Charles Banks: Duncan Fraud, Guilty Plea, and Four-Year Sentence

Charles Banks, the financial adviser who managed money for Tim Duncan for nearly two decades, defrauded the NBA star out of millions through a sports merchandise company called Gameday Entertainment. Banks pleaded guilty to wire fraud in April 2017, was sentenced that June to four years in federal prison, and was ordered to pay $7.5 million in restitution. The fraud against Tim Duncan by Charles Banks also cost Banks his wine and hospitality empire and drew a permanent bar from the securities industry.

How Banks Became Duncan’s Adviser

Banks first met Duncan in 1997, the year Duncan left Wake Forest as the top pick in the NBA draft. At the time, Banks was an executive at CSI Capital Management, a San Francisco firm that specialized in managing money for professional athletes and grew to roughly 150 athlete clients and about $400 million in assets under his leadership.¹²

Banks stepped away from day-to-day management at CSI in 2007, and SunTrust Investment Services bought the firm in April 2011.² Even so, he stayed on as Duncan’s primary financial adviser and acted as the go-between with SunTrust on Duncan’s accounts.³ That continuing relationship is what made the later fraud possible. Duncan trusted Banks’s recommendations, and Banks steered him into ventures where Banks himself had financial interests without telling him.⁴

The Gameday Entertainment Scheme

The criminal case centered on Gameday Entertainment LLC, a sports apparel and merchandise company where Banks served as chairman of the board. In 2012, Banks convinced Duncan to lend Gameday $7.5 million, promising him a first-priority security interest in the company’s assets and telling him the business was thriving. Gameday was in fact struggling to meet its obligations.⁵

The SEC later found that Banks told Duncan another investor was putting in a matching $7.5 million as part of a $15 million offering. No such co-investor existed. Banks quietly took a $225,000 fee on the transaction and skimmed $15,000 from each of Duncan’s $75,000 monthly interest payments over two years, totaling about $543,000 in undisclosed commissions.⁶

The scheme escalated in 2013. Banks persuaded Duncan to co-guarantee a new $6 million loan from Comerica Bank to Gameday, telling him the deal would actually reduce his existing risk by $1.5 million. Banks sent Duncan only the signature pages and misrepresented what the rest of the documents said. The transaction created a new $6 million contingent liability for Duncan and subordinated his original security interest to the bank’s claim, the opposite of what Banks had described. Duncan signed while competing in the NBA Finals. Banks then took more than $1.5 million from the new loan proceeds for himself rather than paying down Duncan’s original investment. Gameday collapsed, both loans went into default, and Duncan was left holding the losses.⁷

Other Investments Duncan Says Were Tainted

Duncan’s civil claims went beyond Gameday. He alleged Banks had duped him into putting $1.1 million into Métier Tribeca LLC, a cosmetics company doing business as Le Métier de Beauté. In a July 2012 email, Banks pitched the company as profitable, with $8 million in annual sales, and told Duncan that he was personally putting in $1 million and Kevin Garnett $500,000. According to the lawsuit, Banks was actually skeptical of the projections and had decided not to invest his own money. The company filed for Chapter 11 bankruptcy in September 2014.⁸

Duncan filed two civil suits against Banks, the first in January 2015 and the second that November. Together they alleged Banks’s conduct had caused more than $25 million in losses across sports merchandise, wineries, hotels, and cosmetics between 2005 and 2013, in each case with Banks failing to disclose his own stake in what he was recommending.¹ The losses surfaced during a 2013 financial review tied to Duncan’s divorce.⁹

Wire Fraud Charges, Guilty Plea, and Four-Year Sentence

Federal prosecutors indicted Banks on four counts of wire fraud on September 20, 2016. The SEC filed a parallel civil enforcement action in the Northern District of Georgia, charging him with violating antifraud provisions of the Securities Act, the Securities Exchange Act, and the Investment Advisers Act.⁶

On April 3, 2017, Banks pleaded guilty to one count of wire fraud in the U.S. District Court for the Western District of Texas. He entered the plea without a plea agreement. He admitted to misleading Duncan about the Gameday transactions and to sending text messages that were “untrue or were made with a reckless indifference to their truth or falsity.”⁵⁷

U.S. District Judge Fred Biery sentenced Banks on June 28, 2017 to four years in federal prison, followed by three years of supervised release, and ordered $7.5 million in restitution.¹⁰ The court calculated the actual losses at $13.5 million, reflecting the $7.5 million loan and the $6 million guarantee.¹¹

At the hearing, Duncan told the judge: “You may not understand how difficult it is for me to be in the public light in this horrible way: as the poster child for a dumb athlete whose financial adviser took his money.” He urged Biery not to impose a sentence so light that Banks could claim he had done nothing wrong.¹² Outside the courtroom, Duncan told reporters he thought the sentence was fair.¹⁰ Banks apologized to Duncan and to his own family before the sentence came down.

Restitution, Civil Settlement, and SEC Bar

Duncan settled his civil suits against Banks for $7.5 million, with the money to be paid through the criminal restitution order rather than a separate civil recovery.¹³ Duncan had originally accused Banks of causing more than $20 million in total losses, but the $7.5 million reflected what the court determined was recoverable through the criminal process.

A week after the criminal sentencing, on July 5, 2017, the U.S. District Court for the Northern District of Georgia entered judgment against Banks in the SEC’s civil case. The court permanently barred him from violating federal securities laws, prohibited him from serving as an officer or director of any public company, and ordered disgorgement, prejudgment interest, and penalties in amounts to be set later. Banks also consented to an SEC order permanently barring him from the securities industry.¹⁴

The Fifth Circuit Affirms the Sentence

Banks appealed his 48-month sentence to the U.S. Court of Appeals for the Fifth Circuit, challenging both the $13.5 million loss calculation and a sentencing enhancement tied to gross receipts from a financial institution. On July 16, 2018, the Fifth Circuit affirmed in full. The Department of Justice later confirmed that the government recovered full restitution for Duncan.¹¹

Collapse of Banks’s Wine Empire

Alongside his advisory work, Banks had built a global wine and hospitality portfolio through Terroir Capital, which he founded in 2003. By 2016 the firm was managing about $200 million in assets, with holdings that included Mulderbosch and Fable Mountain in South Africa, Trinity Hill in New Zealand, Qupé and Wind Gap in California, and a stake in Mayacamas Vineyards in Napa co-owned with the Schottenstein family.¹⁵¹

The felony conviction unwound most of it. Because the crime involved moral turpitude, Banks’s ability to hold California liquor licenses was in jeopardy, and as a convicted felon he was effectively required to divest his control of winery properties.¹⁶ He stepped down as CEO of Terroir Capital soon after his plea, replaced by former COO Kevin McGee.¹⁷

The Schottensteins sued in Napa County Superior Court to force Banks out of Mayacamas, arguing his felony put the winery’s state and federal permits at risk. In August 2017, the case ended with a confidential, court-approved agreement under which Banks transferred his shares and resigned. Proceeds from the share transfer were earmarked for his $7.5 million restitution obligation.¹⁸ Banks also resigned as a director of Trinity Hill in New Zealand, where the Overseas Investment Office had opened an inquiry into whether he remained “of good character” after his conviction.¹⁶ Terroir went on to sell Mulderbosch to California-based Third Leaf Wines at the end of 2018 and sold the Qupé brand to Vintage Wine Estates.¹⁹

Kevin Garnett’s Separate Claims

Duncan wasn’t the only former Banks client to come forward. Kevin Garnett, who had also been a client during Banks’s CSI years, later alleged that Banks “intentionally and continuously looted” his earnings and assets over many years, using the money for personal expenses including mortgages, private jets, and personal investments.²⁰ Garnett filed a $77 million federal malpractice suit in Minneapolis against his former accountant Michael Wertheim and Welenken CPAs, alleging they knew about Banks’s theft and failed to act, and separately sued Banks through Hammer Holdings LLC in a sealed arbitration in Hennepin County, Minnesota.²¹ Garnett had initially supported Banks during the Duncan proceedings; that support ended once he looked more closely at his own records.

1
North Bay Biz. The Curious Case of Charles Augustus Banks IV
2
SEC. SEC Complaint, Securities and Exchange Commission v. Charles A. Banks, IV
3
San Antonio Express-News. Feds Charge and Sue Tim Duncan’s Former Adviser
4
MySanAntonio. Tim Duncan Claims Adviser Duped Him Into Investments
5
Wine Spectator. Wine Executive Charles Banks Expected to Plead Guilty
6
SEC. SEC Litigation Release No. 23642
7
FindLaw. United States v. Banks, No. 17-50654
8
San Antonio Express-News. Tim Duncan Claims Adviser Duped Him Into Pouring Money Into Investments
9
Fox Sports. Tim Duncan Ex-Financial Advisor Indicted on Fraud Charges
10
KSAT. Tim Duncan’s Ex-Financial Adviser Sentenced to 4 Years in Wire Fraud Case
11
U.S. Department of Justice. Fifth Circuit Court of Appeals Upholds 4-Year Prison Term for Gameday Entertainment Chairman
12
Courthouse News Service. Tim Duncan’s Adviser Gets 4 Years for Fraud
13
NBA.com. Tim Duncan Settles Lawsuit Against Ex-Financial Adviser
14
SEC. SEC Litigation Release No. 23879
15
Forbes. Charles Banks Interview, Terroir Capital, Screaming Eagle
16
Wine Business. Charles Banks Wine Business Divestiture
17
Wine Enthusiast. Terroir Capital’s Charles Banks Likely Out of Wine Business for Good
18
Wine Spectator. Former Wine Executive Charles Banks Enters Federal Prison
19
Wine Spectator. California Wine Investment Firm Buys South Africa’s Mulderbosch
20
ESPN. Kevin Garnett Sues Accountant Over Lost Wealth
21
Financial Planning. NBA’s Kevin Garnett Sues Charles Banks