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How Did 'Rare' Wine Dealer Make Millions from His Fakes?

How Did 'Rare' Wine Dealer Make Millions from His Fakes?

Rudy Kurniawan made millions of dollars by selling wine that he mixed together at home and sold as rare vintages

Rudy Kurniawan, a renowned wine dealer who specialized in rare wines, was sentenced on Thursday, August 8 to serve jail time for defrauding his clients out of millions of dollars.

Kurniawan, whose clients included some of the wealthiest people in the country, had been selling “old bottles of wine mixed together,” for which he spent several years creating fake labels, reports The New York Times.

Along with prison time, Kurniawan was ordered to pay more than $28 million in restitution to his victims, who include billionaire William Koch, Univision CEO Andrew Hobson, and Quest Software founder David Doyle.

At his sentencing on Thursday, Kurniawan’s lawyer told the court that his client had gotten in over his head and that “Rudy wanted to be accepted and recognized” by his peers.

For the latest food and drink updates, visit our Food News page.

Karen Lo is an associate editor at The Daily Meal. Follow her on Twitter @appleplexy.


Counterfeit Fine-Wine Dealer Sentenced to 10 Years

Rudy Kurniawan stands before U.S. District Judge Richard Berman during his sentencing Thursday in this courtroom sketch.

Sean Gardiner

A wine swindler was sentenced to 10 years in prison Thursday for what prosecutors called a "grand con" involving more than $20 million of counterfeit rare vintages sold to wealthy oenophiles.

Rudy Kurniawan, 37 years old, was once one of the world's most prolific wine collectors. He displayed no outward emotion as U.S. District Judge Richard Berman called his crimes "a bold, grandiose, unscrupulous but destined-to-fail con" in federal court in Manhattan.

"Just want to say I'm really sorry," Mr. Kurniawan said before the sentence was read. His lawyer, Jerome Mooney, said he "almost certainly" will appeal.

Mr. Kurniawan was convicted in December of two counts of mail fraud. He has been jailed since his arrest 2½ years ago and that time will be reduced from his term. He was also ordered to pay $28.4 million in restitution to his seven victims and forfeit an additional $20 million as punishment.

Related

Three bottles of wine used as evidence at the trial.

Outside the courtroom, Mr. Mooney said he was shocked by the judge's sentence, saying he has represented people convicted of violent offenses who received less time. Mr. Mooney had hoped his client would get five or six years.

At the hearing, Mr. Mooney argued that all of Mr. Kurniawan's victims were wealthy wine enthusiasts whose lifestyles weren't affected by his misdeeds.

One victim, he said, spent more than $231,000 on a single bottle.

"I don't want to think what that translates to per sip," the attorney told Judge Berman. "There shouldn't be a bottle of wine that is three times what people make in a year. It completely misrepresents the harm of what was done. Nobody died. Nobody lost their savings."

Mr. Mooney told the judge that Mr. Kurniawan has already "lost what's most important, which is his reputation."

The judge asked about Mr. Kurniawan's motivation. Mr. Mooney said his client comes from a wealthy family and didn't sell the counterfeit wines for greed. Rather, he wanted to be respected by a group of rich wine lovers.

Over time, the collectors fronted Mr. Kurniawan money so he could find rare vintages, gaining their friendship in the process. "He started to make up these wines because he couldn't find them," Mr. Mooney said.

Rudy Kurniawan in March 2005

Industrialist William Koch, a noted wine collector, testified at the criminal trial. Mr. Koch also sued Mr. Kurniawan in civil court, alleging he was sold more than $2 million in counterfeit wine. Mr. Koch, who couldn't be reached for comment Thursday, settled the civil suit in July, the judge said.

Prosecutor Stanley Okula said the law makes no allowance to reduce a sentence because the victims are wealthy.

"Your honor, fraud is fraud," he said.

Mr. Okula said if Mr. Kurniawan craved acceptance from oenophiles, "he could have fit in by bringing his bottles, his bogus bottles, to their dinners. But he did it for money."

Mr. Okula estimated that for eight years Mr. Kurniawan sold or attempted to sell close to $50 million worth of counterfeit wine he purported to be extremely rare. According to the criminal complaint, between 2006 and 2011, Mr. Kurniawan spent more than $16 million on his American Express card on clothing, travel and wine.

"Did he need the Lamborghini just to fit in," Mr. Okula said.

Ink stamps used to mark corks that were used as evidence in the trial.

Mr. Kurniawan moved from Indonesia to California at the age of 16 on a student visa, the judge said, adding that he remained in the U.S. illegally. He lives in Los Angeles with his 66-year-old mother, who isn't in good health, his lawyers said.

Using his family's wealth, Mr. Kurniawan became a well-known dealer in the wine world after spending $1 million a month on rare vintages for several years. In 2006, Mr. Kurniawan sold part of his collection at auction for $36 million.

By then, however, suspicions about some of the wines Mr. Kurniawan was selling started to circulate in the wine-collector world. For instance, the labels on some of Mr. Kurniawan's bottles claimed to be produced between 1959 and 1971 included an accent mark that wine collectors later learned wasn't on the genuine bottles until 1976.

According to the criminal complaint, Mr. Kurniawan used his sophisticated palate to mix and blend lower-price wines so they mimicked the taste, color and character of rare and expensive wines.

He then poured the mixtures into empty bottles of rare and expensive wines he got from restaurants and other sources and affixed counterfeit wine labels he had created.

"The public at large needs to know that our food and drink are safe and can trust what's on the label," the judge said, "and not some homemade and potentially unsafe witch's brew."

Write to Sean Gardiner at [email protected]

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Wine Fraud

There is nothing new about wine fraud. Thomas Jefferson knew the risk he made sure his Bordeaux was bottled and sealed at the chateau. Pirates, Crusaders and traders mixed wine and treasure scams. The quote above—really a parable about wisdom—is from a Jewish text of the third century C.E. “Even in biblical times there were good and bad wines. Looking at the flask may be misleading,” says Rabbi Aaron Panken of Hebrew Union College – Jewish Institute of Religion. So let’s bring out more sage advice: if it seems too good to be true, it probably is. For some unknown reason, says Jim Budd of investdrinks. org, people who wouldn’t fall for a �” Nigeria scam in a million years will throw caution to the wind when a bargain or sight-unseen vintage Bordeaux is offered.

What is wine fraud? Obviously, it’s when the juice in the bottle you purchase is not what’s indicated on the label. It doesn’t have to be expensive but it is probably a “deal.” It may be through a broker, a retailer, online or at auction, or it may be a tip from an acquaintance. It may not even be actual wine but shares in a wine investment intended for resale. Most often involved are premium hard-to-get wines, rare wines and old vintages.You might be a newbie looking to resell a bottle for a tidy profit or a savvy wine investor who’s been buying wine futures and rare wines by the case at auction for 20 years. Take comfort: even reputable auction houses are being defrauded. The Colorado indictment and conviction of Ronald Wallace of Rare LLC says it all when it comes to wine investment fraud. According to court documents, Wallace took in $11 million by “purporting to sell older bottled wines that he did not own, by purporting to sell wine futures he did not own, and by diverting and misusing money that his clients had entrusted to him.” In all, he swindled 600 investors, including company owners, Hollywood stars and Seattle high tech geniuses who took their dotcom bonanzas and tried to do the same with wine. Wallace was ordered to pay restitution and sentenced to two years house arrest.

Nobody quite knows how big the wine fraud market is. Wine Enthusiast interviewed retailers, members of the wine trade and law enforcement, eBay merchants and government fraud trackers in several countries. Global figures can’t be estimated with any authority. The United States Department of Justice doesn’t keep statistics by product. Court cases and customs seizures only count for what is captured.

If you buy mid-range to top-end wines from a reputable fine wine dealer, it is highly likely that the wine is exactly what it says it is, though there are no actual U.S. figures for this. In the European Union, the estimate is that between 1% and 9% of bottles sold are counterfeit—for all alcoholic beverages. “If you’re looking at Lafite, Latour and Margaux, you really need to do a lot of research. You are talking about alternative investment, not regular stock. Is it stored properly? There’s a lot that could happen,” says Samir Bhavnani who runs gottannins.com from San Diego.

Fraud experts say that whenever you buy wine and don’t know the seller or the origin, you are taking a risk. It applies whether it is by-the-bottle online, at an auction house in New York, Chicago, London or Hong Kong, or if you succumb to pressure from a cold caller. Doctors are frequent targets because they generally have high incomes, they are easy to identify (their titles are included on databases) and they tend to overestimate their savvy in wine and investments.

It is often repeated: “If you lose money on wine,” Money magazine pointed out in its sober March 2007 analysis of wine in an investment portfolio, “at least you can drink it.”

What the story didn’t mention is that to drink it, you have to have the bottle in your hand.

Investing in fraud
Are you a target for wine investment fraud? Answer these questions: Do you have an American phone number? Are you passionate about wine? Do you blog or post comments on wine forums? Are you a doctor If the answer is yes to at least two questions, then you could be a target, according to our investigation.

The sales pitch can be persuasive the temptations for wine devotees can be strong. Here is a
sampling of recollections by people we spoke to who believe they were defrauded. Their names will not be used, and some comments were slightly changed to protect identities.
· “I was told they purchase wines for their clients directly from the chateaus, since their owner has a longstanding relationship with the Bordeaux chateaus.”
· “I can buy Mouton or Margaux at first release price, he assured me.”
· “She called me at the office and I wasn’t able to find out how they got my name, but she said that someone had referred me. She wouldn’t say who.”
· “I was told I would receive 100% profit in three months.”
· “I bought a ‘position’ and then asked him to sell and was told I owed around $10,000.”
· “I received a document that stated that I owned a position on 12 cases. But instead of all first growths, there were only three.”
· “I was told the value was $30,000 but when I checked the prices in London, I could have bought the same wine for $13,000 less.”
· “If I don’t make the installment payments, I lose the entire investment, I guess.”

How typical is this? Very. The boiler room pitch and pressure will change depending on your interest, perceived wealth, and ability to hang up the phone. You may be told the company has “connections” with Bordeaux chateaux and will arrange private tours there. You will be told the wine is in bond, insured, and there is no tax on profits.

No tax on profits? Well, if no profits, no tax. And, in all likelihood, you, the investor, do not own those cases of Latour in a secret cellar in bond in London. If they were bought, the company owns them.

There are variations on these scenarios. Some can start as a genuine investment with a reputable dealer. Then, the dealer runs into trouble because someone didn’t pay and the chain breaks down.

“If you have the option of investing through funds or actual wine itself, argue for the latter,” says Steve Bachmann, a former investment banker who launched Vinfolio in 2003. “How do you determine if they are credible or not? I don’t know how you do that.” Bachmann strongly endorses transparency and knowing your retailer, whether on the street or online.

The Claret web
It wasn’t wine but whisky that may have started the current drinks investment fraud cycle. The first widely reported whisky investment fraud, in 1993, netted some $90 million. By 1998 a raft of Bordeaux investment schemes were popping up, and changing names as fast as directors could drain one bank account and open another off-shore. Americans became targets and lost millions through 2003. The boiler-room frauds appeared to take a break, but wine collectors are reporting that a new round of wine investment schemes began again this year. Some in the wine trade predict this will continue into 2009.

Wine investment fraud is potentially a high-pay, low-risk business. As fraudsters know, cross-border lawsuits take forever, cost more than the wine investment lost and, even with a conviction, rarely result in restitution. Crafty investment scam artists tend to target wine lovers using the phone and mail—both methods are significantly less likely to result in a complaint, according to the 2007 analysis by the Federal Trade Commission.

How serious is it? If it’s your money, very. An English High Court just sentenced two men to jail in a $152 million scam known by various names, including Hallmark Partnership, that followed the tried-and-true route: one case of wine at a good price that rolls over to shares that rolls over to equity that rolls over to…nothing. The company goes bankrupt or simply disappears. Most of those millions came from Americans. The time from the first calls in 1995 to conviction: 11 years. American doctors were sucked into another Cayman Island-UK investment debacle, known as Architects of Wine they were left at least $20 million short and with no wine. (See investdrinks.org for other examples).

Directors and company names appear to move around regularly in what Budd calls the “Claret web.” Of course, not all are based offshore or cross borders. In the last year, scams in Colorado and Hawaii were either shut down or the fraudster was convicted.

Label lawlessness
Fraud sometimes grabs headlines when a well-known connoisseur says a rare wine sold at auction is fake. But most bottle fraud is at a much lower level. A wine collector told Wine Enthusiast about the manager of a liquor store in Los Angeles who could satisfy any need. Need a Margaux? What vintage? We don’t have it, but come back tomorrow and you will have it. What was produced the next day was a bottle of fresh new wine with a recently printed facsimile of an old label.

There are dozens of stories from around the world that involve the relabeling trick it inspired the joke that there is more Château Pétrus in Las Vegas than was ever made. Château Lafite Rothschild is the Asian star in the Bordeaux first growth crown both are constantly under counterfeit attack.

“The easiest bang for the buck is to counterfeit anything pre-1945 Bordeaux, no radioactive elements,” says Kasey Carpenter, who writes the investment column, the Wine Mogul, for classicwines.com. He has been in the wine trade and brokered cellars for insurance companies. “There are sloppy examples and really good examples. Some stuff is clearly Mickey Mouse—Photoshop and color printer going to town. And sometimes something didn’t seem right but I couldn’t put my finger on it. There’s lots of goofy stuff out there.”

Buyers themselves are driving the counterfeit market. “Guys made millions and billions and they lose their heads when it comes to wine,” says Carpenter.

The auction hammer
Serena Sutcliffe, head of Sotheby’s international wine department, says the fraud problems at auctions are most prevalent in Asia and the United States. “So much of the wine that is fraudulent is turning up at auction in the States,” she says “And now, the Europeans are getting involved because they’ve seen how much money can be got out of faking bottles.”

“When we are selling wine, we do not always know where the bottles have come from,” says Sotheby’s Senior Director Stephen Mould. “Maybe the owner has died, the widow doesn’t have all the original invoices. In these cases, one goes on gut instinct,” But, he stresses, if you are buying to sell, provenance is critical. “It’s pure naiveté for people who do buy wine and don’t check.”

Austrian Werner Feldner, who reports on the Wine and Auction Watchlist of wien-plus.de and runs winecollect. eu, says several auction scams seem to float around from one eBay website to another of a different language. One scam sold � Mouton Rothschild-original box.” After high and successful bids, it turned out the sale was just the box, no wine.

Feldner says that a common trick is for a bidder to be immediately contacted by the seller, outside normal eBay channels, with the same wine in larger quantities. The seller takes the credit card and the buyer never gets the wine and may find other charges on the card shortly thereafter. (If you see something fraudulent, contact eBay security they do take action but often are not as fast as the fraudsters. A spokeswoman for eBay’s corporate office said they did not have any figures but that the problem did not seem to be great.) Feldner says he has seen an increase in counterfeit single bottles in recent months. He monitors, investigates and reports potential eBay wine fraud daily.

Feldner advises potential bidders to watch out for accounts that are open for no more than three days. Another ploy by fraudsters is to sell small items on the account, get good feedback and then put something up like a 1990 Pétrus in a magnum. “Think about it. It would be like buying Pétrus in a drug store!” he says. Ebay itself advises participants not to transfer money if the eBay account owner and bank account owner are not identical.

A grand jury investigation involving auction wine sales has been ongoing for nearly two years, according to people have been subpoenaed and news reports. A Department of Justice spokeswoman would not confirm or deny the investigation.

Charity
So a person finds himself with a fraudulent case or bottles. Other than suing, how else can a newly minted unscrupulous character dump a fraudulent wine and still get a return?

A French couple who received bad wine with a fake label from an online purchase started their own online fraudulent wine sales. They were charged and convicted earlier this year but asked the judge to be lenient—they said they had used good wine in the fake Côtes du Rhone.

A small but worrisome outlet among those who have been stung, however, is the charity auctions. “Last year I was auctioning for a charity and was presented with photos of wines,” says Sotheby’s Mould. “I rejected the [wines for auction].Whether it was being done knowingly or not…” he muses. “A collector may know it’s a fake or think it’s a fake but may have an auctioneer who is not a wine expert and would never know.”

Mike Haney agrees. He runs l’Été du Vin, Nashville’s July charity auction, the premier international lot charity auction in the United States. He says that new auctions run by people with little experience can result in both charity and buyer getting burned. “I worry that 2009 will be the year it really hits. We haven’t had problems so far,” Haney continues, “but we get most of our wines directly from the wineries. Experts check others. And collectors we deal with would be horrified if they gave me a bad bottle.”

Even with a charity, it is buyer beware.

Solutions and resolutions
What are your options if you come face-to-face with a fake in the cellar? Bill Koch, who bought four Thomas Jefferson bottles he now believes are bogus (the subject of Benjamin Wallace’s The Billionaire’s Vinegar), could afford to spend a lot more money. He hired experts, took bottles around the world for tests, chased the suspected fraudster and sued. Massachusetts collector Russell Frye, who disovered some of his rare bottles were fraudulent, also sued and settled, but took another route, too: he created wineauthentication. com, a subscription service through which buyers can check their wines. Frye has invited wineries to participate but so far none have.

Trying to crack the counterfeit wine circuit is like playing “Whac-A-Mole,” says Joseph Potenza, an intellectual property lawyer with Banner & Witcoff in Washington D.C. “It pops up here and pops up there. Technology would be a way to turn off the game.”

Technology is racing to keep up. Carpenter and Haney think it is not the buyer’s responsibility, but the industry’s. Until then, Haney believes it will just get worse.

Since 2000, the Bordelais have put on a full-court press against fraud. Most wineries now use engraved bottles and apply techniques on labels such as holograms and watermarks. The capsules are impregnable without total removal so no new cheap wine is siphoned into the bottle. First-growth cartons are now bound by metal strips and sealed.

However, Sylvie Cazes-Régimbeau, president of the Bordeaux Union des Grands Crus, admitted there is no way of guaranteeing old wine is what it is supposed to be since it has passed through so many hands after leaving the chateau.

While some wineries in Napa Valley use anti-counterfeit technology, fraud is not a big issue there, says Terry Hall of the Napa Valley Vintners Association.

Historically, fakes and forgeries have been part of the insurance black hole known as “moral hazard.” But a tiny breakthrough may be on the horizon. Fireman’s Fund has just created a “provenance” policy for for fine art, a first in the insurance world.

“If you become aware you might have a fake or forgery we provide funds to explore the authenticity and to do
provenance research, contact experts and do scientific testing,” said Theresa Lawless, director of fine arts and collectibles for Fireman’s Fund Insurance Co. Lawless said it may be extended to wine. It still
doesn’t cover how you get the money back but does help create a case.

Experts and collectors recommend policies protecting against fire, theft, power outage as well as normal hazards of wine, like dropping the bottle. Warning: Lawless said adjustors would not look kindly on using breakage as a way to get rid of a counterfeit bottle.

Is there insurance for making a stupid purchase? “No,” says Lawless.

And are there repercussions to the winery for repeated attempts at fraud? Of course, but….when Italy’s Sassicaia and Tenuta San Guido were counterfeited in a notorious incident, a Saint-Emilion winemaker who hadn’t yet had the experience wryly noted, “My wine must not be famous enough yet. I’d better raise my price.”


Grapes of wrath: When $390 million worth of rare wine was set on fire

IT WAS a spiteful act that cost $390 million. What drove this 136kg man to torch some of the most precious booze?

On the day that wine counterfeiter Rudy Kurniawan is sentenced, we'll take a look at ways for wine lovers on distinguishing fakes from the real deal. MarketWatch's Priya Anand.

On the day that wine counterfeiter Rudy Kurniawan is sentenced, we'll take a look at ways for wine lovers on distinguishing fakes from the real deal. MarketWatch's Priya Anand joins Simon Constable on the News Hub with some helpful tips. Photo: Getty

Devastatingly simple: Ink stamps used to mark corks that were used to bottle fake wines in Kurniawan’s scam. AFP/Getty Images Source:Supplied

IT was a warm day in October 2005, and Mark Anderson, a 136-kilogram man carrying a bucket of petrol-soaked rags, was definitely up to no good.

He walked into the massive Wines Central warehouse in Vallejo, California, where some of the world’s finest wine was stacked on pallets � feet (12 metres) high stretched the length of two football fields.”

He lit the rags with a propane torch, dropped them along the pallets of wine and hauled out of there, running as fast as his massive frame would allow. By the time he was done — it took firefighters eight hours to control the blaze — he had destroyed “more than 4.5 million bottles of premium wine” worth nearly half a billion dollars on the retail market. “It was the greatest crime involving wine in history.”

But the fire, as veteran journalist Frances Dinkelspiel lays out in her new book Tangled Vines, was just the latest, nastiest blow to the industry, as wine fraud had already cast doubt on the identity of some of the supposedly finest wines in the world.

Mysteriously rich businessman Rudy Kurniawan. Now in jail, the damage he idid to the wine world is immeasurable. Photo: AP Source:Supplied

THE WINE FRAUD AND THE $350,000 MEAL

In the past decade, rare wine collecting has taken two major hits.

The first centred around a mysteriously wealthy Indonesian named Rudy Kurniawan, who was “the boy wonder of the fine-wine world,” spending as much as $AU1.4 million a month “to acquire coveted varietals.”

Kurniawan joined three wine-tasting groups — BurgWhores Deaf, Dumb, and Blind and the Royal Order of the Purple Palate — whose members included “Hollywood directors, movie producers and business managers for A-list stars. He started to meet movie stars, like Will Smith and Jackie Chan, and treat them to gourmet dinners filled with special wines.”

At one especially memorable gathering in 2004, Kurniawan and friends “went on a four-day eating and drinking binge at Cru, a restaurant just north of Washington Square in New York famous for its 150,000-bottle wine list.”

The bottles emptied that night contained what wine writer Michael Steinberger called 𠇊 murderer’s row of legendary wines,” including 𠇊 1945 Mouton Rothschild, a 1964 Romanພ-Conti, and a 1971 La Tache, wines so rare and expensive few had ever had the pleasure of drinking them.”

The bill for the meal came to $350,000, which Kurniawan paid with his American Express black card.

But while the night propelled Kurniawan into “the upper echelons of the wine world,” it ended on a strange note, as Kurniawan asked the restaurant to send the empty bottles to his home.

In 2006, Kurniawan enlisted an auction house to sell off wine from his collection, which was so spectacular that, for its first time ever, the house held an entire auction for just the one seller. Promoting Kurniawan’s collection, which included some of the rarest wines, they called it, “the greatest cellar in America.”

The auction took in $14 million, making it “the largest single-owner sale ever by an American collector,” although Kurniawan eclipsed it soon after with an auction that raised $35 million.

Two years later, though, at a similar auction, the bloom came off the rosé. Included in the bottles for sale were � bottles from three French Burgundy estates,” including a 1929 Ponsot Clos de la Roche from Domaine Ponsot. When Laurence Ponsot, the estate’s proprietor, heard about the sale, he was “immediately alarmed,” since his family only began “producing wine under its own name” in 1934.

At Ponsot’s insistence, all 97 of his bottles were pulled from the auction — about $1.4 million worth. One Kurniawan customer who got wind of the fraud was William Koch, brother of David and Charles Koch. William is an energy magnate in his own right, and owner of “one of the world’s most impressive wine collections, with 43,000 bottles scattered across his two cellars.” Koch had spent over $2.8 million on Kurniawan’s wines.

After discovering that $6.3 million worth of wine in his collection (not all Kurniawan’s) was fake, Koch became the most determined enemy wine frauds could have, spending $42 million to $56 million in the coming years to uncover frauds and bring the perpetrators to justice. He also sued Kurniawan and the auction house in 2009. In time, it was discovered that Kurniawan’s home, which he shared with his mother, was 𠇊 veritable wine-counterfeiting factory,” with bottles and fake labels everywhere. Federal agents uncovered intricate recipes for reproducing the taste of classic wines. “One recipe for a fake 1945 Mouton Rothschild called for ‘one-half 1988 Pichon Melant one-quarter oxidised Bordeaux and one-quarter Napa cab.’”

Kurniawan settled with Koch, paying him $4.2 million and agreeing to share everything he knew about wine fraud. In August 2014, he was sentenced to 10 years in prison, fined $28 million and “ordered to pay $28.4 million ($AU40 million) to seven victims.”

But the actual damage Kurniawan did to the wine world is immeasurable, as the fake wine he sold is spread throughout collections across the globe.

“Some say Kurniawan’s deceit has tainted — perhaps irreparably — the rare-wine auction market,” writes Dinkelspiel. “Global auction sales of rare and fine wines dropped 19 per cent in 2012 and another 13 per cent in 2013, and some observers believe the doubts about provenance are partially to blame.”

Devastatingly simple: Ink stamps used to mark corks that were used to bottle fake wines in Kurniawan’s scam. AFP/Getty Images Source:Supplied

Spot the fakes: Three bottles of wine used as evidence at the trial of Kurniawan. Photo: AFP/Getty Images Source:Supplied

THE 𠆌ORPULENT RAIDER’ AND THE $388 MILLION FIRE

Meanwhile, Mark Anderson was a man about town in the Sausalito area who wrote hob-nobby columns about town goings-on and sat on the boards of local organisations. He also spun wild yarns, telling people he “invented voicemail,” or “managed the rock ’n’ roll band Iron Butterfly.” He also claimed to have been an Israeli spy and that he once had lunch with Chairman Mao.

In truth, he was living off his sickly father’s savings. The move created a horrible rift between Anderson and his brother, Steven, who created a website called Corpulent Raider to call out what he saw as his brother’s predatory behaviour.

Dinkelspiel describes Anderson as 𠇊 self-taught wine connoisseur” who had a deep love of everything wine-related. “He loved wine so much,” she writes, “that he travelled regularly to Italy and France and spent much of his time eating and drinking.”

In August 1999, Anderson opened a wine-storage facility called Sausalito Cellars and the first few years saw robust business. Somewhere along the way, though, his finances took a fall, and it occurred to him that he had a large, valuable asset at his disposal: his clients’ wine collections.

Anderson began selling wine.

Over the next few years, he sold $391,725 worth of wine to one buyer and $415,302 worth to another. By 2002, his business had grown so successfully that he moved into a larger space.

By 2003, 𠇊nderson had gotten into such a rhythm . that he didn’t even try to hide his illicit dealings from his employees. Anderson would pull out a box, strip off all signs of his client’s name and then hand the boxes over to a hired cellar worker to put in a van.” He was so open about his theft that one of his employees, on the space on his time card used to designate duties, wrote, “Helped Destroy Evidence.”

Later that year, a restaurateur client going through bankruptcy, Samuel Maslak, was ready to pick up the 756 cases of wine he𠆝 stored with Anderson — worth about $900,000 — so he could sell them. When his driver arrived with a truck, though, he found just 144 cases. Anderson offered a furious Maslak a litany of excuses.

Word spread, and Anderson’s other clients began to check on their collections, only to find them largely emptied out.

His buyers stopped buying from him, but Anderson got around that by simply creating a new company under a new name and selling to the same people (who apparently weren’t well-versed in the art of background checks).

Despite the sales, business was faltering, and Anderson needed a new facility for Sausalito Cellars. He found it at Wines Central, a massive wine warehouse where he rented a 2,500-square-foot bin.

By 2004, Anderson was facing civil suits from numerous clients, and in April 2005 a SWAT team raided his home, finding 𠇊 stack of books on how to disappear.” Anderson, meanwhile, continued selling wine.

That June, the owner of Wines Central told Anderson he needed to leave the facility and have his inventory out by September. Anderson — who knew the owner before he opened the warehouse and helped him hunt for investors — considered it a betrayal. He seethed and threatened to sue.

But his biggest concern was that the law was closing in. Searching for a way out, he concluded that a fire at Wines Central would make the embezzlement charges impossible to prove, as he could always say that the missing wine had simply been misplaced and had been elsewhere in the warehouse at the time of the fire.

The prosecutor on the case later estimated that the Wines Central fire destroyed 4.5 million bottles of wine worth around $388 million. Many small wineries had most or all of their inventory at Wines Central and learned that insurance would not cover their losses, as wine in a warehouse was considered “in transit.” Many wineries also stashed their libraries — samples of every wine they ever produced — at Wines Central. The fire wiped out their histories.

Anderson was arrested in March 2007 on 19 counts, including 𠇊rson, interstate transportation of fraudulently obtained property, mail fraud, use of a fictitious name in connection with a scheme to defraud and tax evasion.” He was sentenced to 27 years in prison, and ordered to pay $98.5 million in restitution.

After the fire, when Anderson was still just a suspect, someone — most likely his brother, Steven — posted, on the website he had set up to tell the world what an awful person Mark Anderson was, speculation as to Anderson’s motives.

�ter being charged with embezzlement, Anderson set the warehouse ablaze in an attempt to destroy the evidence,” he wrote. “This is how Mark works . if he doesn’t get his way, he will wreck everything for everybody.”


The Kurniawan connection

The civil trial is being paired with a criminal one slated for later this year as having the potential to blow the lid off fraud in the fine wine sector. Last year, one of the most prominent wine dealers in America, Rudy Kurniawan, was arrested and charged as the alleged head of a counterfeit wine laboratory that had fooled the wine world for eight years. It is claimed that from his Californian home, Kurniawan – who also goes by the names of Dr Conti and Mr 47 – mixed low-priced wines to mimic the tastes of far more expensive ones.

According to his indictment, he would then pour the creations into empty bottles of rare wines procured from a restaurant in New York City, and complete the fraud by fitting the bottles with fake labels that he created using stencils and rubber stamps. The finished counterfeits would then be sold for up to $50,000 a bottle, prosecutors say.

Kurniawan's trial is expected later this year. But his name is likely crop up in the civil case that is due to commence on Monday. In legal documents, Koch's lawyers allege that in late 2003, Greenberg bought wines from the alleged counterfeiter. Greenberg's representatives accept that their client bought from Kurniawan, but say "so did many other people" and add that he did not know the purchased bottles were fake.

It has been claimed that actions like those alleged to have been conducted by Kurniawan have caused the fine wine market to be flooded with fakes in recent years. Maureen Downey, a rare-wine expert who is set to give evidence as part of the Koch civil action, said: "The media has only been aware of this in the last couple of years, but the most blatant fraud was going on in 2004 to 2009. At that point there was industry pressure to clean up. It is my belief that when the pressure ratcheted up, there was some wholesale dumping in Asia."

She added that the majority of fakes are still around, with their true price unknown to the collector. "Absolutely – most of it is still out there. I find them all the time, everywhere."

This article was amended on 27 March 2013. The original said that Bill Koch had bought wine through Christie's that purportedly came from the estate of Thomas Jefferson. In fact he bought the wine elsewhere.


The great wine fraud

T he world’s biggest wine forger started small. It was the early 2000s, and a young man who went by the name of Rudy Kurniawan began to make a name for himself on the Los Angeles scene. He had swept-back hair and a hearty laugh. More importantly, he had pockets of seemingly infinite depth, so his new friends overlooked his mysterious origins. It was said he came from a wealthy Sino-Indonesian family, living large off handouts. But nobody pressed too hard as long as the dinners – and booze – kept flowing.

Kurniawan also had a palate of rare finesse, better than most at identifying the characteristics of different vintages. Or at least, that’s what the people he fooled said. At first he was interested in Californian wines, in particular pinot noir, but soon developed a taste for Burgundy, made mainly from the same grape but far more glamorous. In Burgundy’s Byzantine system of appellations, Kurniawan sensed hard profits. He became a major player at auctions, buying – and selling –some of the 20th century’s greatest wines. He bought so much Domaine de la Romanée-Conti he became known as “Dr Conti”, which presumably later amused some of those he defrauded.

In one auction at Acker Merrall & Condit in 2006, Kurniawan sold $24.7m of wine, beating the previous record by $10m. These were the days of the first dotcom boom, when Silicon Valley had more money than sense, a combination which has always been drawn to fine wines.

Corked: foil capsules, labels and corks that were used as evidence in the trial of Rudy Kurniawan. Photograph: Stan Honda/AFP/Getty Images

In time, however, discrepancies appeared in the market. Bottles of Clos St Denis from Domaine Ponsot, of vintages between 1945 and 1971, started to turn up. Laurent Ponsot, the head of the house, found this surprising as his family only started making the wine in 1982. He set out to investigate.

Around the same time Bill Koch, an American billionaire who found fake bottles in his collection, hired private detectives and filed a lawsuit. Authentication experts saw more and more dodgy consignments emerging from these record-breaking auctions. At last the FBI got involved. In March 2012 they raided Kurniawan’s house in Arcadia, California. They found a fully equipped counterfeiting workshop, complete with corking tools, labels, empty bottles and extensive tasting notes. Kurniawan had been taking cheaper wines – though still better than you will find in your average off-licence – and putting them in more expensive bottles, or altering bottles to appear more valuable.

The most expensive wines are so rarely drunk few can claim to be expert on how they taste. On the occasions they are opened, it is usually courtesy of a generous host. It is poor guestmanship to lob aspersions on any proffered bottle, let alone one that cost as much as your car. What’s more, several scientific studies have shown that even professed experts are hardly better than chance at identifying different wines. The entire industry hangs on the word of the critic Robert Parker, whose scores are a benchmark against how wines are priced. A Princeton economist came up with an algorithm based on weather data from the grape crop’s growth period that nearly exactly mimicked Parker’s scores.

Caught red-handed: bottles being prepared att Kurniawan’s California home Photograph: pr

The feeling of being scammed will be familiar to almost anyone who has ordered wine in a restaurant: Kurniawan simply scaled it up. In 2014 he was sentenced to 10 years in a California prison, the first person to be convicted of wine fraud.

A new documentary, Sour Grapes, revisits the story. It came about after two directors met by chance at Kurniawan’s trial. Jerry Rothwell, an Englishman who had been working on a film about the founders of Greenpeace, was following Laurent Ponsot on the trail of his faked wine. Reuben Atlas, an American, was coming from the opposite view. Having read about the arrest in New York Magazine, and not being a wine buff himself, Atlas thought Kurniawan sounded like a Robin Hood figure, taking only from those who could afford to pay.

“We were always at the back of the line for interviews in court, so we ended up talking to each other a lot,” says Rothwell. “Pretty quickly we worked out that we could work together, and given the nature of the story it was helpful to have someone in Europe and someone in America. It’s like the opposite of an Agatha Christie story, where there is one detective and multiple suspects. Here there were multiple detectives.”

The tale is told through a mixture of interviews and archive footage. A film crew had followed Kurniawan for a few days early on, for a pilot of a food and wine show that was never made. These scraps let us see Kurniawan as he must have appeared to the world he conned: boyish, charming, evasive. “Can we put the cork back in the bottle,” he jokes at one point. Knowing how his story ends, it is compelling, and very funny. Like Atlas, you cheer along as he toys with his new friends. One group calls itself the Angry Men because of the way they feel when they take a good bottle to a party and find everyone else has bought plonk. At Angry Men dinners, $200,000 might be drunk in a night.

Spot the difference: three bottles of wine used as evidence in Rudy Kurniawan’s trial. The magnum dates from a time when magnums were not available Photograph: Stan Honda/AFP/Getty Images

Atlas and Rothwell tried in vain to secure an interview with Kurniawan. Once they knew they wouldn’t have time with him, the nature of the film changed. “It became a film about being conned, rather than the conman,” says Rothwell. Even then it wasn’t easy to get hold of the collectors: few want to admit they have been duped.

Ponsot was essential to Kurniawan’s unravelling. Unlike many in the wine community, he does not take himself too seriously. Above a well-kept grey and black beard, his eyes have a Gallic twinkle. He saves seriousness for the concept of Burgundy. “The fakes are like a piece of dirt on the name of Burgundy,” he says. “I wanted to wash it off.”

From the American end, the pursuit was led by Bill Koch, brother of Charles and David who run Koch Industries and are part of a vast oil and gas dynasty. With an estimated fortune of $2bn, Bill left the family firm and became a collector of sculpture, ancient Greek coins, model ships, real ships (his team won the America’s Cup in 1992) and impressionist art. Interviewed in front of a wall of Monets in his Florida mansion, he comes across like a teddy bear with a temper.

“I hate being cheated,” he says. “There’s a code of silence in the wine industry – I was not going to take it. With super-fine wines you can taste the love the vintner had in making it, and that to me is almost a religious experience. We collectors like precious things. What price can you put on love?” he says, before correcting himself. “Well, when you get divorced you can.”

“In some ways Bill had more resources than the FBI,” says Rothwell. Without Koch, the trial might never have come to pass. He hired Brad Goldstein, a private investigator who prefers beer and clearly finds the whole wine scene preposterous. Goldstein had spotted a magnum of Pétrus from 1921, a time when they made no magnums.

Those duped were almost exclusively male. These were men showing off, including Jay McInerney, the Manhattan literary enfant terrible who has mellowed into a wine critic. There is “Hollywood” Jef Levy, a red-nosed sunglass-clad producer of films you won’t have heard of. There’s a drawling suit-clad investor, swirling a glass in a taxi across town. “Buy ’06 Champagne,” he tells us. “If you can’t afford that, buy ’02. If you can’t afford that, drink fucking beer.”

It’s striking how easily those in the boys’ club were prepared to believe in the character of Kurniawan – an ingenue immigrant with plenty of cash, who wanted to be part of their gang. “Everyone in the story could play themselves in the Hollywood movie,” says Atlas. “They were all so perfectly cast: you pick up on who they are very quickly.”

The effect of the rogues’ gallery is that Kurniawan comes across as a more sympathetic figure. As with a diamond heist, you root for the plucky conman rather than the rich victims, and like any great forger, Kurniawan is a skilful artist himself. Part of the reason it took so long for the fraud to emerge is that as long as a bottle of fake wine is passed from cellar to cellar, nobody loses out. In one of those gleaming snippets of old footage, Kurniawan tells his fellow diners to beware of online auctions, where you can’t be sure of the wine’s provenance.

“When we started out I thought: ‘Here’s a guy who’s sticking it to rich people, and good on him,’” says Atlas. “But as I got to know the people involved, and understand the process of wine-making, I became less sympathetic. My perspective changed.”

Kurniawan’s was the first case of wine fraud to be successfully prosecuted in the US. But the government did not chase the paper trail back to Indonesia. There are signs he was not acting alone. Ponsot believes it would have been impossible for one man to produce so many counterfeit bottles, and also that wine fraud is a much bigger problem than has been acknowledged. In a recent interview he said he suspected 80% of the Burgundy allegedly from before 1980 is counterfeit.

“Rudy is by no means the only faker,” Rothwell agrees, pointing to the stories from France about “wine terrorism”, where a group of activists has taken to smashing up vineyards and storage facilities, partly out of fears over cheap Spanish imports.

Kurniawan’s family is tantalising, and in the far reaches of his story lie implications darker than the cellars of a few movie moguls. The investigators allege that Kurniawan’s real name is Zhen Wang Huang – “Rudy Kurniawan” is a compound of two famous Indonesian badminton players – and he was denied a US visa in 2003. The documentary traces his mother’s brothers, Hendra Rahardja and Eddy Tansil, back to an infamous bank fraud, where $800m was stolen and has not been recovered. Tansil is still at large, supposedly in China. In 2007 alone, Kurniawan wired $17m to his brothers in Hong Kong and Indonesia. And although email documentation shows Kurniawan was often desperately short of money, he still lived in a mansion and drove a Ferrari.

It’s clear that some of his friends from the wine world still don’t want to believe what Kurniawan did. Hollywood Jef slips between the past and present tenses talking about his old friend, incredulous that this could have happened. “I still don’t know whether Rudy got into wine and then saw an opportunity, or saw wine as the opportunity from the start,” says Rothwell. “Anything that depends on what people want to believe is a complex area.” When rich men want to spend money, they’ll find a way to do it, in other words. To prove the point, a market has already emerged for Kurniawan’s wines – both the unadulterated bottles in his collection and also the fakes that survive.

Bad bottles: a magnum of Pétrus 1947 from the trial… only it isn’t. Photograph: Stan Honda/AFP/Getty Images

“Taste is obviously really subjective and contextual, and it’s hard to put into words,” says Rothwell. “But with wine it’s not as simple as saying it’s the emperor’s new clothes, or that this was a victimless crime. There are bigger questions of authenticity, which is why Ponsot is so important to the tale. This reaches deep into French soil and French history, and for him is quite abstract. Whether you’re into wine or not, it’s a story about human fallibility.”

Whose, though? Wine is meant to bring people together, in warmth, conversation and laughter. Beyond this we add history, mystique and science, mainly because they are fun. The spirit of wine frolics around naked it is not a suited accountant. Few drinkers, as they uncork an £8 bottle from Tesco, think in terms of investment, or the authenticity of the bottle. Rudy Kurniawan broke the law, but Dionysus would surely have chuckled.


How Atomic Particles Helped Solve A Wine Fraud Mystery

French physicist Philippe Hubert uses gamma rays to detect radioactivity in wine. "In the wine is the story of the Atomic Age," he says.

C J Walker/Courtesy of William Koch

In a laboratory, deep under a mile-high stretch of the Alps on the French-Italian border, Philippe Hubert, a physicist at the University of Bordeaux, is testing the authenticity of a bottle of wine.

"We are looking for radioactivity in the wine," says Hubert. "Most of the time the collectors send me bottles of wine because they want to know if it is fake or not."

First, Hubert takes the bottle in the hand and puts it close to a detector. After he closes the shielding, which blocks the radiation, he records the gamma rays. The level of those gamma rays emitted can often tell him something about when the wine was bottled. For example, if it was bottled before about 1945, there shouldn't be any cesium 137 — radioactive evidence of exploded nuclear bombs and the Atomic Age — in the wine.

But that's not the only way to do it. Maureen Downey, wine detective and founder of Chai Consulting wine appraisal and authentication in San Francisco, has a toolkit of items she uses to forensically examine bottles of wine — razor blades, magnifying glasses, jewelers loupes, flashlights, blue light.

"Counterfeit wines have become a much bigger problem of late," says Downey. "In the last year, I myself have written reports for about $5 million worth of fakes."

And as fraud goes up, experts are going to greater lengths than ever before to authenticate wine — the fibers of the label paper, the tiny pits in the glass, the depth of the punt in the bottom of the bottle, all hold clues. And so do the corks.

"Fraudsters put a lot of work into trying to make their corks look distressed," says Jancis Robinson, a longtime wine writer for The Financial Times. "It's important that the label look like it's been around the block a bit, so they might rub it with a bit of earth or coffee grounds."

Uncovering The Jefferson Bottles

The "Jefferson bottles" that Bill Koch paid some half a million dollars for and later discovered were fakes. CJ Walker/Courtesy of William Koch hide caption

The "Jefferson bottles" that Bill Koch paid some half a million dollars for and later discovered were fakes.

CJ Walker/Courtesy of William Koch

"There are two ways to counterfeit wine," says Patrick Radden Keefe, a staff writer at The New Yorker. "You're either messing with the bottle or you're messing with the wine itself." He wrote a story a few years ago about one of the most intriguing fakes of all: the Jefferson bottles.

The saga of the Jefferson bottles begins in 1985 at a wine auction at Christie's in London where they auctioned off a bottle of 1787 Lafite, from one of the finest vineyards in France.

"It was a very old bottle inscribed in a spindly hand with 1787, Lafite, and the letters 'Th.J,' " says Keefe. "Christie's said that evidence suggested that this bottle came from a collection of old French wines which had belonged to Thomas Jefferson."

The bottle sold for about $157,000 to the Forbes family — the most expensive bottle of wine ever sold at auction. Keefe says that when Malcolm Forbes was told he'd won the bid, he said, "It's more fun than the opera glasses Lincoln was holding when he was shot. And we have those, too."

After that, wine collectors began jockeying to get hold of other Jefferson bottles as they began to emerge on the market. Bill Koch, whose brothers Charles and David of Koch Industries are often referred to as the Koch brothers, is an avid collector of art, Western Americana and wine. He purchased four of the Jefferson bottles in the late 1980s for a half-million dollars.

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"When people came to visit and have wine in his capacious wine cellar at his home in Palm Beach," says Keefe, "Bill Koch would proudly show off his Jefferson bottles."

In 2005, when the Museum of Fine Arts in Boston was preparing for an exhibit of Koch's collection, it contacted the Thomas Jefferson Foundation at Monticello to verify the provenance of the wines.

"All of us at Monticello at that time were very skeptical about any connection between Jefferson and these wine bottles," says Lucia (Cinder) Stanton, a senior historian who has worked at Monticello for over 30 years.

Jefferson was the "leading wine connoisseur of the Republic, the presiding expert in French wine in this country," Stanton says. He ordered wine for George Washington, and he wrote out descriptions of the first growths and best wines in France for a number of American merchants.

He was also a meticulous record keeper who recorded every aspect of his life in detail. When he returned from France he had the wines he'd purchased for himself and President Washington carefully shipped to the U.S. According to his detailed books, they all arrived intact, she says.

"In his vast records of over 60,000 documents," says Stanton, "there was nothing that suggested Jefferson had ever ordered any of these wines. In the so-called Jefferson bottles, there were about a dozen bottles including a 1784 and a 1787 Chateaux d'Yquem, a 1787 Lafite, a Margaux. Most of them were 1787, a vintage Jefferson never ordered in his life."

When Bill Koch realized that he had potentially been crossed, he contacted Jim Elroy, a former FBI agent.

"Elroy is a kind of a genial, bloodhound of a guy," says Keefe, the reporter. The ringtone on his cellphone is the whistled theme to the Clint Eastwood cowboy film, The Good, The Bad and the Ugly. "So Koch says to Elroy: 'Saddle up.' And Elroy did."

Elroy put together a team of wine experts, including a former Scotland Yard inspector in England and a former MI5 agent in Germany, and launched an international investigation.

"I identified the perpetrator as a man named Hardy Rodenstock," says Elroy.

Bottles of vintage wine dating back to the end of the 18th century are carefully labeled and stored in the cellars of Chateau Lafite Rothschild, Bordeaux, France. Adam Woolfitt/Corbis hide caption

Hardy Rodenstock was a former music publisher who managed German pop acts. He had been a fixture on the European wine scene since the 1980s. He was well-known for hosting lavish, flamboyant wine tastings inviting celebrities, dignitaries and wine critics.

"Hardy I met quite a few times," says wine expert Jancis Robinson. "Hardy supposedly found the Jefferson bottles in a bricked-up cellar in Paris, but he couldn't give anymore details. He was never specific about exactly how many bottles there were."

The Cesium 137 Test

Jim Elroy had a hunch that the wine in the Jefferson bottles did not date back to the 18th century, but he needed a way to prove it, preferably without opening the bottle and destroying its contents.

Herve Guegan of the Nuclear Research Centre of Bordeaux runs a test on a 1944 vintage bottle of Medoc wine. Regis Duvignau/Reuters /Landov hide caption

Herve Guegan of the Nuclear Research Centre of Bordeaux runs a test on a 1944 vintage bottle of Medoc wine.

Regis Duvignau/Reuters /Landov

"I started looking in Scientific American magazine," said Elroy, "and I found an article that Philippe Hubert, a French physicist, had written about using low-level gamma ray detection for cesium 137 to date wine. Cesium 137 did not exist on this planet until we exploded the first atomic bomb."

As physicist Philippe Hubert explains: "The cesium radioactivity we find in the wines reflects exactly the history of the Atomic Age. It is radioactive isotope, which is not natural. It's a fission product. First you had the development of the nuclear bomb: Hiroshima, Nagasaki. Then in the '50s and '60s, the Cold War between the U.S. and Soviets, and the nuclear atmospheric tests. Then in 1986 — the Chernobyl accident, which released a lot of cesium activity into the atmosphere. And then Fukushima Daiichi in Japan — we are following that."

This radioactivity is everywhere on Earth — in our food, clothing, the cells of our body. "It is in the atmosphere," says Hubert. "And then with rain this radioactivity falls on the grapes. When you make the wine, this comes into the wine and stays into the wine."

Jim Elroy was confident that this was going to be the smoking gun that would prove Rodenstock guilty of fabricating the Jefferson bottles. He personally flew to the French-Italian border where Hubert was going to do the test, carrying the Jefferson bottles in bulletproof cases.

"By looking at the level of gamma rays emitted from a bottle of wine," Elroy explains, Hubert could determine when the wine was bottle. Obviously, if it was bottled before about 1945, there shouldn't be any Cesium 137 in the wine."

The experiment took place a mile underground to shield the test from the gamma rays in the atmosphere. "In order to shield the detector even further," says Elroy, "we had to use lead that was smelted prior to 1945. In this case, it was Roman lead smelted shortly after the birth of Christ."

Hubert subjected the Jefferson bottles to the test. "We don't need to open the bottles," says Hubert. "The gamma rays can escape the wine and cross the thickness of the glass without any problem."

"Unfortunately," says Hubert, "we could not detect any cesium inside the wine."

So it was certain that the wine had been bottled before the Atomic Age. But there was no way this test could prove whether or not this wine was as old as Jefferson.

Recipes And Dentistry Provide More Clues

Counterfeiting wine is nothing new. People have been doing it for centuries. "Louis XIV had a royal decree that all of the wine barrels coming from the Côtes du Rhône area had to be stamped with a CDR to prove that they were Côtes du Rhône," says wine detective Maureen Downey.

In modern times, fraudster Rudy Kurniawan, who is now in jail for creating and selling counterfeit wine, built an entire laboratory in his condo in California.

"Kurniawan's kitchen was literally a factory for making counterfeit wine," says Downey, who went through the evidence with the FBI. "He had recipes written on bottles in his kitchen. For example, his recipe for 1945 Mouton Rothschild said: one-half 1988 Pichon Melant one-quarter oxidized Bordeaux and one-quarter Napa Cab."

"You're not talking about plonk that is being put into these bottles," says Downey. "These are careful recipes. I don't know if Kurniawan was a great chef or a chemist."

And what about those Jefferson bottles? Bill Koch's investigators tracked down the people in Germany who had engraved the Jefferson bottles with Th.J. They used a modern dentist tool that could not possibly have existed in the time of Thomas Jefferson.

"One expert likens it to Abraham Lincoln holding an iPhone," says Downey. "When you've got Abraham Lincoln in a photograph holding an iPhone, we've got a problem."


How Wine Fraud Works

It's hard to feel sorry for Bill Koch. The billionaire brother of conservative political donors Charles and David Koch sold his share in the family energy business years ago and dedicated his enviable nest egg — how big of a nest do you need for $4 billion — to the aristocratic hobby of collecting rare and absurdly expensive things [source: Forbes]. His less-than-modest Florida home features original works of art by Picasso and Monet and a wine cellar containing some of the most expensive and scarce vintages in the world. It also contains several hundred bottles of "moose piss" [source: Stephens].

That's how Koch described the dubious contents of 421 bottles of counterfeit wine that he unwittingly purchased for $4.5 million over the past 25 years. The phony bottles of Chateau Lafite-Rothschild from 1961 and handblown relics reportedly owned by Thomas Jefferson were forged by enterprising wine dealers-turned-fraudsters who "aged" fake labels with coffee grounds, tampered with corks and passed off grocery-store hooch for the finest of fine wines.

One of those high-society swindlers, Rudy Kurniawan, was sentenced in 2014 to 10 years in prison and over $48 million in damages for running a wine-forging factory out of his Los Angeles apartment, corking up custom blends of inexpensive wine in reclaimed bottles and selling them for hundreds of thousands of dollars a pop to über-rich saps like Koch [source: Gardiner and Sharp].

You could argue that wine fraud is a victimless crime, since the people who "suffer" still have billions to spare. Kurniawan's defense lawyers used that very argument in a vain attempt to reduce the forger's sentence. "Nobody died. Nobody lost their savings. Nobody lost their job," they pleaded. Who cares if a handful of one-percenters get ripped off trying to impress their friends?

Wine drinkers, for one. All told, wine fraud is estimated to have cost $650 billion worldwide in counterfeiting, piracy, patent infringement and copyright theft [source: Gannon]. Those costs are built into your next bottle of cabernet sauvignon. And when wine prices are artificially high on the top end — as they were when Kurniawan sold $35 million in fake booze in 2006 — it raises prices on the low end, [source: Steinberger].

Keep reading to hear how private investigators solved the mystery of the infamous "Jefferson Bottles" and learn about the high-tech precautions wineries are taking to protect their priceless beverages from enterprising con artists.

To fake an expensive wine, you have two options: tamper with the bottle or mess with the wine inside. For the first method, you can buy bottles of perfectly good wine and plaster on the label of a much better one. Sometimes all you have to do is replace one digit of the vintage year or blur a few numbers on the aging cork.

For the second method, the bottle is legit, but the wine is fake. There is a brisk business on eBay in empty wine bottles from exceptional vintages like a 1982 Chateau Lafite-Rothschild [source: Goldstein]. Once you possess a real bottle, the trick is to mix up a convincing cocktail of quality Bordeaux and a shot or two of California red to pass the sniff-and-spit test.

Even better, many collectors view their most expensive bottles as too precious to drink. As long as the bottle passes muster, the con artist is in the clear.

Wine fraud is not an exact science like reverse engineering a $500 iPad and selling it in China as a $17 iPud. The experience of drinking wine is extraordinarily subjective and greatly influenced by the name on the label, the experienced (or inexperienced) palate of the drinker, and the price paid for the bottle.

Given the extreme subjectivity of wine, a successful wine forger must sell more than a convincing label or even an excellent tasting wine he must sell himself as an avid collector and trusted wine expert. That's the best way to create the illusion that the $10,000 bottle in your hand is not a well-packaged fraud, but the "priceless" real deal.

Successful con artists throw lavish marathon wine-tastings and Dionysian dinner parties in private rooms at the most exclusive restaurants. It's no coincidence that the most expensive bottles are often uncorked at the end of the night, when the guests are too loaded to know the difference between a 1945 Mouton and a boxed Bordeaux from Costco [source: Keefe].

Next we'll look at two of the most brazen cases of wine fraud.

In a famous 2001 experiment, a researcher in France assembled 57 experienced wine drinkers — they were French, after all — and poured them a glass of red Bordeaux from a bottled labeled as a humble house wine. A week later, he poured them the very same wine labeled as an expensive "grand cru." The house wine was dismissed as "weak" and "simple," while the grand cru was "complex" and "full" [source: Keefe]. So much for the superior French palate.

One of the most accomplished wine frauds in recent history is Rudy Kurniawan, sentenced in 2014 to 10 years in prison for his crimes. Kurniawan's exploits as a wine fraud were brilliantly chronicled in a 2012 Vanity Fair profile by Michael Steinberger.

From that article, we learn that Kurniawan came to America from Indonesia as a teenager and fell in love with wine with his first sip of the high-end California wine Opus One. Bankrolled by what he said was family wealth, Kurniawan launched an expensive wine habit in his 20s, buying millions of dollars of rare bottles at auction and splurging for elaborate parties with bar tabs in excess of $250,000.

Once Kurniawan amassed an impressive collection of rare vintages, he began selling them. At two auctions alone in 2006, Kurniawan sold thousands of bottles for $35 million, including a few bought by Bill Koch.

But Kurniawan, FBI investigators ultimately discovered, was a wine fraud of the second school: real bottles, fake wine. After his lavish wine-tasting parties, he demanded that restaurants ship him the empties. Back home, he would fill the bottles with off-label versions from the same region or concoct his own custom blends using his talented nose for detecting subtleties of flavor. Koch sued Kurniawan in 2009 for selling him counterfeit booze, but it was the fed's criminal investigation that landed him in prison for mail fraud [source: Steinberger].

The second most famous wine cheat is still at large. German collector Hardy Rodenstock, born Meinhard Goerke, was the con-man genius behind the "Jefferson Bottles," 1780s vintages of Chateau Lafite bearing the scrawled initials of famous Francophile Thomas Jefferson.

Like Kurniawan, Rodenstock cultivated a colorful reputation as a globetrotting millionaire with exceptional taste. His greatest talent, though, was finding previously undiscovered cellars containing some of the world's rarest vintages. The Jefferson Bottles, Rodenstock insisted, were discovered behind a brick wall in a Paris basement [source: Keefe]. The address, conveniently, remains a secret.

Koch and fellow billionaire Christopher Forbes bought several of the hand-blown, wax-capped Jefferson Bottles at auction for hundreds of thousands of dollars a pop.

They became the crown jewels of Koch's collection, and he solicited historians from Monticello — Jefferson's estate in Virginia — to fill in the backstory of the wine's provenance.

To Koch's severe displeasure, the Jefferson experts reported the bottles were likely counterfeit, since they never appeared in Jefferson's meticulous records. Secondly, Jefferson typically signed his name "Th:J" in letters, but the initials on the bottles were "Th.J" [source: Keefe].

To solve the mystery, Koch employed an ex-FBI agent named Jim Elroy to scour the globe for clues. What did he discover?


Berkeley rare wine store owner pleads guilty in Ponzi scheme

John Fox, 66, admitted masterminding a “massive scheme to defraud” through his store Premier Cru — taking millions from vino lovers around the world without acquiring the wine first, according to a statement Thursday from the Department of Justice. Under a plea agreement, Fox is facing 6 ½ years in federal prison.

Fox falsified purchase orders for about $20 million of wine that he never bought, and then sold that “phantom wine” to unsuspecting customers, the statement said.

In the plea deal, the Concord, Calif., resident admitted he embezzled money from the business. He spent nearly $1 million on women he met online, and also used funds to pay off personal credit cards, buy golf club memberships and purchase or lease luxury cars such as Ferraris, Corvettes, a Maserati and “various Mercedes-Benzes,” the statement said.

Fox also said he used money from newer customers’ orders to purchase wine promised to earlier customers — an arrangement compared to a Ponzi scheme by Asst. U.S. Atty. Ben Kingsley and Judge James Donato, according to the San Francisco Chronicle.

Fox co-founded Premier Cru in 1980. On its website, the company billed itself as “offering quality wines at prices lower than anyone else around.” Aside from the brick-and-mortar store, the company also dealt in wine futures — offering customers the chance to buy wines at a discount before they had even been bottled.

Premier Cru has been the subject of numerous customer complaints. Last year, several customers filed lawsuits against the company, alleging they never got the wine they had paid for, according to the Wine Spectator. In January, Premier Cru filed for bankruptcy protection it listed $70 million in debt and $7 million in assets.

On Yelp, Premier Cru’s page is riddled with irate customers complaining of waiting years for wine deliveries — if they received them at all.

“Be very careful and think twice before even engaging in business with these guys,” wrote Vick S. of Half Moon Bay. After a year, he had yet to get his order of Bordeaux, the review said, and the company never responded to questions about his order.


Wine dealer accused of fraud that drove up prices worldwide

NEW YORK — Wine expert Michael Egan eyed the six bottles of purported 1966 Montrachet sitting at the front of the courtroom. “They wouldn’t look out of place in the urology department at Mt. Sinai,” Egan said as he noted the cloudy liquid’s sickly ocher cast.

And they probably wouldn’t taste much better than a specimen, according to Egan and other aficionados who testified this week in the fraud trial of Rudy Kurniawan, a onetime boy wonder of the wine world who once enjoyed an enthusiastic following in Los Angeles for his sophisticated palate and eye-popping collection of exquisite reds and whites.

Now Kurniawan, a nebbishy-looking 37-year-old, faces 20 years in prison if convicted on charges he used a laser printer, sealing wax, ink stamps, empty bottles and old corks to perpetuate from his Arcadia home a fraud that wine experts say may have fueled a global surge in fine wine prices.

Jury deliberations begin Wednesday in the trial, whose witnesses included wine authenticators, some of the world’s preeminent French wine producers, and collectors of the most valuable vintages, including billionaire industrialist William I. Koch.

“I got conned,” Koch testified Friday. “I got cheated.” He paid $30,000 in 2005 for what was said to be a double magnum of 1947 Chateau Petrus from the Bordeaux region, a rare wine from a vintage so spectacular that prosecutors say Kurniawan adopted it as a nickname: Mr. 47.

Prosecutors said the bottle was counterfeit and a tiny portion of a massive fraud that played out in auction houses and wine cellars around the world from as early as 2004 until Kurniawan’s arrest in 2012.

In addition to doctoring bottles with fake labels to pass them off as more prized vintages, Kurniawan diluted expensive wines with far cheaper ones and re-corked them to fool buyers, Assistant U.S. Atty. Joseph Facciponti said Tuesday. Prosecutors said he sometimes sold counterfeit bottles alongside genuine rare wines to hide his fraud “so that he could dismiss as spoiled bottles or aberrations” any that were identified as fake.

Wine experts say Kurniawan’s alleged fraud was about more than a few extraordinarily wealthy people being cheated. By acquiring huge amounts of fine wine at auction, he helped fuel competition that boosted prices across the board, they say. From 2002 until 2007, when Kurniawan was at the height of his buying and selling binge — he sold $35 million worth in 2006 alone — the value of fine wine sold worldwide went from $90 million to more than $300 million, Egan testified.

“Every single person who drinks wine was affected by this because it drove all prices up,” said Maureen Downey, a sommelier and wine consultant in San Francisco who came to New York to watch the trial in federal court in Lower Manhattan. “When you raise the ceiling, you raise the floor.”

Throughout the trial, Kurniawan has sat quietly with his defense team, looking small in a gray suit and black-rimmed glasses. His attorney, Jerome Mooney, said Tuesday that Kurniawan was an insecure outsider who loved wine and wanted to be part of the sophisticated world of collectors who drink $5,000 bottles at exclusive tasting dinners.

In his closing statement, Mooney said that Kurniawan, who was born into a wealthy Indonesian family and came to Los Angeles in the 1990s on a student visa, began buying up fine wine in hopes of breaking into that world. He shared his trove with fellow wine-lovers at dinners in lavish restaurants such as Melisse in Santa Monica and Per Se in New York. Often, he picked up the check.

Mooney, who called just one defense witness, said that like all major collectors, Kurniawan sometimes was fooled into buying counterfeit wine. He then unwittingly consigned it to auction houses or sold it privately, Mooney said.

“He’s not educated enough to know the difference” between the real thing and a bottle with a fake label from a fancy vineyard, Mooney said. “He went out there wanting to be part of the club, wanting to show off.”

Mooney said materials found in Kurniawan’s home in a March 2012 raid that prosecutors say constituted a fake wine factory — including thousands of fake wine labels, empty bottles and bags of corks — were evidence merely of Kurniawan’s attempt to recondition old bottles to make them look better.

“He’s cleaning up a few bottles,” Mooney said, comparing it to scrubbing clean a valuable antique.

Kurniawan has said his love of wine began in 2001, when he was at a San Francisco restaurant for his father’s birthday. They bought a 1995 Opus One, a Napa Valley wine that at $150 was the priciest bottle on the wine list. He began acquiring expensive California wines, but soon developed a taste for those from France’s Burgundy and Bordeaux regions. He packed his collection with bottles whose labels virtually guarantee greatness: Domaine de la Romanee-Conti, Domaine Ponsot, Chateau Petrus, Chateau Lafite Rothschild, and others.

Then, prosecutors say, he began counterfeiting the world’s most expensive wines to fund his lavish lifestyle.

“This is a case about greed and lies,” Facciponti said, displaying Kurniawan’s 2007 American Express bill of $6 million, which included $208,908 for clothing at Hermes.

Among the items sought for forfeiture by prosecutors and listed in the criminal indictment are 10 Patek Philippe watches valued at $534,680, a black Lamborghini, a $17,945 Mont Blanc pen and Kurniawan’s homes in Arcadia and Bel-Air.

As Kurniawan’s wine collection grew, so did suspicion about the young collector and his habits.

Witnesses testified that he was obsessed with reclaiming empty bottles from tasting dinners and that he bought hundreds of bottles of unimpressive wine that no serious collector would want — wine that prosecutors say was used in his “witch’s brew” of fake fine wine.

One witness, wine collector Douglas Barzelay, testified that he became suspicious in 2008 when he viewed an auction catalog that included bottles from Kurniawan’s cellar, purported to be Domaine Ponsot wines from as far back as 1945.

“I wasn’t even aware they existed,” Barzelay said.

He alerted Laurent Ponsot in France, who confirmed they did not. The wine in question was first produced in 1982, Ponsot testified in court.

The wines were pulled from the auction.

In addition to the suspected wine fraud, prosecutors say Kurniawan also lied on a loan application about his immigration status by saying he had applied for permanent residence, even though he was denied asylum in 2003 and ordered to leave the country.

Mooney said Kurniawan never learned of the ruling because it was sent to the wrong address.


Watch the video: Ερέτρια: Εξελίξεις στο θρίλερ με την αυτοκτονία του διοικητή Το σημείωμα που βρέθηκε στο αυτοκίνητο (October 2021).