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How Wine Fraud Works

Corks, foil capsules and wine labels used as evidence in 2013 the trial of wine dealer Rudy Kurniawan. He was found guilty of masterminding a lucrative scheme to sell fake vintage wine.
Corks, foil capsules and wine labels used as evidence in 2013 the trial of wine dealer Rudy Kurniawan. He was found guilty of masterminding a lucrative scheme to sell fake vintage wine.
STAN HONDA/AFP/Getty Images

It's hard to feel sorry for Bill Koch. The billionaire brother of conservative political donors Charles and David Koch sold his share in the family energy business years ago and dedicated his enviable nest egg — how big of a nest do you need for $4 billion — to the aristocratic hobby of collecting rare and absurdly expensive things [source: Forbes]. His less-than-modest Florida home features original works of art by Picasso and Monet and a wine cellar containing some of the most expensive and scarce vintages in the world. It also contains several hundred bottles of "moose piss" [source: Stephens].

That's how Koch described the dubious contents of 421 bottles of counterfeit wine that he unwittingly purchased for $4.5 million over the past 25 years. The phony bottles of Chateau Lafite-Rothschild from 1961 and handblown relics reportedly owned by Thomas Jefferson were forged by enterprising wine dealers-turned-fraudsters who "aged" fake labels with coffee grounds, tampered with corks and passed off grocery-store hooch for the finest of fine wines.

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One of those high-society swindlers, Rudy Kurniawan, was sentenced in 2014 to 10 years in prison and over $48 million in damages for running a wine-forging factory out of his Los Angeles apartment, corking up custom blends of inexpensive wine in reclaimed bottles and selling them for hundreds of thousands of dollars a pop to über-rich saps like Koch [source: Gardiner and Sharp].

You could argue that wine fraud is a victimless crime, since the people who "suffer" still have billions to spare. Kurniawan's defense lawyers used that very argument in a vain attempt to reduce the forger's sentence. "Nobody died. Nobody lost their savings. Nobody lost their job," they pleaded. Who cares if a handful of one-percenters get ripped off trying to impress their friends?

Wine drinkers, for one. All told, wine fraud is estimated to have cost $650 billion worldwide in counterfeiting, piracy, patent infringement and copyright theft [source: Gannon]. Those costs are built into your next bottle of cabernet sauvignon. And when wine prices are artificially high on the top end — as they were when Kurniawan sold $35 million in fake booze in 2006 — it raises prices on the low end, [source: Steinberger].

Keep reading to hear how private investigators solved the mystery of the infamous "Jefferson Bottles" and learn about the high-tech precautions wineries are taking to protect their priceless beverages from enterprising con artists.

To fake an expensive wine, you have two options: tamper with the bottle or mess with the wine inside. For the first method, you can buy bottles of perfectly good wine and plaster on the label of a much better one. Sometimes all you have to do is replace one digit of the vintage year or blur a few numbers on the aging cork.

For the second method, the bottle is legit, but the wine is fake. There is a brisk business on eBay in empty wine bottles from exceptional vintages like a 1982 Chateau Lafite-Rothschild [source: Goldstein]. Once you possess a real bottle, the trick is to mix up a convincing cocktail of quality Bordeaux and a shot or two of California red to pass the sniff-and-spit test.

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Even better, many collectors view their most expensive bottles as too precious to drink. As long as the bottle passes muster, the con artist is in the clear.

Wine fraud is not an exact science like reverse engineering a $500 iPad and selling it in China as a $17 iPud. The experience of drinking wine is extraordinarily subjective and greatly influenced by the name on the label, the experienced (or inexperienced) palate of the drinker, and the price paid for the bottle.

Given the extreme subjectivity of wine, a successful wine forger must sell more than a convincing label or even an excellent tasting wine; he must sell himself as an avid collector and trusted wine expert. That's the best way to create the illusion that the $10,000 bottle in your hand is not a well-packaged fraud, but the "priceless" real deal.

Successful con artists throw lavish marathon wine-tastings and Dionysian dinner parties in private rooms at the most exclusive restaurants. It's no coincidence that the most expensive bottles are often uncorked at the end of the night, when the guests are too loaded to know the difference between a 1945 Mouton and a boxed Bordeaux from Costco [source: Keefe].

Next we'll look at two of the most brazen cases of wine fraud.

Florida energy magnate Bill Koch arrives at federal court in Manhattan to attend the closing arguments in his trial against California businessman Eric Greenberg whom he accused of selling him counterfeit wine.
Florida energy magnate Bill Koch arrives at federal court in Manhattan to attend the closing arguments in his trial against California businessman Eric Greenberg whom he accused of selling him counterfeit wine.
EMMANUEL DUNAND/AFP/Getty Images

One of the most accomplished wine frauds in recent history is Rudy Kurniawan, sentenced in 2014 to 10 years in prison for his crimes. Kurniawan's exploits as a wine fraud were brilliantly chronicled in a 2012 Vanity Fair profile by Michael Steinberger.

From that article, we learn that Kurniawan came to America from Indonesia as a teenager and fell in love with wine with his first sip of the high-end California wine Opus One. Bankrolled by what he said was family wealth, Kurniawan launched an expensive wine habit in his 20s, buying millions of dollars of rare bottles at auction and splurging for elaborate parties with bar tabs in excess of $250,000.

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Once Kurniawan amassed an impressive collection of rare vintages, he began selling them. At two auctions alone in 2006, Kurniawan sold thousands of bottles for $35 million, including a few bought by Bill Koch.

But Kurniawan, FBI investigators ultimately discovered, was a wine fraud of the second school: real bottles, fake wine. After his lavish wine-tasting parties, he demanded that restaurants ship him the empties. Back home, he would fill the bottles with off-label versions from the same region or concoct his own custom blends using his talented nose for detecting subtleties of flavor. Koch sued Kurniawan in 2009 for selling him counterfeit booze, but it was the fed's criminal investigation that landed him in prison for mail fraud [source: Steinberger].

The second most famous wine cheat is still at large. German collector Hardy Rodenstock, born Meinhard Goerke, was the con-man genius behind the "Jefferson Bottles," 1780s vintages of Chateau Lafite bearing the scrawled initials of famous Francophile Thomas Jefferson.

Like Kurniawan, Rodenstock cultivated a colorful reputation as a globetrotting millionaire with exceptional taste. His greatest talent, though, was finding previously undiscovered cellars containing some of the world's rarest vintages. The Jefferson Bottles, Rodenstock insisted, were discovered behind a brick wall in a Paris basement [source: Keefe]. The address, conveniently, remains a secret.

Koch and fellow billionaire Christopher Forbes bought several of the hand-blown, wax-capped Jefferson Bottles at auction for hundreds of thousands of dollars a pop.

They became the crown jewels of Koch's collection, and he solicited historians from Monticello — Jefferson's estate in Virginia — to fill in the backstory of the wine's provenance.

To Koch's severe displeasure, the Jefferson experts reported the bottles were likely counterfeit, since they never appeared in Jefferson's meticulous records. Secondly, Jefferson typically signed his name "Th:J" in letters, but the initials on the bottles were "Th.J" [source: Keefe].

To solve the mystery, Koch employed an ex-FBI agent named Jim Elroy to scour the globe for clues. What did he discover?

High-end wineries are using a special seal with a bubble pattern on the bottle to prevent wine fraud. The bubble pattern can be matched on the Prooftag website to make sure the wine is authentic.
High-end wineries are using a special seal with a bubble pattern on the bottle to prevent wine fraud. The bubble pattern can be matched on the Prooftag website to make sure the wine is authentic.
© Brant Ward/San Francisco Chronicle/Corbis

Jim Elroy learned about a nuclear physicist in France who might hold the key to unlocking the true age of the wine inside the Jefferson Bottles. The physicist, Philippe Hubert, is an expert in dating objects by detecting levels of cesium-137, a radioactive isotope of the element that didn't exist before the explosion of the first atomic bombs over Hiroshima and Nagasaki in 1945. If the Jefferson Bottles are as old as Rodenstock claimed they were, the grapes used to make the wine should not contain any cesium-137. Hubert had used this method to debunk several other supposedly ancient wines [source: Keefe].

For Koch, though, cesium-137 wasn't the smoking gun. The test showed no radioactive elements, meaning the wine was produced before 1945. But 160 years before 1945? The killer clue turned out to be on the bottle, not in it. Consulting glass and tool experts, Elroy concluded that the etching of "Th.J" on the bottles could only have been done by modern dentist's drills, not 18th-century copper wheels [source: Keefe]. Koch sued Rodenstock, but the German citizen claimed immunity from U.S. prosecution and continues to collect and sell wine as of 2014.

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High-profile con men aren't the only wine fraudsters in on the game. Knockoff outfits in China are selling cases of counterfeit product supposedly from high-end California wineries, and legions of smaller con artists are flooding the auction circuit with fakes. One wine expert believes that 80 percent of pre-1980 Burgundies sold at auction are counterfeit [source: Steinberger].

To protect their investment and calm jittery buyers, some wineries are investing in technology that authenticates their bottles. A company called Prooftag sells a product that creates a one-of-a-kind "bubble seal" — like a fingerprint — on the neck of the bottle [source: Gannon]. The bubble pattern, along with a scannable QR code, tracks the bottle back to the winery. Another company, Applied DNA Sciences, can embed invisible, encrypted DNA tags into the wine's label. The DNA information cannot be replicated or even detected by counterfeiters [source: ADNAS].

Further, the California label Opus One has invested in a tamper-proof capsule that changes color once the bottle has been opened. There's also a chip on the back label that can be scanned with a smartphone to give information on the wine as well as its precise location. [source: Stephens].

But all of this new technology isn't much use to collectors like Koch, who crave bottles from the pre-digital age. For his part, the retired billionaire doesn't dwell much on being duped. As Koch said in a 2007 article about the Jefferson Bottles in The New Yorker, "I used to brag that I got the Thomas Jefferson wines. Now I get to brag that I have the fake Thomas Jefferson wines."

Author's Note: How Wine Fraud Works

I love that experiment where 57 wine drinkers strongly preferred the wine from the fancy bottle over the exact same wine with the generic label. It speaks to human nature and the many ways that our expectations and assumptions interfere with the way our senses process the sights, smells and tastes around us.

That might explain why Robert Parker, the world's most famous wine critic, gushed about the intensely aged flavor of an uncorked Jefferson Bottle, giving it a perfect 100 points, even though the wine was almost certainly a modern concoction mixed up by fraudster Hardy Rodenstock. The "history" of the wine was more powerful than any taste bud. Which makes me wonder, does it really matter if wine is counterfeit? Does it prevent the owner from experiencing the joy of owning a rare delicacy and the thrill of uncorking it for a very special occasion? Not unless you know it's a fake, in which case, maybe it's better not to ask.

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Sources

  • Applied DNA Sciences. "SigNature DNA" (Aug. 15, 2014) http://www.adnas.com/products/signaturedna
  • Forbes. "The World's Billionaires: #393 William Koch" (Aug. 15, 2014) http://www.forbes.com/profile/william-koch/
  • Gannon, Suzanne. "New Ways to Fight Counterfeiters." Wines & Vines. Sept. 2009 (Aug. 15, 2014) http://www.winesandvines.com/template.cfm?section=features&content=66988
  • Gardiner, Sean; and Sharp, Sonja. "Counterfeit Fine-Wine Dealer Sentenced to 10 Years." The Wall Street Journal. Aug. 7, 2014 (Aug. 15, 2014) http://online.wsj.com/articles/rudy-kurniawan-counterfeit-fine-wine-dealer-sentenced-to-10-years-in-prison-for-selling-fake-vintages-1407432096?mod=_newsreel_5
  • Goldstein, Robin. "Are Empty Wine Bottles on eBay Being Used for Counterfeiting?" Freakonomics. June 26, 2009 (Aug. 15, 2014) http://freakonomics.com/2009/06/26/are-empty-wine-bottles-on-ebay-being-used-for-counterfeiting/comment-page-3/
  • Keefe, Patrick Radden. "The Jefferson Bottles." The New Yorker. Sept. 3, 2007 (Aug. 15, 2014) http://www.newyorker.com/magazine/2007/09/03/the-jefferson-bottles
  • Nelson, Davia; and Silva, Nikki. "How Atomic Particles Helped Solve a Wine Fraud Mystery." NPR. June 3, 2014 (Aug. 15, 2014) http://www.npr.org/blogs/thesalt/2014/06/03/318241738/how-atomic-particles-became-the-smoking-gun-in-wine-fraud-mystery
  • Steinberger, Michael. "A Vintage Crime." Vanity Fair. July 2012 (Aug. 15, 2014) http://www.vanityfair.com/culture/2012/07/wine-fraud-rudy-kurniawan-vintage-burgundies
  • Stephens, Dustin. "Counterfeit wine: A vintage crime." CBS News. Dec. 22, 2013 (Aug. 15, 2014) http://www.cbsnews.com/news/counterfeit-wine-a-vintage-crime/
  • Susman, Tina. "Wine fraudster, Rudy Karniawan, once an L.A. name, gets 10 years." Los Angeles Times. Aug. 7, 2014 (Aug. 15, 2014) http://www.latimes.com/nation/nationnow/la-na-nn-wine-sentencing-20140807-story.html

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