Bacchus v. Lucre

The story of Brutocao Family wine fortune — available on their website — follows the classic early immigrant trajectory of struggle over multiple generations until at long last the good life is finally achieved. But making a fortune is one thing, keeping it is another. Until quite recently the Brutocao wine business remained uncertain, and the third generation of Brutocaos was struggling until they hired Christopher Mulcahy as Chief Financial Officer in 2008. In four short years, Mulcahy seemed to have put the family business firmly in the black but then the family says it caught him stealing.

The Brutocao Family’s financial problems went public last week when Mulcahy went on trial for tapping the Brutocao family till. District Attorney David Eyster, a wine enthusiast, has been handling this case himself, working closely with Brutocao CEO Steven Brutocao and other family members on the prosecution of Mulcahy.

Steven Brutocao spent most of three evasive days on the stand. The perception of evasiveness was so compelling that Judge John Behnke had to warn spectators that if they continued to guffaw at Mr. Brutocao’s responses, they would be ejected from the courtroom.

The defendant, ex-finance director Mulcahy, by way of contrast to his ex-boss seemed the very picture of unassuming modesty and, along with his thorough questioning by defense attorney Justin Petersen, the first week of the trial — encompassing most of the prosecution’s case — ended with the defense enjoying some distinct advantages. The crux of the accusations appeared to be a move by the Brutocaos to change CFO Mulcahy’s status with the business from that of a full time employee to an independent contractor sometime in 2009 — after the family business started enjoying some long awaited profits. Steven Brutocao was particularly vague and aloof when it came to contracts between himself and Mr. Mulcahy’s contracting company, North Coast Vineyard Services.

Justin Petersen: “Let’s go back to the impact of changing Chris’s (Mulcahy) status from employee to contractor. Do you know what kind of time and money it takes to set up a company — a corporation, like that?”

Steve Brutocao: “Certainly it’s not my area of expertise, but I’d suppose it’s minimal.”

Petersen: “Do you remember any contracts in ’09 between Chris Mulchaey and Brutocao?”

Brutocao: “I don’t remember any contracts, but I’ve seen evidence in the last few months that I signed them.”

Petersen: “You don’t remember signing ten or more of these contracts?”

Brutacaao: “I may have, I don’t know. We trusted this man. He put stuff in front of me and I signed it. I’m not proud of myself for that, but I sign a lot of papers.”

Petersen showed him one of the contracts and asked if it was his signature.

Brutocao: “Yes, I signed it. I signed the paper, but I had no idea I was doing business with that business until I saw the forged checks.”

Petersen: “It has the name right at the top of the first page. Did you read this contract?”

Brutocao: “No.”

Petersen: “So you don’t know whether this contract gives him leave to sign checks for recovery disbursements?”

Brutocao: “My understanding was that there was no intent to have him sign my name to checks.”

Petersen: “Is it your habit to sign contracts without reading them?”

Brutocao: “No, I trusted him. We all did.”

Petersen: “So if he put something in front of you you’d sign it?”

Brutocao: “We had a verbal agreement. Our deal was it’d (Mulcahy's compensation) be $136,000 no matter what. So he’d put it in front of me and I’d sign it.”

Petersen: “What if it was a check?”

Brutocao: “If he handed me a stack of checks I’d look through the invoices and sign them. I wouldn’t look through the paperwork at all. I trusted him — bad choice, as it turned out. This case has gone on for over a year now. The agreement was $136,000 and the contract was a piece of paper for his files, so the contract means nothing to me — he had no right to sign my name!”

Petersen: “Did the original contract include rates that were to be paid to vineyard workers?”

Brutocao: “As I’ve testified, the contract was not something we were going to use, so any content in it was not something I’d refer to as valid.”

Petersen showed the witness a contract with hourly rates for workers and verified that the signature was the CEO’s.

Brutocao: “We said we were only going to pay $136,000 and that’s all we were going to do.”

Petersen: “Yes, but now he’s no longer an employee, he’s a contractor for these services, and he’s coming to your office with these expenses for labor. And my understanding is he’s not billing you for himself, but for the workers — was Mr. Mulcahy paid on a regular basis?”

Brutocao: “That was our intent, but he had a lot of ideas in his head.”

Petersen: “Was he paid regularly, or were there gaps?”

Brutocao: “Yes, there were gaps. I think three months at times. But he controlled the money so he told us when we could pay [sic].”

Petersen: “Did you and Chris ever get together to discuss where you were on billing?”

Brutocao: “Sadly, we never did. As CPA and our CFO, had that happened, I’d have seen that he was overpaid and I would have investigated.”

Petersen: “Did you and Mr. Mulcahy discuss billing?”

Brutocao: “Yes.”

Petersen: “Was there a schedule for these discussions?”

Brutocao: “No, there was no schedule, it could happen any time.”

Petersen: “Did any of the supposedly forged checks have invoices?”

Brutocao: “Not that I’ve seen. Two-thirds of the time he’d come by on the fly without invoices and say can you sign this check.”

Petersen then explored the issue of his client’s moving expenses from Kansas, showing CEO Brutocao a document.

Petersen: “It says moving costs, $30,000, and there’s a check request.”

Brutocao: “I’ve never seen this before.”

Petersen: “Was this a normal form?”

Brutocao: “I’ve never seen a form like that — it’s not our form. I don’t think there is any ‘normal’ form.”

Petersen: “The amount includes new furniture, doesn’t it?”

Brutocao: “I don’t remember that.”

Petersen: “Well, Chris was eventually reimbursed and when he bought new furniture it was agreed that this would save Brutocao more money in moving expenses, right?”

Brutocao laughed at this question, but his merriment was not contagious. In fact, it caused some of the jurors to squirm uncomfortably in their seats.

Brutocao (after his lonely laughter had subsided): “I have no idea what you’re talking about.”

Petersen: “Was Chris ever paid 7.5% interest on his moving expenses?”

Brutocao: “I’ve seen that question come up in evidence, but Chris was really well-off — he had a ranch in Tennessee as well as holdings in Kansas, and his wife made more money than he did. We weren’t doing very well at the time and he said not to worry about it, so I didn’t.”

Petersen: “Was the interest ever paid?”

Brutocao: “To my knowledge… I don’t know.”

After lunch, defense attorney Petersen got into the subject of shiners (bottles of wine without labels, distributed to other wineries), shell companies, and the “Bliss” wine label, started by Irv Bliss, Steven Brutocao’s grandfather.

Petersen: “Do you remember Chris (Mulcahy) telling you about a distributor in Memphis who couldn’t move Brutocao’s wines and an idea he had for a company he wanted to start, using shiners in that regard?”

Brutocao: “He talked about a shell company; but the shell was in receivership, I thought of it as a piece of paper, a bond.”

Petersen: “But isn’t it true that the more wine you sell the more tax you have to pay and that this idea had something to do with that?”

Brutocao: “As our CFO, it was his job to keep our tax rate down if we increased sales.”

Petersen: “Do you remember the name of the shell?”

Brutocao: “Sapphire Hill, I think it was.”

Petersen: “Do you remember him buying the company?”

Brutocao: “My thought was he was buying a piece of paper, a bond. I listened to him but not very long on this one. At some point I found out it was a more substantial company. I thought it was a shell, but it had a tasting room — in Healdsburg.”

Petersen: “And you wanted a tasting room in Healdsburg, didn’t you? Did you visualize him as a competitor after that?”

Brutocao: “Sure. In Sonoma you get a lot higher prices.”

Petersen: “Were you concerned with Chris being a competitor while working for Brutocao?”

Brutocao: “Yes! I said you deceived us — you have a tasting room in Healdsburg!”

Petersen: “So you felt betrayed?”

Brutocao: “Yes.”

Petersen: “Did Chris ask about buying a pallet of shiners from you?”

Brutocao: “Yes, and I refused.”

Petersen: “Was that because you didn’t want him to be successful?”

Brutocao: “No, it was my Dad’s favorite wine and we didn’t want him selling it for more money than we get — it wasn’t because I didn’t want him to be successful.”

Petersen: “Well, you said he was a competitor, so as a competitor, wouldn’t that diminish your business?”

Brutocao: “I didn’t want him to fail — he lied!”

Petersen: “That was in 2010, let’s go on to 2011. At this time Brutocao’s business is picking up, is that fair to say?”

Brutocao: “I felt that business was picking up. In ’08 the smoke from the fires tainted the grapes, made the wine taste like smoke. In ’09 cash was tough to come by; I was forced to borrow money from my Mom after Dad passed, and the cash flow finally hit even in 2012. The ’08 wine was a real crisis.”

Petersen: “Did Mr. Mulchaey’s pay change in 2011?”

Brutocao: “Yes.”

Petersen: “Why?”

Brutocao: “The main reason was he wasn’t doing a good job, we were recouping, and brought another accountant on board at that point.”

Judge Behnke: “Who was the other guy?”

Brutocao: “Craig Borden.”

Petersen: “And you did this with no warning to Chris, no notice at all?”

Brutocao: “Yes.”

Petersen: “Did that create an unpleasant feeling?”

Brutocao: “I have no idea what he was feeling. We were bouncing checks and Mr. Mulcahy was running an additional winery. So we brought Borden in to get the work done.”

Petersen: “Borden played lacrosse with [a family member] at Cardinal Newman, didn’t he?”

Eyster: “Objection, relevance.”

Behnke: “Sustained.”

Petersen: “And there was friction between your wife and Chris?”

Brutocao: “Yes.”

Petersen: “And there was friction between Tammy and other employees?”

Brutocao: “I’d not say ‘friction’ — no.”

Petersen: “So you reduced Chris’s hours — how much?”

Brutocao: “I believe it was to 40%.”

Petersen: “So let’s say he was reduced about 20 to 25 hours per week, and the plan was to pay him 40% of the $136,000… Was this put on paper anywhere?”

Brutocao: “Again, we didn’t use contracts. It was a gentleman’s agreement.”

It may come as news to some readers unfamiliar with the arcane of the wholesale and retail aspects of the wine industry to note that most of your high-dollar wines are not available in stores, they are “direct sales” — sold on mailing lists, acquired through people who drop into tasting rooms. The only other place to get them is to search out restaurants, and pay the sizeable markup involved in avoiding the wholesale middleman.

CEO Steve Brutocao remained on the stand the rest of that day and into the next, the better part of three long days, and most of it under cross-examination by Petersen. Then his brother Dave Brutocao was called.

DA Eyster on direct: “Do you remember the day you first saw the forged checks?”

Dave Brutocao: “Yes. It’s a day I’ll never forget.”

Eyster: “Are you aware of Chris Mulcahy ever being authorized to sign Steve Brutocao’s name to checks?”

Brutocao: “No, never.”

Eyster: “What were you doing that day?”

Brutocao: “I was planning to meet with Chris that morning around ten o’clock.”

Eyster: “Did he arrive for the meeting?”

Brutocao: “No. I think he finally showed up around one. Meanwhile Steve showed me the checks and Craig Borden and I went to work changing the passwords and access codes to our computer system.”

Eyster: “To lock Mr. Mulcahy out?”

Brutocao: “Yes. We finished before he showed up. Steve and Lenny [another of the Brutocao brothers] were there and we knew we had to confront Chris with the three checks.”

Eyster: “Did Steve make any accusations?”

Brutocao: “He did; he accused Chris of forgery and stealing from us.”

Eyster: “What did Chris say when you confronted him?”

Brutocao: “He said he didn’t have anything to do with it.”

Eyster: “You pressed him a bit, though, didn’t you?”

Brutocao: “Yes. It was clear by then that the checks had been deposited in his account. So we said we thought he did it.”

Eyster: “Did he ever say he was owed that money?”

Brutocao: “No.”

Eyster: “Nothing further.”

Petersen on cross: “Did you know anything about Mr. Mulcahy’s contracts with Brutocao?”

Brutocao: “He showed me some contracts when he started his business, but I didn’t sign any of them; although Steve may have.”

Petersen showed one of the contracts to the witness and asked if he recognized it.

Brutocao: “I don’t think so… I don’t really remember this format… It was a few years ago.”

Petersen: “Do you remember why Chris brought the contract to you?”

Brutocao: “He said he wanted to start his own business.”

Petersen: “Was Chris looking for feedback from you?”

Brutocao: “I don’t remember that, either.”

Petersen: “Was it more than one contract that he showed you?”

Brutocao: “I don’t remember. It was a long time ago.”

Petersen: “Did he leave it with you to go over later?”

Brutocao: “I don’t remember if he left it with me or took it… I don’t know.”

Petersen: “Did you show the contents to other members of your family?”

Brutocao: “No.”

Petersen: “Ever discuss it with the family?”

Brutocao: “I don’t think I did.”

Petersen: “So even after the investigation began, no one ever showed you that contract with Steve’s signature on it until I did today?”

Brutocao: “No.”

Petersen: “Do you recall if he was to receive money for moving expenses? I believe he was.”

Petersen: “Do you recall the amount?”

Brutocao: “No, not really.”

Petersen: “But it was in the tens of thousands, wasn’t it?”

Brutocao: “It was over $10,000, yes.”

Petersen: “Was it paid some years later?”

Brutocao: “It may have been a year or two later. He knew the financial situation we were in, so he didn’t press it.”

Petersen: “Let me show you this document. Does it relate to moving expenses?”

Brutocao: “I think it does.”

Petersen: “Are you the person who cut the check?”

Brutocao: “No.”

Petersen: “Did you cut the check for interest on the moving expenses?”

Brutocao: “No.”

Petersen tried to introduce another document but the DA objected and the judge sustained the objection. Another series of questions delved into the time of Mulchaey’s firing and the audit that was going on at that time. And the session ended with a stipulation of the parties to a Bank of America account in the defendant’s name being entered into evidence.

At this point prosecution rested.

Justin Petersen had mauled Dave Brutocao as badly on cross as he had his brother Steve. Also, there were many areas Petersen wanted to explore that the scope of cross-examination of direct testimony did not include, and the shrewd Petersen reserved both witnesses to recall, in defense’s turn, to delve into these areas which prosecution preferred to avoid.

At the end of the day it looked like the prosecution was putting a lot of faith in an unlabeled shiner. But juries, like pricy wines, are notoriously unpredictable, and presumptuously slurping a bumper of what you thought was chilled, congratulatory Gewüztraminer may well come spraying back out as tepid Rhennish plonk when the verdict comes in next week.

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Footnotes: “Bumpers” are brimming glasses of wine (as in calling for “Bumpers all around!” when proposing a toast), and I used it to parody the stingy trickle of wine they dole out in tasting rooms; “Rhennish” is a wine snob’s slur for Rhine wine (Yourik poured a flagon of “rhennish” on Hamlet’s head for a gag); “plonk” was originally French for white wine, but has come into English usage in tasting-room parlance as a dismissive term for cheap, inferior wine (c.f. Two-Buck Chuck).