Wine counterfeiting

After a series of high-profile legal battles shone the spotlight on rare-wine fraud, auction houses, wine merchants and wineries introduced more rigorous authentications – but is it safe to buy again, asks Michael Steinberger. Illustration by Chris Burke

Image: Chris Burke

On March 8 2012, FBI agents arrested prominent wine collector Rudy Kurniawan at his home in suburban Los Angeles and charged him with mail and wire fraud in connection with the sale of counterfeit rare wines. Kurniawan, a 35-year-old native of Indonesia, had seemingly come out of nowhere in the mid-2000s to become one of the biggest players on the fine-wine market. In 2006, he sold $35m worth of rare wines at two Acker Merrall & Condit auctions in New York, the dollar figures made all the more shocking by the fact that Kurniawan was so young. And now it turned out that many of the wines sold at those auctions had been fakes, produced not in the vineyards of France, but in the kitchen of Kurniawan’s house. When FBI agents searched the property, they found a counterfeiting factory, with dozens of bottles in the process of being turned into fakes and hundreds of phony labels for the most sought-after burgundies and bordeaux.

Bottles used as evidence in the 2013 trial of counterfeiter Rudy Kurniawan
Bottles used as evidence in the 2013 trial of counterfeiter Rudy Kurniawan | Image: Stan Honda/AFP/Getty Images

In the years leading up to Kurniawan’s arrest, the issue of wine counterfeiting had burst into the public consciousness. In 2005, Bill Koch, a Florida billionaire, sued Hardy Rodenstock, a German wine collector and merchant, for wine fraud. Years earlier, Koch had bought four bottles that had purportedly belonged to Thomas Jefferson; after learning that the wines were fakes and had originally been put on the market by Rodenstock, he took legal action. Over time, Koch became convinced that the market was inundated with counterfeit bottles, and subsequently sued several auction houses and collectors, among them Kurniawan. Kurniawan’s downfall, however, began not with Koch’s lawsuit, but rather when he was caught in 2008 trying to sell a cache of indisputably fake wines from Burgundy’s Domaine Ponsot at another Acker Merrall & Condit auction. His arrest four years later, and the discovery of the extensive counterfeiting operation in his house, seemed to confirm that the rare-wine market had indeed been totally corrupted.

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Kurniawan was convicted by a federal court in Manhattan in December 2013 and sentenced to 10 years in jail. Koch has since settled his lawsuit against Kurniawan and all the other lawsuits he brought, effectively ending his crusade against wine fraud, and there appears to be no indication that the US government is pursuing any other cases of wine counterfeiting. So for now, the furore has died down and a little perspective can be brought to the discussion of wine fraud. Was the problem really as pervasive as Koch claimed and all the breathless headlines suggested? And with Kurniawan now in jail, wineries embracing various authentication technologies in order to protect themselves and consumers from fraud, and chastened auction houses performing more rigorous due diligence than they did in the past, is it safe to buy in the rare-wine market again?

Cork stamps from the Kurniawan trial
Cork stamps from the Kurniawan trial | Image: Stan Honda/AFP/Getty Images

In reality, counterfeiting was largely confined to two categories – old burgundies and old bordeaux. And it was even more limited than that. In the case of burgundy, it centred around a handful of producers: Domaine de la Romanée-Conti, Burgundy’s most celebrated estate, along with Domaine Armand Rousseau, Domaine Georges Roumier, Domaine Ponsot and the wines of the late Henri Jayer. Likewise, with old bordeaux it was limited to the rarest, most venerated wines, such as 1947 Cheval Blanc and 1945 Mouton Rothschild.

Corks, foil capsules and labels from the Kurniawan trial
Corks, foil capsules and labels from the Kurniawan trial | Image: Stan Honda/AFP/Getty Images

But even though the counterfeiting was narrowly focused, a lot of fraudulent bottles were put on the market. It has been suggested that Kurniawan alone may have put as much as $100m worth of counterfeit wines into circulation. Geoffrey Troy, a New York wine merchant who played a key role in calling attention to Kurniawan’s dubious bottles, says Kurniawan’s concoctions will continue to haunt the market for years to come. A broker recently approached Troy offering a methuselah of 1988 Romanée-Conti. Troy had misgivings about the bottle, in part because the branding on the cork was illegible, and he contacted Domaine de la Romanée-Conti. He gave the estate the bottle number, eight, and was told that it should have borne the label of the domaine’s US importer, Wilson Daniels. Instead, it had the label of the European exporter. Ultimately, Troy was able to trace the bottle back to Kurniawan. A few weeks later, the same bottle appeared in the catalogue of a forthcoming auction in Hong Kong. The auction house withdrew the methuselah from the sale after being informed of the problems with the bottle and the Kurniawan connection. But that’s just one bottle among possibly thousands that the now-imprisoned fraudster put on the market – and Kurniawan was hardly the only person peddling counterfeit wines.

A rare bottle of 1945 Romanée-Conti, sold at a Christie’s charity auction in 2007
A rare bottle of 1945 Romanée-Conti, sold at a Christie’s charity auction in 2007 | Image: AFP/Getty Images

Still, Troy thinks that the rare-wine market is in better shape now than it was a few years ago. “There is still fraud going on, but I’d say the market is healthier,” states Troy, who now serves as a consultant to Zachys, a major US wine auction house. He believes that fear of litigation has led auction houses to be much more careful about due diligence. It is a point echoed by Ben Nelson, president of Chicago auctioneers Hart Davis Hart. Hart Davis Hart is, along with Sotheby’s, one of the few auction houses that have never been accused of selling counterfeit wines. Nelson isn’t smug about the fact, but does recall being astonished at what he considered to be blatantly fake wines being put up for sale by other auction houses. “There were some really cynical people who were willing to sell anything. The attitude was that these wines were just going to be buried in the cellar of some rich guy who didn’t know any better.” That’s no longer the case, he says. “They wouldn’t dare sell those bottles today, because now there are consequences, like prison sentences.”

Laurent Ponsot in the Domaine Ponsot “library”, holding a jeroboam of Clos de la Roche
Laurent Ponsot in the Domaine Ponsot “library”, holding a jeroboam of Clos de la Roche | Image: Courtesy of Domaine Ponsot; photo: JL Bernuy

The consequences have indeed been pretty severe, and not just for Kurniawan. In April 2013, Koch was awarded $12m by a New York jury in a lawsuit he’d brought against another collector, Eric Greenberg, who had sold him counterfeit wines. (The judgment was later reduced to $711,000.) Greenberg had procured some of the fakes from Royal Wine Merchants, a New York retailer that also ended up being sued by Koch. (Full disclosure: In 2010, I wrote a lengthy expose for Slate magazine about Royal and its ties to Rodenstock, and my piece was cited in Koch’s lawsuit.) The case was settled last year. As part of the deal, Royal is now only allowed to sell wines produced after 1975, a significant constraint on its business. Koch also settled last year with Acker Merrall & Condit, which he sued in 2008, for an undisclosed sum (Koch described it as “substantial”). As part of the settlement, the company agreed to take back any wines it sold that were subsequently found to be suspect or counterfeit, and it also agreed to have an independent expert authenticate all pre‑1970 wines.

A protective Prooftag Bubble Seal on a bottle of Château Margaux, with the accompanying smartphone app
A protective Prooftag Bubble Seal on a bottle of Château Margaux, with the accompanying smartphone app | Image: Courtesy of Château Margaux

Christie’s is not untouched by the fraud imbroglio either – back in the 1980s, it sold some of the so-called Thomas Jefferson wines. I asked David Elswood, the head of Christie’s wine department, how it was protecting itself and its clients from counterfeiting in the wake of the Rodenstock and Kurniawan sagas. Elswood’s response was that Christie’s has always been extremely vigilant, but has also learnt from recent fraud cases. “Christie’s takes the issue of authenticity very seriously and as a matter of policy, it undertakes a vigorous vetting process to ensure to the best of its ability that all the wines it offers for sale are authentic. When cases such as the Kurniawan one occur, we also take the time to review the testimony of the wine experts used by the prosecution and arrange to inspect the confiscated wine itself in order to learn as much as we can about how counterfeit wines appeared. We consider it part of our ongoing education.”

A bottle of 1947 Cheval Blanc
A bottle of 1947 Cheval Blanc | Image: © Deepix

Wineries too are taking steps to ensure that current and future vintages are not nearly so vulnerable to fraud. In the same way that spiralling prices for rare wines encouraged counterfeiting, the onslaught of fake bottles has spawned a cottage industry dedicated to combating it. For instance, Prooftag, a French company, offers a Bubble Seal that – in combination with the wine producer’s website or an app that can be downloaded onto one’s smartphone – can instantly confirm whether a bottle is genuine; the seal can’t be broken without damaging the bubbles, which are uniquely patterned and cannot be replicated. A number of prominent wineries, among them Châteaux Lafite and Latour, two of the five bordeaux First Growths, are now using the Prooftag technology.

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Authentication technology is no help, of course, when it comes to the kind of older wines that Kurniawan and Rodenstock trafficked in. For those wines, there are a number of independent appraisers who tout their ability to distinguish genuine articles from knock-offs. But Hart Davis Hart’s Nelson questions the need for “high-paid experts flying all over the world verifying authenticity”, as he puts it. In his view, counterfeiters like Kurniawan succeeded because a lot of otherwise intelligent people suspended their disbelief and didn’t perform even minimal due diligence, such as demanding proof of a wine’s provenance. Referring to Kurniawan, Nelson says, “If some 26-year-old guy shows up at your door with $20m worth of rare burgundies and he can’t tell you where he got them, you don’t need an expert to verify the authenticity of those wines. Basic common sense would weed out 99 percent of these problems. If something seems too good to be true, it probably is.”

A few years ago, Laurent Ponsot, the proprietor of Domaine Ponsot, claimed that 80 per cent of all pre-1980 burgundies on the market from the best-known wineries were fake. Reached by phone in August, while on his annual motorcycle trip across the US, Ponsot was even more adamant. Asked if the rare-wine market was more trustworthy now, he said, “The answer is easy: no.” Ponsot said that even if auction houses are being more scrupulous these days, there is simply no way to ensure that every bottle that comes through the door is authentic, and there is still lots of counterfeiting going on. “You put one faker in jail, two new ones appear.” Consumers, he says, should simply stop pursuing rare old wines. “We should go back to the way it used to be – buy recently released wines from merchants and keep them for your children and grandchildren.”

Stephen Browett, chairman of UK merchant Farr Vintners, has similar views, but for slightly different reasons. Farr is now significantly less active in this segment of the market than it was a decade ago, and not just because of fakery. “Even the great wines of the great years of the period 1945 to 1961 are now past their very best and carry a risk of ullage and oxidation.” He says that Farr and other merchants are content to leave that business, and all that risk, to the auction houses and to focus instead on newer vintages.

There is no denying that buyers still need to be very careful when it comes to old and rare wines. As mentioned, in the case of burgundy they should be especially cautious about old vintages of Romanée-Conti, Roumier, Rousseau and Ponsot, or any vintage of Henri Jayer. Large-format bottles (magnums, jeroboams, etc) of very old vintages from famous names should be viewed with scepticism. That also applies to old bordeaux, especially pre-1970 wines from the major Right Bank appellations, Pomerol and St-Emilion, a subcategory that has been targeted by fraudsters. Michael Egan, a former Sotheby’s director who now works as an independent fine-wine expert, believes that buyers should also be on their guard with bordeaux from the acclaimed 1982, 1989 and 1990 vintages. The best wines from these years are exorbitantly expensive, which attracts counterfeiters, and because they’re still in greater abundance than wines from the 1940s and 1950s, it’s easier to escape detection.

If you are in the market for prestigious older wines, but would like to steer clear of bordeaux and burgundy because of the fraud issue, there are alternatives to consider. Although the Piedmont region of Italy is getting a lot of consumer interest now, the counterfeiting problem has not (yet) reared its head there, and older barbarescos and barolos from producers such as Bruno Giacosa, Giacomo Conterno, Bartolo Mascarello and Giuseppe Mascarello offer some of the greatest drinking pleasures you can find. California produced amazing wines in the 1970s, 1980s and 1990s, but counterfeiters have shown no apparent interest in exploiting this. Look for wines from Heitz, Mayacamas, Diamond Creek, Joseph Phelps, Château Montelena, Ridge and Dominus. Old Riojas are also worth exploring. The likes of López de Heredia, CVNE and La Rioja Alta turned out sensational wines in the 1950s, 1960s and 1970s. They’re woefully underpriced relative to their quality. As such they are of no interest to counterfeiters, but should be to collectors. No, they don’t have the cachet of 1947 Cheval Blanc or 1961 Pétrus, but are less likely to cause grief.

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