Archive for October, 2014

26
Oct
14

Wine Fraud: Millions of Dollars for Fake Wine

Prehistoric burial sites are proof of man’s predilection for gathering precious objects that were  important enough to travel with the owner into the grave. Nowhere is this better illustrated than in the tombs of the pharaohs where possessions were arranged around a sarcophagus. Guarantees of wealth assured a comfortable life in the afterworld. Through the course of time, in other cultures, burial practices reveal how wealthy collectors amassed treasured belongings that set them apart from the masses.

Obsessed individuals with deep pockets continue to exist throughout time. Those bitten by the collecting bug willingly spend a fortune on rare treasures to display affluence. Insatiable acquisitiveness and eagerness to flaunt their trophies are a subtle form of “look at me.” Stratospheric prices confer immense cachet on the object and to its owner, but it takes an unfortunate negative turn. Con artists are encouraged to engage in fraud, forgery, misrepresentation, and counterfeiting. It encourages scam artists to engage in fraud, forgery, misrepresentation, and counterfeiting.

Wine fraud plays second fiddle compared to more sensational examples of art fraud, albeit wine fraud scams run into millions of dollars, Beginning in the early 2000s, demand and prices for the rarest wines shot up rapidly, as did the potential payoff from selling fakes. The idea of owning a prestigious historical bottle sets up a shark-feeding frenzy between potential collectors. Covetous wine lovers with deep pockets, some who are connoisseurs and others who collect rare bottles for prestige, compete to buy cult wines, rare vintages, and famous labels. Wine collectors who desire to own particular vintages and notable producers suspend credulity, seduced into believing they achieved their heart’s delight. Unfortunately, it in many cases it results in  outrageous sums paid for fraudulent wine.

Wine deception abounds. It can start on the most basic level at a winery when a harvest goes awry and fails to produce high quality grapes. Some less-than-honest vintners adulterate a poor vintage, adding wine from previous crop or from different wine regions. Coloring agents or wines with stronger flavors are used to improve pallid wines. Some wines are adjusted to the tastes of certain markets.

Fraud can also occur at the seller level when unscrupulous merchants fill old bottles of rare provenance with new wines sold as the genuine article, complete with counterfeit labels that provide assurance to buyers. Even if the new owner decides to uncork the bottle and taste the contents, who knows what a two hundred year old wine tastes like?

Con artists developed a successful formula for counterfeiting wine. Collect a cache of old bottles by buying great wines at restaurants and taking home the corks and bottles as souvenirs with labels in good condition. If not, a duplicating machine and a little skill in making a new label look old works. Sand the vintage date from the cork. Carefully reprint a new date onto the old cork to match the label. Blend vin ordinaire with old or even excellent wine that costs only a couple of hundred dollars. The new creations are passed off as wines with pedigree for thousands. Recork the bottle and add a capsule. Voila! A ordinary wine that gained an impeccable prestige supposedly produced in significant wine region such as Bordeaux, Burgundy, Napa, and Chianti. Consumers who should have been skeptical bought the wines without checking to see if they were the real goods.

Two notorious cases recently perpetrated the latest iterations of wine fraud involving millions of dollars. The scam included many famous labels, including a cache of old Bordeaux purportedly belonging to Thomas Jefferson found in Paris in the 1980’s. The handsome old bottles were engraved with the initials of America’s third president.

As American envoy to France, Jefferson developed a love of wines from top chateaux in Bordeaux. The third American president had become an ardent collector of French wine when he was American envoy to France, but he worried about the common practice at the time of adulterating wine. He ordered directly from owners of his favorite chateaux, Lafitte, D’Yquem, and Haut Brion to insure the quality of the cases he was sending to George Washington and to his home at Monticello.

Hardy Rodenstock, a German collector who endeared himself to well-known celebrities, writers, and connoisseurs of the wine world, sold four of the Jefferson bottles to billionaire Bill Koch, who over several years, spent $2.1 million on wine, yet he is only one of many rich wine enthusiasts who spent millions of dollars on counterfeit wines.

The Jefferson imprimatur made the sales easy to accomplish. No one knew what a 200 year-old wine tasted like, and more than likely, the bottles would remain as unopened trophies. Even so, Koch became suspicious and hired a team of detectives. A new test proved the wine was new and the Th J initials might have been incised with a dental tool. Koch sued Rodenstock and launched a multi-million-dollar campaign to combat what he believed was a flood tide of counterfeits.

A more recent case involved Rudy Kurniawan, born in Indonesia but living illegally in California, was arrested in March 2012. Kurniawan, considered this century’s most notorious perpetrator of wine fraud. In 2012, he was arrested indicted and convicted for selling counterfeit wine at auction. Although there are plentiful examples of others who trade in fraudulent wine, Kurniawan is considered this century’s most notorious perpetrator of wine fraud. The thirty-year old built a reputation as a charming, debonair wine connoisseur, spending immense sums entertaining friends and potential buys.He took home from restaurants empty bottles of expensive wine and their corks supposedly as souvenirs, impressing everyone with his knowledge and excellent palate. (Who knows if he really tasted what he described? Wine lingo slips easily off the tongue.) He became famous for his ability to find some of the rarest, most expensive wines in the world, and eventually made a fortune passing off fakes of great wines, including several Jefferson bottles. He netted millions of dollars from counterfeit wine he produced in his kitchen. His successful run ended when a police raid found his computer loaded with scanned images of old wine labels, stacks of rare French wine labels Kurniawan allegedly forged on a laser printer, and historic bottles, among them bottles supposedly from Thomas Jefferson’s cellar. Prosecutors labeled him as a fraud who duped some of the country’s wealthiest wine collectors passing off young wines blended with commonplace older wine in his kitchen. Kurniawan was sentenced in August of 2014 to ten years in prison, fined over $20 million dollars, and ordered to pay a similar amount in restitution to former clients. He will be deported as an illegal immigrant after he served his prison term.

Questions remain about a symbiotic relationship between the con artist and an avaricious, gullible mark. What provokes someone, even with unlimited resources, to pay six figures for a single bottle of wine that may never be tasted, but rather bought as an investment for future sale … or for prestige? The lesson to be learned? Caveat emptor.

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