ATO closes in on fake alcohol wholesaler Fernbrew after audit found company owe large tax bill
The D’Aquinos Group’s products have attracted scrutiny over their authenticity. (ABC News: Bellinda Kontominas)
Drinkers beware: ABC investigation uncovers fake spirits on sale in independent bottle shops
A major liquor wholesaler accused of selling fake spirits is in administration, as the Australian Taxation Office (ATO) closes in on the operation.
- Business papers reveal Fernbrew’s 2017 revenue was $66 million
- It’s facing a large tax bill after an ATO audit and has gone into administration
- Fernbrew claims to import Blue Cactus Tequila, which authorities say isn’t authentic
Fernbrew Pty Ltd called in administrators on January 30 — five months after it was exposed in an ABC investigation into counterfeit spirits.
The ATO sent Fernbrew’s clients a letter claiming the company had an unpaid tax bill of more than $87 million.
More than 50 creditors, including Westpac and National Australia Bank, are invited to a meeting on Monday called by administrators Hall Chadwick.
“It’s about time this happened,” one industry source said.
“I don’t think you will find anyone feeling sorry for them.”
Business papers reveal Fernbrew — which lists liquor merchant Rex D’Aquino as its sole director — had revenue of $66 million in 2017.
Five days after it was placed in voluntary administration, Fernbrew bought up alcohol production company Hunter Wine Services (HWS), which Mr D’Aquino had previously run with an old friend.
HWS has faced fines for underfilling wine casks and discharging toxic waste into stormwater drains near its headquarters in regional NSW.
In a statement, Hall Chadwick said administrators were assessing Fernbrew’s financial position to determine the extent to which it could continue to trade.
Fernbrew claims to import Blue Cactus Tequila, which retails for about $35.
Under trademark laws, a product can only be called tequila if it is made in Mexico.
However, Mexican authorities say that product is “not linked” to the industry in Mexico, and that it uses a fake Mexican distillery address and a false watermark.
Its barcode was traced to a Canadian company which specialises in swimwear, not spirits.
Esau Garza, Mexico’s trade commissioner to Australia, said he welcomed further scrutiny of Fernbrew and the “closure of misleading and false Tequila sales” in Australia.
ProMexico trade commissioner Esau Garza (R), with Mexico’s Ambassador to Australia Eduardo Pena Haller, welcomes further scrutiny of Fernbrew. (ABC News: Riley Stuart)
The ABC has obtained a copy of the ATO’s letter, which claimed Fernbrew had a large tax debt and said outstanding invoices should be paid directly to the Federal Government.
Another NSW-based liquor producer said tax officials visited the business last year as part of the probe.
The ATO declined to comment.
The move to voluntary administration is the latest in a string of problems Mr D’Aquino is facing.
Another of his companies, D’Aquino Bros Pty Ltd — based at the same address as Fernbrew — is fighting a lawsuit brought by the Scotch Whisky Association (SWA).
The SWA is seeking unspecified damages in the Federal Court alleging trade mark infringement, as well as the revocation of D’Aquino Bros’ licence to import and market scotch.
Mr D’Aquino is no stranger to litigation, having been convicted in 1999 of “aiding and abetting of the smuggling of alcohol into Australia” in the New South Wales Supreme Court.
Meanwhile, the Federal Court ordered him to stop selling and/or marketing fake Scotch in 2006, 2009 and 2012.
Boozy black sludge spill
Five days after entering voluntary administration, Fernbrew became the sole owner of Hunter Wine Services (HWS), a Muswellbrook based alcohol manufacturer run out of an old dairy.
The share buy-out — as advised to ASIC by director Rex D’Aquino — is worth $501,000.
HWS is the supplier of raw ethanol to Fernbrew, and its website states it produces more than four million bottles of wine and three million litres of ethanol every year.
Ethanol, as a clear spirit alcohol, can be mixed with chemical flavourings and water to make bottled spirits like brandy, rum and gin.
The spirit attracts heavy taxes, calculated at $85 per litre.
HWS was in 2009 fined in the Newcastle Local Court for ripping off consumers by underfilling wine casks.
The company also has a history of environmental complaints, the most serious of which took place in December 2016, when feints — a toxic by-product created in the distilling process — flooded into a stormwater drain.
The oily “black looking” sludge filled stormwater ponds after an early-morning spill near the HWS still.
Documents seen by the ABC revealed pond water tested by an employee after the incident had an alcohol volume of 11.8 per cent — the equivalent of a bottle of wine.
A HWS employee subsequently complained that staff-members’ warnings to management about “safety things” like faulty equipment and fire hazards were ignored.
“This goes on with a lot of things,” they said.
“You tell them ‘don’t do that, it’s not a good idea, there’s going to be consequences’ and they just shrug it off, they don’t listen.”
HWS was eventually fined and entered into a clean-up agreement with Muswellbrook Shire Council.
Mr D’Aquino’s elderly mother Zina, and another man named Peter Tuson are co-owners of Fernbrew through a holding company.
D’Aquinos Group has been contacted for comment.
Residents complain of ‘rotting wine’ smell
The company has long been complained about by residents near its headquarters, in the Upper Hunter, about 230km north-west of Sydney.
Many of the complaints are about foul “rotting wine” odours from the factory causing migraines and nausea.
In July 2013, council investigators found 100,000 litres of toxic wastewater was illegally pumped onto paddocks on the HWS property over two days, using an irrigation system.
“The majority of the time I can’t open windows and have to run air conditioning” one neighbour told officers.
“I get migraines and vomiting.”
Another complained about the “raw sewage smell” entering their home saying “it is quite strong, like having a truck load dumped in your house.”
A third resident said on many occasions they had “not been able to eat dinner inside the house, the smell is so bad”.
“Other times I have woken up wondering who has been sick in the night as the smell is so much like vomit and permeates the house.”
Investigations into alcohol wholesaler
- 1999 — Rex D’Aquino is fined $232,000 and convicted on smuggling offences in NSW Supreme Court
- 2006-2012 — The Federal Court makes three separate orders against Rex D’Aquino relating to fake Scotch sales
- 2007 — Fernbrew is fined $30,000 for selling “Old McTavish” spirit falsely labelled as Scotch
- 2009 — Hunter Wine Services is fined for selling underfilled wine casks
- 2013-16 — Hunter Wine Services is investigated by Muswellbrook Council for pollution offences