that prohibit the practice. Excise and other taxes are not paid on such shipments, and policing this “crime” costs more than the wine is worth.

Moreover, trying to prosecute isn’t easy. How, for instance, does the state of Texas prosecute a California winery for violating Texas laws?

Authorities, therefore, have generally looked the other way, especially when it’s six bottles of California Chardonnay going to a radiologist in Colorado.

In fact, authorities in two of the three East Coast states (Maryland and Pennsylvania) involved in the December seizure of California wine say they have no plans to pursue the matter.

However, New Jersey authorities, though declining to discuss the case with The Times, have intimated that they would like to charge Fred Benz, owner of Ameripak Express, with violating state law.

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Ameripak was the trucking company that shipped the seized wine. But wine industry observers say that Ameripak is only a tiny speck on a snowy radar screen. According to some insiders, the biggest lawbreakers are not wineries using small shipping firms like Ameripak. The real culprits are large retail shops all over the country.

“I wouldn’t be surprised if 6 or 7 million cases of wine were being shipped illegally every year,” said Ed Everett, a wine industry consultant from San Francisco, “and more than half of it is being shipped by large specialty retailers.”

These wine shops take out ads in major wine publications such as Wine Spectator, Wine News and Wine Enthusiast, promising a wide selection of wines and good pricing. The ads also state: “We ship anywhere.”

It is exactly this sort of thing that has gotten states such as Florida and Texas to react recently. Florida’s Division of Alcoholic Beverages and Tobacco asked the federal Bureau of Alcohol, Tobacco and Firearms to help halt illegal alcoholic beverage shipments into the state.

And Texas authorities, citing illegal shipments by Scotch societies, mail-order beer clubs and wine retailers in other states, have sent letters threatening a crackdown to those who advertise wine for sale in wine magazines.

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The issue is so hot that the National Conference of State Liquor Administrators (NCSLA) set the subject of “mail-order alcohol” as its No. 1 agenda item for this summer’s national meeting.

This spotlight on illegal shipments has had a chilling effect. The owners of three wineries in California, speaking on the condition of anonymity, said they had eliminated direct-mail shipments to states where problems could crop up.

Retailers, too, are aware of the crackdown on illegal shipments of wine.

Ron Loutherback, owner of the Wine Club stores in Santa Ana and San Francisco, said: “I’m delighted that they are cracking down on illegal interstate shipping. There’s a big misconception that we ship a lot of wine out of state, and we don’t, comparatively speaking.”

He said, however, that some large East Coast retail shops, “especially those guys with the big ads in the national magazines,” may find they will have to alter their sales methods if the heat goes up.

Has Loutherback himself ever shipped wine to a state with prohibitions against it? “Has a state ever notified me not to ship there?” he replied. “Yes, now and then. And in most cases we have discontinued sales to those states. Occasionally these good buyers have the wine shipped to a neighboring state, and then they go pick it up.”