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Wine-Fraud Court Case Starts in New York

Wine-Fraud Court Case Starts in New York
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Maureen Downey explains the significance of a civil action brought by billionaire Bill Koch against internet entrepreneur Eric Greenberg.

Bill Koch’s attorneys filed a complaint against Eric Greenberg (and Zachys Wine Auctions) for fraud, negligent misrepresentation and violations of New York General Business Law on October 26, 2007.

While the suit against Zachys has long since been dropped, the total value of the wine involved in Koch's civil case is said to be hundreds of thousands of dollars. However, the wider implications – or the "so-whats" – of this case could be industry-changing.

This action, being heard in a lower Manhattan court, could mark the start of a new era – from colossal changes in the fine and rare wine industry (possibly defining required improved business practices), to potentially new levels of tolerance on questionable wine provenance, to personal satisfaction that people are finally paying attention to cleaning up the industry.

Starting in 2000, while working as an auction specialist at Morrell and Co. in NYC, I became fascinated with the reality that there were fake bottles of wine. In a strange way, I can thank Hardy Rodenstock, a German wine trader whom Bill Koch has attempted to sue for wine fraud, for teaching me to pay attention to certain details that would indicate possible counterfeiting.

Rodenstock was interested in a few large-format bottles of 1945 Château Gruaud Larose on sale. He faxed a bizarre list of questions, asking about details of the punt, the glass and the paper, that most of us would never had considered inspecting so carefully. He then asked for particular photographs of the bottles at strange angles and specific details on the labels. I did not gain the impression that he was interested in purchasing these wines.

Today, in lower Manhattan, the Bill Koch vs Eric Greenberg civic trial begins. The implications of this even coming to trial are huge: the public and the courts are finally taking the issue of wine fraud seriously. Regardless of the outcome, the mere fact that a case is being heard is huge for those of us who have for so long thought wine fraud to be a blight on the fine and rare wine industry. If Greenberg were to be found guilty, there could be criminal charges that follow up the civil suit. That would be the second set of criminal charges after the Rudy Kurniawan arrest of last March. The Kurniawan case is scheduled to go to trial this summer.

Eric Greenberg (L) pictured with Chateau Margaux's Paul Pontallier and Acker Merrall's John Kapon ahead of a 2010 auction in Hong Kong
© AFP/Mike Clarke | Eric Greenberg (L) pictured with Chateau Margaux's Paul Pontallier and Acker Merrall's John Kapon ahead of a 2010 auction in Hong Kong

Many ask why Koch, one of America’s wealthiest men, did not take a settlement that Greenberg proposed. But to do that would be to ignore the reason for the lawsuit in the first place. Koch is not looking out for only himself; he wants to clean up poor business practices by retailers, auction houses and collectors of fine and rare wine. He eventually hopes to see some of the worst offenders prosecuted.

While I am a witness (by deposition) in the case, I do not purport to know Bill Koch’s full motivations or whom he considers the worst offenders – beyond what is commonly reported. But as someone who has been in this profession for some time, I do know that there are some very guilty parties out there that must be getting nervous as the legal action ratchets up. The “so what” to them is probably a lot of sleepless nights.

Tragically, one of the most important “so what’s” of this story is that it had to come to this. While most media types, and even many serious wine collectors, only became aware of the scope of wine fraud in the past year or so, it has been a considerable issue for well over a decade. But those perpetrating the fraud were left to run wild with no oversight and no pressure on them to clean up their act.

In my opinion, some media ignored the giant, pink, screaming elephant in the room in lieu of sycophantic articles about how cool the worst offenders were. Among most collectors the topic was very unpopular as it meant that lots of the "cool kids" who were boasting about their great bottles were being defrauded by their best friends. They did not want to know that the large-format 1945 Romanée Conti they were bragging about was filled with young California pinot noir and dirt.

Whatever the outcome, today marks a monumental day in the world of fighting fine and rare wine fraud. Bill Koch’s tenacity in battling this problem blight is commendable. He has met with much resistance, including a widespread public belief that rich white guys cannot be victimized through buying fake expensive wines (in March this year Koch's fortune was estimated by Forbes to be $4 billion). But he has persisted.

Ultimately, the “so what” is already visible as many vendors have made every effort to provide a better industry – one in which we can all purchase wines with more confidence. But some of the worst offenders will still have to answer for their actions. Ultimately, the “so what” for some of them may be loss of business, or personal freedom.

* Maureen Downey is an expert on wine fraud, and is the owner of San Francisco-based Chai Consulting, a firm which advises collectors of fine wine. The view represented in this article are her own and do not necessarily represent those of Wine-Searcher.

Related story:

Wine Collector's Fraud Lawsuit Against Christie's Dismissed

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  • Comments

    Francis Kennedy Jr wrote:
    28-Mar-2013 at 10:50:04 (GMT)

    While I feel this suit or civil action will help to clean up Rare Wine Auctions and sales. Moreover, this will make sure all Rare Wine dealers dig deeper when researching bottles up for sale. In addition making sure each Auction House or Rare Wine dealer do their due dilligace when proving providence on every bottle up for sale.

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