Keeping tabs on fine wine fraudsters

An estimated $3bn of fake fine wine is sold every year. No wonder authenticated bottles charge a premium.

Wine fraudster Rudy Kurniawan

Don’t like to boast about it but I made my big screen debut last year. It was in a documentary called Sour Grapes: the tale of wine fraudster Rudy Kurniawan and his spectacular rise and fall. The film was released last year and is now on Netflix. I think I spotted myself — well, my shirt anyway — in a background shot at a wine event when the makers were interviewing “wine detective” Maureen Downey, who helped to expose Kurniawan.

The film will, of course, be of interest to fine wine lovers. But as a sort of viticultural version of the infamous Enron scandal, it is a worthwhile watch for anyone.

Kurniawan, a dashing young Indonesian, appeared on New York’s fine wine scene in the early 2000s with a mysterious backstory. He spent and made a fortune buying and selling fine wines, quickly gaining a reputation as a generous host and great taster. Soon he found himself at the centre of a group of wine-drinking friends called the 12 Angry Men, who would regularly spend six-figure sums on decadent wine dinners. But Kurniawan’s world began to unravel when Laurent Ponsot, owner of Burgundy’s Domaine Ponsot, cried foul after fake versions of his wines were put up for auction.

FBI agent Jim Wynne nailed it when he described Kurniawan as a gen X Great Gatsby. The Angry Men were unsympathetic characters who, I suspect, saw themselves as “masters of the universe”. Kurniawan conned them, though, so a few obnoxious multi-millionaires got burned, which some might consider almost a victimless crime. But his activities have had a wider impact.

Downey’s team at winefraud.com reckons Kurniawan sold €140 million of fake wine before he was arrested in 2012. That is $US550m ($728m) in today’s money when you take into account the rise in fine wine prices, and little of it has been taken out of circulation.

Few investors or retailers, it seems, want to find out whether they have fakes in their inventories as it will mean they have to take the financial hit. Downey says she spots fakes in shops and auction catalogues all the time.

She hosted a seminar recently where she showed many examples of fake wines. Some were laughable, such as the 1949 burgundy that had a recycling logo on its bottle capsule. Others were much more convincing. Downey opened a fake 1947 Cheval Blanc, which frankly tasted like good old bordeaux and not like the legendary 1947. Tasting is, in fact, the least reliable tool for authenticating wine, with paper type, ink, bottle and glue being far better indicators.

Downey believes the problem is worse today than it was when Kurniawan was in his pomp. She says worldwide wine sales are $US304 billion and fine wine sales — or wine traded on secondary markets — make up about 5 per cent of that, or $US15bn. Downey reckons 20 per cent ($US3bn) of these fine wines are fake. Curiously, in Asia, serving fake fine wine is often acceptable, in the same way that wearing a knock-off Rolex is.

You would think stopping the fraudsters would be high on the industry’s agenda, yet Downey says just 29 per cent of fine wine producers have taken anti-fraud measures. The diamond industry has similar issues with guaranteeing provenance and ownership. It uses a digital authentication system based on blockchain technology, which underpins the crypto-currency bitcoin, to track more than a million diamonds. Now Downey’s company, Chai Consulting, has teamed up with a start-up, Everledger, to launch the blockchain-based Chai Wine Vault (see more at winefraud.com).

Authenticated bottles of wine are entered into the virtual cellar and identified by up to 90 data points. Any change of status — for example, a sale, movement of storage site or damage to label — are recorded and verifiable. Authenticated wines will, you would expect, begin to command a premium at resale.

At the moment, the fine wine market is a bit like the wild west, in that anything goes and it is fertile ground for fraudsters. At last, it seems, a solution is in sight.