September 11, 2014
This is an update of "In Vino No Veritas Says Kurniawan Jury" (BrokeAndBroker.com, December 20, 2013).
Before I became a lawyer, I was the third generation of my family in the wine business. Who knows, maybe one day I will add a wine column to BrokeAndBroker; however, for today, let's stay with my profession as a lawyer. Taking a break from going after Wall Street's fraudsters, Preet Bharara, the United States Attorney for the Southern District of New York filed a criminal Complaint on March 8, 2012, against wine dealer Rudy Kurniawan, 35, of Arcadia, CA. MANHATTAN U.S. ATTORNEY AND FBI ASSISTANT DIRECTOR-IN-CHARGE ANNOUNCE CHARGES AGAINST WINE DEALER FOR MULTI-MILLION DOLLAR FRAUD SCHEMES (March 8, 2012). Thereafter, on May 9, 2012, Kurniawan was named in an Indictment , which charged him with:
- Mail Fraud: Scheme to Sell Counterfeit Wine
- Wire Fraud: Scheme To Defraud A Finance Company
- Wire Fraud: Scheme to Double Pledge Collateral
- Wire Fraud: Scheme to Defraud A California Collector And the New York Auction House
Chateau Foni Baloni
According to the allegations, Kurniawan sold millions of dollars of wines, including approximately $35 million in 2006. Kurniawan often held himself out to be a wine expert with particular savvy in detecting counterfeit bottles of rare and expensive wine, claiming the ability to detect such tell-tale signs as counterfeit labels, tampered corks, or improper bottle markings. The Indictment characterizes him as "one of the most prominent and prolific dealers in the United States of purportedly rare and expensive wines."
The Indictment explains that Kurniawan:
[M]anufactured and attempted to manufacture counterfeit bottles of rare and vintage wine at his home, operating what was, in effect, a counterfeit wine laboratory. . .[he] blended lower-priced wines so that they would mimic the taste and character of rare and far more expensive wines; KURNIAWAN poured his creations into empty bottles of rare and expensive wines that he procured from, among other places, a restaurant in New York City; and KURNIAWAN created a finished product by sealing the bottles with corks and by outfitting the bottles with counterfeit wine labels, including labels he created or heped create using stencils and rubber stamps, among other things . . .
Paragraph 3 of the Indictment.
By way of example, the Indictment alleged that Kurniawan bought a Napa Valley, CA wine for about $100 and then used the contents to fake 1940s to 1960 vintage Pomerols or Graves. Similarly, he fabricated 1940s to 1950s Domaine de la Romanee-Conti vintages from a $250 California Pinot Noir.
Kurniawan went so far as to procure the empty bottles of rare and expensive wines into which he would pour his concoctions, some of which he fobbed off as Chateau Mouton Rothschild, Chateau Lafite Rothschild, Chateau Latour, Chateau Margaux, Chateau Petrus, Chateau Haut Brion, and other great names of Bordeaux and Burgundy.
84 Bottles Of Wine On The Wall
In 2008, Kurniawan allegedly consigned for auction at least 84 bottles of counterfeit wine purporting to be from Domaine Ponsot, Burgundy, France, with a pre-auction estimate of about $600,000. Ahhh but there were hiccups - starting with that 1929 bottle from Domaine Ponsot, which, unfortunately, only began estate bottling in 1934, but, hey, what's a few years between wine connoisseurs? Now the '29 is one of the greatest of years - a '34 was a superb harvest but, frankly, not in the same class as the earlier vintage; and, you know, if you're going to be spending about $7,000 on a bottle, I'd go for the '29.
Then we had the ticklish concern about the Kurniawan's 1945 and 1971 Domaine Ponsot "Clos St. Denis" - that incredible Grand Cru vineyard in the Côte de Nuits - except Domaine Ponsot didn't bottle that vineyard until 1982. Ah, mon dieu, details, mere details!
Charley Chan or Charley Chenin?
Sadly, Kurniawan's dubious Burgundies were withdrawn from auction at the behest of the Administrator for Domaine Ponsot, who in an effort to protect the reputation of his company and the integrity of the brand, sought out Kurniawan in an effort to ascertain the pedigree of the vintage wines up for sale. In response to the Administrator's request for contact information about the source for the offered Domaine Ponsot bottles, Kurniawan divulged that it was an Asian collector and gave two telephone numbers for verification purposes. Sacre bleu! - calls to those numbers resulted in dead ends in the form of one number being that of a regional Indonesian airline and the other a Jakarta shopping mall.
In February 2012, in exchange for a fee, a straw seller allegedly agreed to pretend that Kurniawan's wine was really the intermediary seller's, and then he further agreed to consign the wine for sale at an auction in London under his name rather than Kurniawan's. Consequently, about 78 bottles of Domaine de la Romanée-Conti, among the rarest and most sought after liquid treasures, were listed at a pre-auction estimate of $736,500. This lot was withdrawn in the face of controversy; for example, on an oenophile's computer bulletin board, one individual questioned the offering's authenticity, noting that some of the bottles included four-digit serial numbers when genuine bottles would have had five- or six-digits. There were further red flags: The foil around the cork was not like the foil that covered the corks of genuine bottles. Perhaps the reddest of flares and the loudest of alarms was the allegation that an accent mark that first appeared on the label in 1976 was inexplicably printed on wines in the lot from 1959 to 1971.
Champagne Wishes, Caviar Dreams
In late 2007 and early 2008, Kurniawan procured a $3 million loan from an unnamed finance company based upon misrepresentations that understated his $11 million personal debts. $11 million in personal debts? Wow, that's impressive and, yet, he still could afford the top climats and the finest vintages. Truly, a lifestyle of the rich and famous. Champagne wishes. Caviar dreams. I don't recall - was there also a line in there about bogus Burgundies?
Still, there's more - or as one famed winemaker monk once said "I see stars!" In May 2008, Kurniawan allegedly pledged certain artwork as collateral for millions of dollars of loans he obtained from a New York auction house. In and of itself not particularly shocking but for the fact that the artwork has been previously pledged as part of obtaining the $3 million loan from the previously referenced unnamed finance company. Still - what's a little double dipping when you have a tastevin; it's sort of expected, n'est-ce pas?
In 2009, Kurniawan sold a portion of his wine collection at auction: Wine that he he had previously pledged as collateral to secure millions in loans from an auction house - the same auction house where he sold the collateralized wines. Oooh, how gauche.
On December 18, 2013, following a one-week trial, a jury in Manhattan federal court found Kurniawan guilty of of one count of mail fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which also carries a maximum sentence of 20 years in prison.
In vino veritas! Well, maybe not, after all.
On August 7, 2014, Kurniawan was sentenced to 10 years in prison, and ordered to forfeit $20 million and to pay $28,405,502.40 restitution.
The other day, the FBI posted a photo gallery of some of the equipment Kurniawan used to further his fraud. It's a fascinating glimpse behind the scenes. VISIT THE GALLERY