I first heard of wine investing back in the 1990s when some friends invited me and my husband, Andy, to a wine tasting at their home. That night I learned that similar to fine art, there exists a parallel world of fine wine collectors, insurance agencies, investment brokers, and auction houses. While I found this somewhat surprising, it also made sense. Where there is passion there is money to be made. Unlike pricing fine art, however, wine valuations, rather than depending on the eye of the beholder, rest on the palette of the œnologue. What did not occur to me is that just like fine art, fine wines are sometimes the stock of counterfeiters and swindlers. A 2016 documentary Sour Grapes, available on Netflix, tells the unlikely story of an Indonesian wine collector and con man, named Rudy Kurniawan. Between 2000 and 2006, Kurniawan slowly established an international reputation for being one of the world’s greatest connoisseurs and dealers of wines from France’s Burgundy region. In 2012, however, he was arrested in his California home where authorities discovered all the trappings of a counterfeiting production line.
The wine investing craze
Fueled in part by the dot com boom, wine-investing began to take off at the end of the 1990s. It was, by-and-large, a pastime of the nouveau riche. Perhaps the fancy invitation to our first wine tasting, which requested black-tie attire, should have clued us in to the grandeur of the event. However, we were focused on launching a new business and expected nothing more than a fun evening with friends where we’d try a couple of Cabernets and Merlots. We forgot about the black-tie formality until the day of the event. After a bit of agonizing, Andy decided to wear his nicest suit and I a pajama-like pants ensemble. As we feared, we were underdressed compared to the other party-goers. Happily, our hosts, who both greeted us at the door, were perfectly welcoming as they instructed us to remove our shoes since the recently cleaned carpets were not yet dry. This posed a new problem for Andy. His only pair of clean socks that day had a sizable hole, revealing his big toe. As he slipped off his shoes, Andy stealthily loosened the sock and bunched up the end, clenching it between his first two toes.
That night we learned that our host, a friend of more than 10 years at the time, had slowly been investing in French wines. We knew that Herb, an avid cyclist, had bicycled in France on a few occasions. We had no idea, however, that while there he was not only touring the countryside à vélo but also learning about various vineyards. Lining a table in the dining room, we found a plentiful spread of wine bottles along with mouth-watering finger food. With minimal fanfare, Herb indicated the order in which we were to try the wines and said little else. At some point in the evening, a guest asked about the price of the wines. Herb pointed to a catalog where we were able to look up each bottle’s valuation. I remember that many of us, having never paid more than $10 for a bottle of wine, were shocked to see that some of the bottles were listed at prices in the hundreds. We never learned what had driven our friend to invest in fine wines. It was a party, and people happily chatted and imbibed, appreciative of Herb’s generosity in hosting the evening.
I don’t mean to imply that my experience compares closely to that of those who became friends with Rudy Kurniawan, but there are some loose parallels. As a young, unassuming man in his twenties, Rudy managed to infiltrate the highest ranks of the wine connoisseur community without anyone, even his closest friends, knowing much about him. He had at one point claimed that he received a $1 million monthly allowance from his Chinese family, living in Indonesia. People figured he had to be rich since he drove expensive cars, wore designer suits, owned fine art, and, last but not least, threw extravagant parties. With copious amounts of wine flowing, none of Rudy’s new-found friends were particularly interested in nailing down the exact path of his ascendency.
A fortune built on fine wine
To be fair, Rudy was known to have an incredible palette and profound knowledge of certain categories of wines. When he first burst onto the wine scene, he’d show up at tastings and auctions and dazzle people with his ability to identify wines and recite minutia regarding the authenticity of a particular label or cork. Wine auctioneer, John Kapon, said that Rudy once correctly identified “ten out of twelve burgundies that he tasted blind.” Even wines made from a combination of grapes seemed to pose little challenge. Rudy was able to pick out each variety, noting the character that it brought to the final blend. He also identified fakes, but never in a flamboyant manner that would call attention to a potentially embarrassed host. Rudy was by all accounts humble, generous, thoughtful, and above all passionate about wine. So, when he began buying and selling tens of millions of dollars worth of wine per year, few had reason to suspect devious motives.
Rudy couldn’t have picked a better time to enter into the counterfeiting business. Between 2003 and 2006, Wine Spectator’s Auction Index rose by 54 percent. It was during this period that the charming young Asian was able to gain the confidence of numerous wealthy collectors. One such mark was Brian Devine, CEO of Petco. In less than two years, Devine wrote 34 checks, totaling $5,320,602.50. The checks were made out to a mysterious agent named Leny, believed by Devine to be representing the Kurniawan cellar. Investigators later determined that Leny was actually Rudy (or perhaps his mother). Caught up in the wine investment frenzy, Devine had shelled out the mind-boggling sum without ever having met the dealer. “All of my purchases were done through internet communications,” he later admitted.
In 2006, Rudy consigned portions of his collection to two major auctions at Acker, Merral & Condit, allegedly the oldest wine merchant in North America. The first auction netted $10.6 million. The second brought in $24.7 million, a record for a single sale of wine that beat the previous record by more than $10 million. Despite the record-breaking totals, and millions of dollars in credit that had been extended to him by Acker, at the end of 2007, Rudy found himself strapped for cash. He applied for a $3 million loan from Fine Art Captial, offering 25 artworks of famous artists as collateral. On the loan application, he estimated his annual expenses as $150,000 per year. Yet while waiting for the loan to be approved, Rudy spent over $200,000 in just two days, simply by buying designer clothing and dining at one of New York’s priciest restaurants. Remarkably, his recklessness escaped detection by the loan officer who approved the loan.
The unearthing of a con-man
In 2008, Rudy was leveraged to the hilt, dodging creditors while his spending continued unchecked. He needed desperately to conclude another grand sale. In April, Acker Merrall & Condit was holding another auction where Rudy was poised to unload 268 bottles of Burgundy from three eminent producers. Of note were 97 bottles from Domaine Ponsot. Unbeknownst to Rudy, however, the proprietor of the esteemed vineyard, Laurent Ponsot, had come to New York to prevent the sale. Ponsot was certain that many of the bottles deemed to be from his vineyards were fake. The dates on a few dozen bottles of Ponsot’s Clos Saint-Denis ranged from 1945 to 1971. Yet, the winery began making the vintage in the 1980s. Minutes before the bottles went up for auction, they were withdrawn from the floor. When asked what had gone wrong, Rudy commented, “We try our best to get it right, but it’s Burgundy, and sometimes shit happens.” The implication was that he, Rudy, was the one who had been swindled.
Ponsot was not assuaged. While he couldn’t be sure that Rudy had produced the counterfeits, he was not willing to exonerate him either. The next day, he pressed the matter, asking Rudy about the wine’s provenance. Rudy said he needed to check his records. A few months later, he gave Ponsot the name and phone numbers of an Indonesian man that Rudy claimed had sold him the fraudulent bottles. When Ponsot followed up, however, attempting to talk to the man, he found both numbers led to dead ends.
Ponsot continued his investigation and soon learned that Rudy had been buying up large quantities of négoiciant Burgundies. These were Burgundies sold in bulk to wine merchants–not of the same caliber that Rudy claimed to deal in. Discrepancies such as these only served to fuel Ponsot’s inquiries.
A well-funded and tenacious investigation
While it’s never good to make enemies, rich enemies are arguably worse. Around the same time that Ponsot was looking into the fraudulent Clos Saint-Denis, another even wealthier collector was training his sights on Rudy. Billionaire Bill Koch, brother of the notorious right-wing Koch brothers (Charles and David), discovered that he had purchased counterfeit wines from Rudy in 2005 and 2006.
Koch took such trickery personally. With a wine collection of over 40,000 bottles, Koch claimed that after close scrutiny, no more than 400 were deemed fake. These, however, were among his most expensive. In an ABC interview, Koch menaced, “I abide by the rules of the Old West. If you cheat me, I’m coming after you.” Koch assembled an investigative team of lawyers, scientists, and retired law enforcement officials, including those formerly with the FBI, CIA, Scotland Yard, and MI6. Koch’s agents traveled the U.S., Europe, and Asia gathering information on Rudy and other counterfeiters he had dealt with. The cost of these efforts exceeded $20 million, more than the value of Koch’s entire collection. But, to Koch, it was worth it.
In September 2009, Koch filed a lawsuit alleging that Rudy had sold him counterfeit bottles and had defaulted on millions in loans from Acker Merrall & Condit and New York’s Emigrant Savings Bank. Three months later, the FBI contacted Ponsot to learn what he knew of Rudy’s shady dealings. Over the next three years, Rudy kept a low profile. Little did he know that two investigators in the FBI were fervently digging into his past.
They started by looking into bank records and credit-card purchases since such inquiries can be made without a search warrant. They then convinced a judge to give them the warrants necessary to examine Rudy’s email accounts. There were thousands of messages that took months to comb through. Eventually, however, they found evidence of purchases that were undeniably incriminating. For example, Rudy bought large amounts of French sealing wax and in an email to the supplier, Rudy asked, “Are the faux wax brittle, like a traditional French seal wax?” Not coincidentally, the wax used to seal wine bottles shatters when penetrated.
One question on the investigators’ minds was where did Rudy obtain all of the antique bottles. It was known that Rudy always asked restaurants to return all of his empty bottles and corks after an event. He claimed to be hanging on to them for sentimental reasons, wishing to keep a collection of all the bottles he had ever purchased. His emails also revealed that he’d purchased hundreds of old, commercial-grade, red and white Burgundies that were not suitable for long-term cellaring or for the auction market. Credit card transactions revealed purchases of Ingres paper, which has an antique appearance, and ink pads in various colors.
In February of 2012, accusations of new counterfeits originating with Rudy surfaced on a web site called Wine Berserkers. The fraudulent bottles were entered in an upcoming auction in London. The auction house, Spectrum, denied that the wines had come from Rudy, but ended up withdrawing several dozen bottles before bidding began. A month later, the FBI wrapped up their 50-page case against Rudy and issued an arrest warrant.
The demise of a much-loved fraud
When agents pounded on his door on the morning of March 7th, Rudy was slow to answer. Just as the FBI was about to break down the door, Rudy opened up wearing pajamas. He allowed the officers to handcuff him while his mother went willingly into custody. The officers entered his house to ensure that no one else was left inside that might cause harm to the agents or evidence. In walking through the home, they discovered thousands of fake labels for valuable wines; a gadget for inserting corks; bottles soaking in water to remove their labels; California wines with handwritten notes indicating the blend needed to mimic a coveted French vintage; and the thermostat set to 62 degrees.
Rudy’s story, combined with countless other cases of wine fraud, leaves little doubt that the fine-wine business is peppered with fakes. Laurent Ponsot has claimed that 80 percent of Burgundies dated prior to 1980 are fraudulent. One might wonder how the counterfeiters get away with it. In the case of Rudy Kurniawan, knowing how to throw a lavish party while charming your guests seems to have helped.
There’s no question that Rudy’s friends dearly loved him. Throughout the Netflix film, pals and colleagues alike express shock and disbelief that he could have been behind such a caper. Rudy was seen as the smart, stylish, and generous host who, in the wee hours of the morning, after copious quantities of food and drink, was known to uncork yet another exceptional bottle. Receiving an invitation from Rudy was a coveted honor. In the midst of such soirées, none of his close associates were going to question him.
Skeptics speculate that one reason people get conned into paying great sums for wine is that as the evening wears on, those that imbibe become increasingly agreeable to the suggestion that a particular wine is worth a lot of money. Thankfully, this same psychology prevailed on the evening hosted by our friend Herb. It’s not that Herb was looking to hawk bottles of his collection that night. Rather, the laisser faire attitude proved beneficial as Andy lost the will to shelter his toe from view. Happily, the other guests only seemed to delight in the toe’s unveiling and all concerns regarding wardrobe decorum were consigned to oblivion.
Drouelle, Fabrice. “Le vigneron et le faussaire.” Affaires Sensibles. 20 août 2018
Hellman, Peter. In Vino Duplicitas, The Experiment, LLC, 2017
Steinberger, Michael. “A Vintage Crime.” Vanity Fair. July 2012
Burrows, Jeff. “French Wine 201: Burgundy is not Complicated.” foodwineclick blog. December 3, 2017