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April 30, 2012

Did you know that the global estimate of counterfeit wine is between $6 Million and $30 Million?

Would you have guessed that between one percent and nine percent of all liquor is counterfeit, according to EU estimates?

I was intrigued by a recent article in VUE WEEKLY (Author: Mel Priestley) and decided to share a few paragraphs here:

There’s an oft-quoted joke in the wine business that Las Vegas restaurants sell more bottles of 1982 Chateau Petrus every year than were ever actually made by the top Bordeaux winery. It’s an unfounded claim – albeit a disturbingly believable one – but nevertheless highlights a widespread problem in the wine world: counterfeits.

Wine fraud is often considered a problem that only wealthy collectors need to worry about. After all, like Petrus, the most expensive wines are usually the most counterfeited. (This usually takes the form of either bottles with fake labels, or authentic empty bottles re-filled with something else.) These wines are often sold at the big auction houses in major centres like London, New York and San Francisco, so how could it possibly affect someone buying a $15 bottle of Argentinean Malbec from their local wine shop?

Last month wine enthusiasts around the world were rocked by the news that one of their most prominent members was arrested for fraud: Rudy Kurniawan, a 35-year-old Indonesia-born wine collector, was arrested on March 8 and charged with five counts of wire and mail fraud, including selling $1.3 Million of fake wine. If convicted of all charges, he faces 20 years in prison.

Arriving on the American wine scene in the early 2000s, Kurniawan claimed to be the son of a wealthy Chinese businessman and that “Kurniawan” was an assumed name. Despite these mysterious origins, he quickly rose to power as a regular buyer and seller of the most expensive wines at auctions throughout the United States. Kurniawan enjoyed a privileged life that precious few can claim: his mansion in Arcadia, California had a Lamborhini, a Mercedes-Benz and a Range Rover in the garage; he racked up $16 Million in American Express bills between 2006 and 2011 and ran up $11 Million in debt in 2007 alone; his elite clientele included billionaire William I Koch; and, in what is now a hilarious case of dramatic irony, he had a recognized “talent” for sniffing out fake wines and was often asked to be arbiter over the veracity of prized bottles.

Major Incidents of Wine Fraud

Red Bicyclette/Pinotgate:

  • In 2010, French wine broker Ducasse Wine Merchants passed off cheap Merlot and Syrah as harder-to-make Pinot Noir
  • Ducasse sold the wine to wholesaler Sieur d’Arques, which in turn sold 18 Million bottles worth to American company E & J Gallo
  • Gallo sold the wine under the 2006 vintage of its Red Bicyclette  label as 85% Pinot Noir
  • Red Bicyclette sells for $8 per bottle
  • Authorities estimate that Claude Courset, owner of Ducasse, made 7 Million Euros through the scam
  • Courset and 11 others were convicted of the fraud charges

Georges DuBoeuf Blending Scandal:

  • The so-called “King of Beaujolais” was fined 30,000 Euros in July 2006 for illegal blending
  • His estate mixed different wines of varying quality in order to disguise the bad 2004 vintage
  • DuBoeuf claimed the incident was an accident due to human error.
  • Supposedly none of the blended wine was marketed or sold.

Billionaire’s Vinegar:

  • In 2006, American billionaire William I Koch filed a lawsuit against wine collector and trader Hardy Rodenstock for four bottles of wine that had allegedly belonged to Thomas Jefferson, but were revealed to be counterfeit
  • The bottles originated with Rodenstock, whom Koch claimed had been orchastrating an ongoing scheme to defraud wine collectors
  • The matter remains unsettled in court
  • In 2008, Random House published a book on this incident, entitled the Billionaire’s Vinegar, written by Benjamin Wallace
  • The film rights were bought by a Hollywood consortium

Mont Tauch:

  • In 2010, 400,000 counterfeit bottles of this premium French wine were released in the Chinese market

The prevalence of counterfeited collector wines also serves to keep prices of these wines expensive, so most people have no hope in hell of ever affording one. While some might not care about this, it’s a real shame for wine enthusiasts without an unlimited disposable income.

If you do have a rare collector wine in your posession, I would hope you have it secured. Be careful with whom you share that information. You want to avoid a targeted break-and-enter!

If you don’t have a security system or don’t have it monitored, call me for a free, no-obligation consultation. You will be glad you did!

Ulli Robson, Security Specialist, (780) 288-2986.

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