FOPPIANO HEIRS IN BITTER FIGHT OVER WINERY'S FUTURE:IN LAWSUIT, SISTER ACCUSES BROTHER OF MISUSING ASSETS, SEEKS HIS OUSTER FROM ROLE OF OVERSEEING FAMILY TRUST

Heirs to one of California's oldest wine families are battling for control in a bitter power struggle that recalls the epic clashes among the Mondavis and Sebastianis.

Louis M. Foppiano, 64, chairman of his family's 115-year-old winery and vineyards in Healdsburg, is being sued by his sister, Susan Valera, 59, who alleges her brother threatened the health of the family trust by using it to make a series of loans to the company, in part for executive bonuses.

In a trial opening Tuesday before Superior Court Judge Mark Tansil, Valera will ask that Foppiano be stripped of his title of co-trustee, leaving her sole overseer of undisclosed assets that could be vital to future company financing.

Legal papers filed over the past nine months reveal a family business in turmoil, beset by plummeting sales and mounting debt. They detail bickering over spousal meddling, over whether to sell the family business and over the elimination of Valera's winery job after 24 years. During that time she served in a number of roles, including hospitality director.

It's a sibling rivalry to match the fisticuffs of the storied Mondavi brothers or the intrigue of the Sebastianis, industry insiders said.

While the Foppianos can't match those families in profile or star quality, they are proving to be equals in intensity.

"Italian families live operatically," said Bo Simons, head of the Sonoma County Wine Library in Healdsburg. "I know it's a gross generalization, but it seems some go crazy about things. They have huge fights."

Both sides were in court Friday to confirm the trial. Valera declined to comment outside the hearing. Her brother's lawyer, Mike Senneff, said efforts to resolve the lawsuit amicably have failed.

"We're locked into this," Senneff said. "It's really unfortunate."

The winery dates to 1896 with its founding by Giovanni Foppiano. The business was passed to his son, Louis J. Foppiano, who ran it until handing it over to his son, Louis M. Foppiano, eight years ago.

The father, who turned 101 in November, created a trust that controls 49 percent of Foppiano Corporations, which includes the winery and vineyards. In 2009, he relinquished his rights, naming his son and daughter as co-trustees. Valera said since her brother took over business operations in 2005, finances deteriorated dramatically. In part because of the economic downturn, the company went from selling nearly 100,000 cases a year to fewer than 20,000 cases. And for the first time ever, it took on debt.

A consultant in 2008 recommended changes to make the company more profitable. Todd Arterburn took over operations from Louis M. Foppiano, who remains the public face of the company. Improvements were suggested for the tasting room and grounds, and a new marketing plan was developed.

To finance it all, Foppiano took loans, first from the family trust and later from the bank, secured by the trust. In two years, he created $4.1 million in debt, Valera alleges.

One of the loans required a signature from the aging father, which Valera alleges her brother forged. Both sides hired handwriting experts to analyze the document.

Valera said in court documents she was misled by her brother into going along with the borrowing because he insisted the company couldn't meet payroll and was on the brink of closure.

About that time, she said, she learned her brother and Arterburn had used some of the money to give themselves "sizable bonuses."

Valera said she began looking more closely at the corporation's finances, but her brother and Arterburn blocked her.

Instead of turning over records she requested, Arterburn fired her and four other employees, she said. Her brother also threatened to sell company property where she had lived for 25 years, she said.

"By taking away petitioner's income and health benefits, Louis M. has attempted to quiet her through economic coercion," Valera's lawyer said in court papers.

Foppiano disagrees. He said in court documents that he decided to "revitalize" the brand with a series of improvements when he took over from his father, who had been reluctant to make investments in the winery for many years.

With the support of family members, including Valera, he hired the consultant who suggested sweeping changes. He brought in Arterburn, a professional manager, and began capital projects that were estimated to require $2.5 million in loans.

Temporary "bridge loans" were needed, so Foppiano turned to the trust. He paid the trust back after getting a larger loan from Summit State bank, he said.

At the same time, the wine industry was suffering record losses because of the economy and severe weather. Revenue was 35 percent less than expected in 2009-2010, he said.

His lawyer said turning a company around is a slow process. "I've heard it described as turning a tanker in an ocean," he said. "You don't just do it on a dime."

Valera and her husband, Tony, were impatient, according to the documents. They began demanding financial records, which Foppiano said he gave them. Tension between brother and sister grew, and family lawyers tried to intervene.

According to the lawsuit, Valera lashed out at her brother and his wife, saying in an email that the family should "just sell the winery so we can all go out with a little dignity and have the same opportunity that you (Louis) have had."

She said her father "told me and Tony to get rid of you over a year ago," according to Foppiano's papers.

To remedy the situation, Foppiano offered to buy out his sister but she walked away from the bargaining table, he said.

Then in January, after Valera's position was eliminated as a cost-cutting measure, Foppiano said, his sister asked to borrow $150,000 from the trust, which she used to hire a lawyer and sue him.

Foppiano denied any coercion connected to earlier loans. He said only corporation money was used for payroll, including year-end bonuses that were shared by Valera.

Foppiano has asked to remain a trustee. If he's removed, it's unclear if his position in the company would be in jeopardy. But such a change would hand the company's purse strings to his sister.

The trial is expected to last up to five days. A total of 15 witnesses will testify, including Valera, Louis M. Foppiano and numerous other family members.

There is no jury. The judge will decide the case.

Simons, the county wine library director, said the winery's image remains strong despite the spectacle of the lawsuit, but described the losses mentioned in it as significant. Simons said it's not unusual for heirs to slug it out. Robert and Peter Mondavi famously came to blows before going their own ways in the 1970s. The Sebastianis quarreled when brother Sam tried to reshape the family business. He was ousted in a coup led by his brother and mother.

"Usually they wait until there is an estate to divide it," Simons said. "Trying to do it in trust is heartbreaking."

You can reach Staff Writer

Paul Payne at 568-5312 or paul.payne@presdemocrat.com.