The [yellow tail] Saga Episode 6

Burn Baby Burn !

Israeli Gas, Israeli Guns and [yellow tail]

By Esther Moriarty & Stuart Pigott

For a long time all the happy families promotion for the great no-brainer wine megabrand [yellow tail] seemed to work like a dream for the Casellas with sales, turnover and profits growing, growing, growing. Of course, you have to do something with that kind of profits and there’s a limit to how much you can invest in a winery once you’ve already got the fastest bottling line on Planet Wine, as Casella Wines does. Therefore it wasn’t a surprise to read in an article published in the October 30^th 2010 issue of the Sydney Morning Herald (SMH3) under the title of ‘Lawyers, guns, money, the sting in Yellow Tail’ that the Casella family’s real estate investments in Griffith and Yenda include two winery buildings, farms and a former retirement home and that they extend to a commerical building in St. Leonards/Sydney for which they paid AUS$5.15 in November 2009 plus a shopping centre on the Gold Coast of New South Wales purchased for AUS$16.4 million in September 2009.

You might think that this would encourage local people to view the Casellas as prominent and respectable members of the community, but maybe not. SMH3 not only reports that The Griffith Show has been renamed the Casella Wines Annual Show, but quoted an anonymous woman connected with the local authority as saying, “they might as well change the town’s name to Casella.” Now, doesn’t that sound a little bitter to you? Are the Casellas less than well loved in their home town? Yes, the questions are back and they are multiplying again!

The family worked hard to make [yellow tail] consumers view them as animal lovers. Recently according to an article on the ‘Field & Game Australia Inc.’ website, Casella Wines has pledged US$100,000 to the Humane Society of the United States (HSUS) an animal rights organisation that in Australia is represented through Humane Society International (HSI). The HSI campaigns against the NSW Shooters Party and has a firm position against hunting. Now all Casella Wines labels in the US will carry the HSUS name. However. according to SMH3 the youngest of the three Casella brothers, Marcello, who you may remember served some time for his involvement in a huge Marijuana crop back in the 1990s (see Episode 5), is planning to build an ammunition factory near Griffith capable of producing up to 10 million shotgun cartridges a year. Blasting with shotguns at roadsigns and kangaroos is a common pastime amongst certain Australian farmers.

However, even this piece of entrepreneurial daring looks cautious and conservative compared to John Casellas Israeli oil and gas exploration company; Cassal Drilling. SMH3 reports that Roy Spagnolo, the Casella family’s accountant in Griffith, as having told the Israeli authorities in May 2010 the company planned to invest at least AUS$60 million in their country. Accoridng to SMH3 Cassal Drilling had already hit a rock in the road though, coming under legal fire in Jerusalem from Rodney Salfinger, the company’s former managing director. Salfinger clearly has a no-holds-barred approach to business disputes, since he told the Sydney Morning Herald that John Casella had been providing the Papua New Guinea police with israeli weapons. Casella did not dispute intending to expand his oil and gas exploration project to Papua New Guinea, but strongly denied Salfinger’s allegations. However, SMH3 reports that photographs were circulating of two Papua New Guinea policemen testing weaponry with an Israeli director of Cassal Drilling. It seems the pictures were taken at the plant of Israel Weapon Industries, maker of the famous Uzi machinegun. Why are a whole lot more guns suddenly turning up in this wine story? Couldn’t we please go back to the Shiraz, or even Chardonnay?

SMH3 also reported a lot of ugly details about Salfinger who then faced prosecution in the US after allegedly producing a revolver at his daughter’s wedding. Yet more guns! On top of this in October 2007 an Australian judge described a legal action brought by Salfinger against the Niugini Mining company as a, “clumsy fraud,” which he, “sought to maintain by repeated acts of reckless perjury.” Maybe John Casella’s barrister, Steve Stanton, was spot on when he said of his client, “His only bad judgement has been to choose Mr Salfinger as a joint venture partner,” Considering that, according to SMH3, their business partnership had lasted 15 years, i.e. it began in [pre-yellow tail] times, you have to ask why it took John Casella so long to figure out that he’d chosen the wrong business partner? Or does Salfinger sound like a reliable and trustworthy businessman to you?

Back to Israel where, according to SMH3, John Casella obtained his first drilling licence in October 2007 and shortly afterwards incorporated Cassal Drilling. By October 2010 work seems to have begun on the company’s first project amongst sand dunes wedged between the Gaza strip and an industrial park next to the port of Ashkelon. SMH3 reported two off-shore projects were also “in the pipeline” [pun]. It is important to point out here that off-shore oil and gas is a seldom-reported factor behind the dispute between Israel and the Palestinians. It all goes back to the discovery of the Gaza Marine 1 and Gaza Marine 2 gas fields in 2000 by a consortium led by British Gas (BG), the Lebanese-owned Consolidated Contractors International Company (CCC), and the Palestinian Authority (PA), then still lead by Yasser Arafat. BG estimated the combined reserves of the two fields as being worth 4 billion dollars, which made the Palestinian Authority’s 10% share in the consortium look very helpful for a fledgling Palestinian State. In May 2007 the Israeli Cabinet approaved a deal for Israel to buy gas from the PA, the idea being to pump the gas ashore at Ashkelon close to Cassal Drilling’s first project, but it seems that security objections from Mossad were immediately followed by the Israeli attack on Gaza in December 2007 which finally torpedoed the deal.

The recent the upheavals in the Arab world have reshuffled the Middle East diplomatic pack and amazingly discussions between the Israeli government and the PA about the gas off Gaza’s shore restarted early this year. Meanwhile, Israeli pressure on Hamas and the population of Gaza continues as an article published in the July 25^th issue of The Guardian entitled, ‘Troubled waters: Palestinian fishermen caught in Israeli gunboat policing net’ makes clear. It reports how the 1993 Oslo accords gave the Palestinian fishermen of Gaza permission to fish up to 20 nautical miles off the coast, but in December 2007 the Israeli government unilaterally imposed a 3 nautical mile fishing limit as part of its land and sea blockade of Gaza. Then followed a graphic description of how this limit is imposed by Israeli gunboats. It was no suprise to us to learn that the United Nations judges this to be the collective punishment of civilians in violation of international law. Is this part of a wider Israeli stratergy to deny Hamas access to the gas below the sea bed off the coast of Gaza? Aren’t there less dangerous places to invest in oil and gas exploration? And isn’t the burning of fossil fuels largely responsible for global warming?

An important Money Question

Just for a moment let’s backtrack to Episode 5, which raised an important money question: how could a company subject to regular inspection by the tax authorities use the contents of hidden sacks or tins of cash to it’s advantage? Some years back I heard some ugly stories about the chief salesman of a European wine company with major exports to the US. Let’s call him “Carlo”, which is not his real name. I met Carlo a number of times and he always struck me as being a totally unscrupulous character, so I feel highly inclined to believe all the stories I heard about him. Apparently Carlo was paying “kick backs”, or illegal incentives, to US wine merchants who placed large orders with him. Legal incentive include things like prizes for the best salesaman and, of course, they go through the company books. The stories said that in return for each large order Carlo would pass a brown envelope containing cash “under the table” to the person placing the order, both as a thank you and to provide them with a damned good reason to re-order as fast as possible. If you were launching a new wine brand and you were as unscrupulous as Carlo you could use a stache of cash to ease your product’s entry into the market and rapidly gain the omnipresence that is a prerequisite for it jumping from obscurity to megabrand status.

A company Profile of Casella Wines in Issue 5/2007 of Wine Business magazine tells the story of how back in the early days of [yellow tail] Wine Australia, the official body for the promotion of Australian wine internationally,  gave Cassella Wines a subsidy which they invested in Australian bush hats and oilskin jackets. These were given to the sales force of their US importer W.J. Deutsch & Sons who used them as a funny, feel-good sales tool. The story also stressed that [yellow tail] was never discounted and that this worked because healthy margins for everyone involved were built in from the beginning. That is, of course, a totally different strategy to Carlo’s aggressive use of kick backs to fuel the sales machine. Even today nobody can tell me where Carlo got all that cash from.