A jury in Manhattan sided with Bill Koch in his lawsuit over 24 counterfeit wines. The collector extraordinaire and energy magnate had sued Eric Greenberg, a wine collector who at one point had a cellar of 70,000 bottles, for selling him the counterfeit bottles. The jury awarded Koch $379,000 in damages to cover the fraudulent bottles and will reconvene this morning to see consider punitive damages.
Bloomberg has the full story including some of Koch’s comments after the trial:
“I absolutely can’t stand to be cheated. Now we got one faker so we’re marching down our hit list of fakers. This is just a start.”
“Millions if not tens or hundreds of millions of counterfeit wines are sold every year. The counterfeiters don’t want anyone to know, for $100 they make it and mark it up to $15,000, I myself paid $100,000 for a counterfeit wine. To me the whole industry is corrupt.”
“What Greenberg did was treat me and Zachys the way you treat mushrooms–kept in the dark and fed manure.”
“I’m thirsty, I want a glass of wine,” Koch said before repairing to restaurant Daniel. “And if it’s not a good bottle, I’m going to sue them.”
The Justice Department filed some photos in their wine counterfeiting case against Rudy Kurniawan. Don Cornwell, a collector and attorney who has been actively following the goings-on, posts the six pictures that the government filed in their latest brief to rebuff Kurniawan’s claim that they entered his house illegally.
While the stacks of boxes, packed and ready to go in the front hall is pretty damning (would love to know where they were headed), there’s got to be a metaphor in the 17 unlabeled bottles lying on the treadmill. They just keep going around and around…
The S&P 500 and gold have outperformed fine wine as an investment over the past few months. But the correlation is most notable between wine and the Shanghai composite as the above chart and article from Bloomberg shows. Since the April 18, 2011 high in Shanghai, wine and Chinese stocks have moved down in tandem, a glaring correlation.
This gives further evidence to our previous question of whether the specter of fraud is casting a pall on the fine wine market: it seems China is such a big driver of fine wine prices, that fraud (specifically, the apprehension of Rudy Kurniawan) has little effect.
So…why not stop treating wine like an asset class, actually pull a few corks, and trade the Shanghai composite instead if you want similar returns to wine? (Or, US stocks or gold for the best return, in hindsight.)
Don Cornwell, an attorney and wine collector, posted an admonition earlier this year not to bid on wines he considered fake wines form Rudy Kurniawan. That spawned an enormous and on-going comment thread over on wineberskers about wine counterfeiting. The thread has heated up in the last week or so Don is back with some new details.
A key part of Kurniawan’s undoing may have been bidding on a ’47 Ponsot Clos St. Denis that he thought was from Domaine Ponsot but was actually from the unrelated Christine Ponsot. Cornwell posts the actual listing in the 2004 Acker, Merrall Catalogue, showing it simply as “Ponsot,” adding, “it makes you wonder if [auctioneer] John Kapon ever really looked at the bottle in question.” Cornwell points out that Kurniawan engaged in a bidding war with another collector, who also may have thought it was a Domaine Ponsot bottling.
Then Cornwell publishes excerpts from sealed depositions, now public, from Bill Koch’s suit against Eric Greenberg. It’s confusing but Greenberg got into wine in a big way, quickly amassing a wine collection of over 60,000 bottles. And then just a few years later, for “health-related reasons,” he whittled the cellar down to a mere 20,000 – 30,000 bottles. In his acquisition spree, he apparently picked up some dodgy bottles from Hardy Rodenstock (see extensive backgrounder). And Koch bought some of those at auction, which was the basis for his suing Greenberg (Koch had previously won a default judgment against Rodenstock; the suit against Greenberg is still pending).
A couple of remarks stand out from the sealed court proceedings: one witness testified that “[Greenberg] said if he had counterfeit wine, he could always sell it through Acker Merrall because John Kapon would take anything.” Also, there was a death threat!
There, now you have your dose of wine counterfeiting news for the week. And more fodder for your screenplay.
Mike Steinberger writes a nuanced, 5,000-word piece on Rudy Kurniawan and wine counterfeiting on VanityFair.com. Although it draws some material we have discussed here previous, such as the court documents including Kurniawan’s indictment on wine and mail fraud, the piece offers insights from numerous interviews of participants involved in the multi-million dollar saga. Lots of interesting details emerge: apparently Kurniawan purchased so much “unremarkable” old Burgundy from one negociant that he “emptied [their] cellars.” Also, the complexity of Burgundy may have been what tripped him up as early in his rise in the wine world, Kurniawan appears to have confused a Christine Ponsot Clos Saint-Denis for a Domaine Ponsot (unrelated) Clos Saint-Denis that didn’t even exist. Steinberger writes “If that is what happened, it is a mistake that now has Kurniawan facing up to 80 years in a federal penitentiary.”
If you are going to looking for a long, thorough piece on the wine fraud story, check out this terrific one. What part of the story do you find the most amazing?
“A Vintage Crime” VanityFair.com
Even though Kurniawan–whose guilt or innocence on wine counterfeiting charges remains to be tried in federal court–was apprehended, wine fraud remains an easy crime: combine sky-high prices with an old collectible whose authenticity may be difficult to verify and willing buyers who may have more capital than wine know-how or may have little intention of ever opening the bottles anyway.
Wine counterfeiting has been around for decades and I’ve always been surprised that it doesn’t get priced in to the fine wine market (but wines sold directly from the producers do fetch a premium). Paul Chiu, a Burgundy fan in Hong Kong, tweeted to me the other day that there’s still surprisingly little discussion about counterfeiting there.
So, as the ArtInfo points out, the decline in the (young) Bordeaux index probably has more to do with shifting (more discriminating?) tastes to old wine and Burgundy since the broader Liv-Ex 100 has not fallen as sharply. “Lafite is out, and Conti is in.” Ack, if the auction market’s taste for Burgundy shifts into high gear, it could crush even a non-collector’s premier cru habit.
But with the Chinese economy slowing down, FT Alphaville suggests some cynics might point out that fewer wines are needed for bribes. Baksheesh aside, it will be interesting to see if, going forward, counterfeiting or the Chinese economic slowdown impacts fine wine prices more. But maybe there will be more buyers, such as the Stamford Management Group, which is raising $100 million for a fund to buy Bordeaux and jade antiques. And perhaps there will be more liquidity and lower spreads if SecondMarket really gets into wine.
New York magazine has a lengthy piece by Benjamin Wallace (author of The Billionaire’s Vinegar) on counterfeiting wine and the saga of Rudy Kurniawan. Grab a magnum of coffee and check it out.
Rudy Kurniawan, aka “Dr. Conti” aka “Mr. 47,” was indicted on four counts of counterfeiting, mail fraud and wire fraud in federal court yesterday. Mike Steinberger posted the 25-page indictment signed by US Attorney Preet Bharara to his blog.
The indictment largely covers the same ground as the documents filed when Kurniawan was apprehended in his home in L.A. in March. It fails to name the auction house where Kurniawan was the consignor of wines in 2008 where Laurent Ponsot dramatically stopped the sale in the room even though it has been widely reported. Nor does it mention the London auction house where he allegedly sold fraudulent bottles through a front man even though it was widely discussed. The front man’s identity at that auction is not revealed; the New York City restaurant that shipped empty bottles to his home remains anonymous and several collectors are mentioned but not named. Further, the “relatively recent” California wines that were to indicated to pass off as older Bordeaux and Burgundy have not been named. So there are still some gaps to the story. But details will emerge as the legal proceedings continue; also, two articles in major, non-wine magazines are in the works.
The case is U.S. v. Kurniawan, 12-MAG-606, U.S. District Court, Southern District of New York.