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August 9, 2012
Wine Fraud – NOT a Wine Auction Problem
In the past months, the issue of wine fraud in the fine and rare wine industry has blown up in the media and on the internet. Some of my industry insider colleagues and I have been awaiting attention on the matter for over a decade, but not in the manner that we have seen. Unfortunately, the frenzied atmosphere surrounding the FBI’s first ever arrest of an alleged fine and rare wine counterfeiter Rudy Kurniawan in March, has served to confuse rather than clarify the most common sources of fake wine in the U.S.
The simple fact is that despite what is written on wine boards and in some of the media articles that have come out since Kurniawan’s arrest, fine and rare wine fraud is not only an auction issue: In fact in the past 6 years, since I started my own company, most of the fakes I have seen have come from brokers and retailers. Interestingly, they are often the same brokers and retailers that were originally the source of wines I refused while working as a wine auction specialist for the 6 years before I started Chai Consulting. (This includes refusing a consignment from Kurniawan in 2002 – never to be offered wine from him again!) Most of the fakes we are aware of are from a very few sources and the US Government is working towards choking off those sources.
Fortunately, the FBI has started cleaning up the industry starting with the arrest and indictment of Kurniawan, an Indonesian born Chinese man whose real name is allegedly, Zhen Wang Huang. He is charged with wine counterfeiting as well as financial fraud and is concurrently being sued in civil court for counterfeiting by avid wine collector and anti-wine-fraud crusader, Bill Koch. The FBI is actively pursuing other parties on the wine fraud front, and I expect more indictments in the near future.
What is known is that a significant wine counterfeiting operation was found in Kurniawan’s home at the time of his arrest. He is known to have sold significant amounts of wine at the wine auction house, Acker Merrall & Condit in New York City since at least 2003. In 2006 alone he sold $35 million at two single seller sales through Acker in New York City. The man in charge of Acker Merrall & Condit, John Kapon, not only failed to attain proper provenance for Kurniawan’s wines but he also either bought a tall tale hook-line-and-sinker or helped create the fraud monster with colorful consignment introductions like this from an April 2005 auction:
There is not much that can be said about this collection, outside of the fact that it is one of America’s greatest. Years have been spent carefully acquiring the best of the best of the best, and there is probably not a single, great wine of the 20th century that this collector has not had on multiple occasions. This is a collector that actually inspects his wine. I have seen many a collector of old and rare wines never even look at the bottles they have acquired, even if they are wines that merit careful inspection. Over the years, and after seeing numerous counterfeit wines, this collector takes exceptional pride in the bottles he has acquired and the quality of his collection. This collector is so sure of the quality of his cellar, that if any buyer has any issues with any of the bottles, he told me, ‘Just have them send it back.’…When I got to the Latour à Pomerol case, I called him and told him that it almost looked too good as the case was in such excellent condition, and despite the corks being branded properly and the labels and capsules being correct, I kept asking questions. Finally he said, ‘Look, just open up a bottle. ….Don’t worry, he actually has just under three cases, all from the same importer and in his possession for decades,and he is replacing the bottle.
page 45, SATURDAY, APRIL 23, 2005 FIRST SESSION, LOTS 1-613
AT CRU, 24 FIFTH AVENUE (9th Street) BEGINNING PROMPTLY AT 10:00AM EDT)
The problem with this introduction is that Rudy was born in 1976, so in April 2005, he was maximum 29 years old. Either this introduction is a complete Acker fabrication, or Rudy was the most prolific toddler buyer of fine and rare wine in history – this is if he “actually ha(d) just under three cases, all from the same importer and in his possession for decades.” And to have this quantity of what is largely considered a “Holy Grail” wine by old-time collectors – is preposterous without documentation. There is no way a responsible auction house would have written, much less sold this wine without a paper trail substantiating the provenance. In 2008, Laurent Ponsot of the esteemed burgundy house Domaine Ponsot had to appear in the sale room to ensure that Acker did not sell $700,000 – $1.3 million of wines that were never produced by his family’s domaine. That wine was also consigned by Rudy Kurniawan. Rudy was elusive about the source of the wines, eventually giving Mr. Ponsot some bogus phone numbers to a strip mall and an airline in Indonesia.
In February of this year, Spectrum / Vanquish, a wine auction partnership out of Irvine, California and London respectively, had a disastrous sale anchored by a consignment of Kurniawan’s wines. Despite knowledge of the source of the wines and inspection by “Senior Consultant and Strategic Advisor” at Spectrum, Kevin Swersey, with whom I worked at Zachys and who as far back as 2002 was aware of Rudy being a ‘problem consignor’, and Vanquish head man Richard Brierley, who has always seemed to have a high level of knowledge, they let some very bad bottles pass inspection and get offered for sale. Some of those bottles were spotted and called out in advance on the Wineberserker.com bulletin board by LA attorney and burgundy collector, Don Cornwell. Major burgundy producers Domaine de la Romanee Conti via their importer Corney & Barrow and Domaine Dujac both requested bottles be withdrawn from the sale based on Cornwell’s reporting. So yes – there are some houses that appear to deserve the scorn. But these are the anomalies.
The vilification of wine auctions as an industry that has failed in its duty of due diligence based only on these widely reported situations is regrettably, understandable, but extremely unwarranted. As someone who has been dealing with wine fraud for over a decade – these bad eggs are not indicative of the larger industry. When I read blogs, wine boards and articles that vilify auctions, all I can think of is how inaccurate these representations are of the fine and rare wine auction industry in which I frequently work. The amount of fake wine that has come out of retailers in the US, and in Europe is very significant, as are the many multi-million dollar sales Kurniawan made to individual collectors that did not pass through auction, despite the reports that some may have been brokered by an auction house.
This does not even take into account the wide spread fraud in, and into, Asia. It is speculated that for some years those few less scrupulous auction houses have been offloading fakes into the Asian market where US investigators are less likely to look, or prosecute, and where the buyers are perhaps less informed…. Again, these activities seem to be ascribed to the same small list of shady characters.
For those interested in buying fine and rare wines, reputable wine auctions remain a great and viable venue for both sales and purchases. The vast majority of major auction houses in the US and Europe are full of competent and dedicated professionals who want the issue of fraud to be rectified as badly as I. They have honest, hardworking owners, directors and specialists who have no reason to want to sell fake wines as the buyers are just as much clients as are the sellers. After all, without buyers, there is no sale.
Auction specialists are frequently far more knowledgeable and responsible about vetting old and rare wines than are many retailers and brokers. Some brokers don’t even ever see the bottles they are selling: Everything is done via email, and the end product ends up in a buyer’s possession with little oversight. There are retailers out there offering wines that are so inconsistent with authentic examples that they make even amateurs laugh. Some of these retailers sell huge quantities of wine, and hide behind ignorance despite decades of experience. To date the pressure is not yet on these suspect retailers, but it should be. I have seen retailers take back ‘bad bottles’ only to reoffer them – but none of these stories are ruminating in the press and on the boards. I sincerely hope that things will change with future prosecutions. Of course there are great retailers as well, and many with whom I am happy to do considerable business.
The fact remains that in any industry there are some shady characters. My advice: Avoid them. It does not matter “how good of a deal” you think you are getting, or “how well” someone may treat you. If they are defrauding you – stop doing business with them, or expect to be defrauded. Trust good companies and ask questions about provenance!
Recommend wine auctions companies, in no particular order: Christies, Zachys Wine Auctions, Heritage Wine Auctions, Hart Davis Hart, Sothebys, Bonhams
Recommend retailers in the US other than those with auction houses previously mentioned: K&L Wine Merchants, CA, Noe Valley Wine Merchant, SF, CA, Vin Vino Wine, Palo Alto, CA, Dee Vine Wines, SF, CA, Hi Times, Costa Mesa, CA,The Wine House, West Los Angeles, CA, Carmel Wines, CA, Crush, NYC, Morrell & Co, NYC, Sherry Lehmann, NYC, Astor Wines NYC
Jancis Robinson, MW, jancisrobinson.com, has graciously given her very personal list of UK merchants and traders from whom she would buy, or has bought, rareties : Berry Bros, Bibendum, Bordeaux Index, Corney & Barrow, Farr Vintners, Four Walls,Goedhuis, Justerini & Brook, Magnum, Reid Wines, Roberson, Seckford, Tanners, Turville Valley, Uncorked, Wilkinson Vintners, Wine Society, Peter Wylie