Investment firm that purchased Lieb Cellars faces scrutiny

02/26/2016 6:00 AM |

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A New York City investment firm made headlines in 2013 when it announced the purchase of both Lieb Cellars in Cutchogue and Premium Wine Group in Mattituck.

It was a milestone for the local wine industry and the futures of both companies were said to be bright.

While both Lieb and Premium have indicated that business has continued to grow in the years since they became one publicly traded company, Premium Beverage Group, the investment firm, Southport Lane Management LLC, has seen its share of problems.

On Jan. 14, those issues became apparent when federal officials raided the investment firm’s Manhattan offices, signaling an investigation into the company’s business practices, which was first reported by The Wall Street Journal and confirmed last week by an attorney for Premium Beverage Group. To date, no criminal charges have been filed.

Southport Lane, which has invested primarily in insurance companies, and its founder, Alexander Chatfield Burns, have been the subject of several recent lawsuits and attention from regulators who allege Southport siphoned off millions of dollars of mainstream insurance holdings, replacing them with overvalued assets, according to online court records and a pair of Wall Street Journal reports.

Premium Beverage Group president and CEO Richard Bailey and Premium Wine Group managing partner Russell Hearn deferred comment for this story to attorney Michael Weinstein of Cole Schotz P.C. in Hackensack, N.J., who said it’s important to note the “multiple degrees of separation” between Southport Lane and the North Fork businesses.

“Southport Lane has ownership in Premium Wine Acquisitions, which owns stock in Premium Beverage Group, which owns Lieb Cellars and Premium Wine Group,” Mr. Weinstein said. “There are a number of intermediary corporate entities that separate the troubles that Southport Lane is having and, obviously, the wine group.

“There is not any allegation that I’m aware of that Premium Beverage Group or Lieb Cellars or Premium Wine Group have done anything wrong,” he said.

The creation of Premium Beverage Group was first announced in March 2013. The acquisition of the two companies from founder Mark Lieb became official later that year.

Records in federal court in South Carolina indicate that Mr. Burns resigned from Southport Lane in early 2014. However, he, along with others, expressed great optimism at the acquisition of Mr. Lieb’s properties in a March 2013 press release.

“The combined companies have received substantial funding through their parent company Southport Lane, a private equity firm focused on growing its portfolio businesses, primarily comprised of complex, highly regulated organizations,” the release stated.

“The [Premium] team’s passion for the business reflects our belief in the strength and quality of these companies,” Mr. Burns noted in the release.

The sale also included an estate at the Lieb Cellars property on Oregon Road, which was recently put back on the market with a $3.2 million asking price. Mr. Weinstein said the listing of the Lieb estate, which occurred two days after the FBI raid, is “not connected [to] or resulting from the recent search warrant or Southport investigation.”

“[It’s a] business decision solely, as the property was under-utilized,” he said. The four-bedroom, 3.7-acre estate — which has annual property taxes of $36,000 — had been used as a monthly rental in recent years. The listing does not include the surrounding vineyards or the adjacent winery and tasting room.

While it was first announced that Mr. Lieb would serve as chairman of the board of Premium Beverage Group, Mr. Weinstein said he has no current operational role within the company. Mr. Lieb did not respond to a request for comment for this story.

Mr. Bailey was hired to run Premium Beverage Group in December 2013. While he initially served as managing director of Southport Lane, his attorney said he held that title for only four months, “when he was getting up to speed and assuming the executive role he now holds.”

In a recent blog post published on Lieb Cellars’ website, Mr. Bailey said that after a difficult 2014, the winery saw significant sales growth in 2015 and that he expects continued success moving forward.

“2016 will be our breakout year,” he wrote.

Lieb Cellars opened in 1992 and currently has about 85 acres of vines, producing wine under both the Lieb and Bridge Lane brands. Aside from the Lieb Cellars tasting room on Oregon Road, it also has a tasting spot for Bridge Lane wines at the Cox Neck Road site of Premium Wine Group’s custom-crush facility. Premium opened in 2000 and is now where 18 wineries produce more than 100 wines each vintage, according to its website.

Mr. Weinstein described the two Premium Beverage Group companies as “very healthy.”

Photo Caption: An attorney for Lieb Cellars said the Cutchogue winery has not been affected by the a recent federal raid of the Manhattan office of Southport Lane, the investment firm that purchased the winery in 2013. (Credit: Grant Parpan)

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