When the agents went into the wineries and asked to examine the field tags on file, they did not find anything suspicious. The paperwork was impeccable, disguising any evidence of fraud. So the agents dug up maps filed with the county that detailed what kind of grapes were grown in specific vineyards. Teams of agents staked out vineyards around the region to observe which grapes were picked and where they were delivered. At times, it was a twenty-four-hour job as the agents monitored the huge mechanical pickers that worked throughout the night, followed by the bands of laborers who arrived to pick at dawn.
By following the grapes from the field to the winery and comparing what was picked to the description on the field tags, the agents were able to document that some growers were passing cheap grapes off as more expensive varietals.
* * *
Steven Lapham had been working at the U.S. Attorney’s office in Sacramento for four years when an ATF agent came in one cold day at the end of December in 1989 with a case he wanted to drop. It involved a grape scam and the agent didn’t think he had enough evidence to go forward. Besides, the ATF “did guns and drugs,” not wine. He needed Lapham’s okay to stop the pursuit.
The federal government at that time had a spotty history prosecuting wine fraud. The cases it did pursue were relatively minor in scope. In 1974, Almaden Winery had misrepresented what was inside 28,000 cases of wine it sold to airlines to put in those tiny screw-top wine bottles. The winery was fined $250,000—at that time the largest fine ever levied.74 In 1982, the bureau arrested a Sausalito man then living in New York, Louis A. Feliciano, who had commissioned wallpaper with the design of Château Mouton Rothschild labels. He cut out the labels and pasted them on forty cases of California wine.
As Lapham listened, he realized that the scale of the fraud the ATF agent was describing was huge. Lapham wasn’t someone who thought wine drinkers were rich and snobbish and deserved whatever they got. Nor did he think falsifying wine or switching out one type of grape for another was a minor matter. The California wine industry brought millions of dollars into the state economy each year and employed thousands of people. Lapham thought that if government didn’t clamp down hard on grape fraud, it would only grow in scope.
Lapham was a wine lover, and perhaps that perspective made him eager to pursue the case. It certainly helped him understand the seriousness of the fraud.
Lapham had a realization about wine in 1982 when he was thirty. He had been a casual wine drinker until then, never paying close attention to what he bought or what he drank. He was in Laguna Beach in southern California on Mother’s Day, visiting his closest friend and his parents. His friend’s father, a cardiac surgeon, brought a bottle of 1966 Château Lafite Rothschild to celebrate. Lapham still remembers his first taste of that famed wine. “It was like velvet. The tannins had all disappeared. It was flavorful, rich and full-bodied. I learned for the first time what good wine was supposed to taste like.” He vowed then and there to only drink good wine—not Château Lafite–level good—but good California Cabernet.
Lapham recruited a more enthusiastic ATF agent to oversee the grape fraud case. Eight months later, agents started to stake out grape fields all over the Central Valley. In the early 1990s, Lapham and California state prosecutors brought more than twenty civil and criminal lawsuits against Delicato, its president, Anthony Indelicato, the Bavaro brothers, Michael Licciardi, Fred Franzia, Bronco Wines, D. Papagni Fruit Co., and others, charging that they had fraudulently sold $26 million of grapes and wines that were not what they professed to be. All of those charged either pleaded guilty or were convicted. Bronco Wines agreed to pay a $2.5 million fine for misrepresenting 5,000 tons of Grenache and Colombard grapes as Zinfandel. They had passed off one million gallons of wine worth approximately $5 million as white Zinfandel when it was made from other grape varietals. Franzia paid a $500,000 fine and was forced to step away from the company’s presidency and the board for five years.
Lapham could have pushed to send Franzia to jail, as he did for the others convicted of fraud. But Franzia persuaded the prosecutor that the small town of Ceres, home to Bronco, would suffer financially if Franzia’s imprisonment triggered the company’s collapse. It was a concession that Lapham would regret years later as he watched Franzia and Bronco Wines grow in strength and financial stability while, it seemed to Lapham, skirting the edge of legality in other ways. Franzia’s conviction has not slowed down his ability to turn Bronco into the fourth largest wine company in the U.S. He now refuses to talk about the conviction in interviews. It weighs on his mind, though. In 2008, he asked President George W. Bush for a presidential pardon. One reason he wanted it was because he wanted to own a gun, which he couldn’t do as a convicted felon.75 His application was denied.
* * *
In 2012, federal agents busted open the largest wine-counterfeiting scheme in the twenty-first century. What made the arrest so shocking, so singular, was that it involved the wine elite, the men who prided themselves on their sophisticated palates and bank accounts deep enough to acquire the most coveted wines in the world. Discovery of the fraud revealed how the pursuit of trophy wines by the rich eager to flaunt their wealth made them vulnerable to deceit and fraud. These men, ranging from young Turks on Wall Street to software founders to energy billionaires, were so intent on acquiring rare wine—and auction houses were equally focused on helping them—that they ignored signs they were being conned. The fraud put wine collecting in the worst light possible, exposing the greed, obsession, and hubris that can accompany a love of wine.
The groundwork for this fraud was set during the last twenty years with the rise in popularity of wine auctions. For many decades, the only wine auctions in the United States were held in San Francisco and Chicago. Other states outlawed them. London was the wine auction capital of the world. Then in 1994, New York State legalized wine auctions, which transformed the affairs formerly held in windowless rooms in auction houses like Sotheby’s and Christie’s and attended by a small group of collectors into raucous events. Wine auctions moved into elegant three-star New York restaurants where the wine poured at the tables rivaled that sold on the auction block. The lunches held to showcase the wines became Bacchanalian affairs where numerous bottles of high-priced wine washed down cuisine prepared by some of the world’s top chefs.
Within a few years New York had overtaken London as the economic center of the fine wine world, led by newly aggressive auction firms like Acker Merrall & Condit and its young president, John Kapon. Young and wealthy Wall Street financiers with a love for rare Bordeaux and Burgundy wine, almost unlimited wealth, and the stamina to withstand days of heavy drinking became the new kings of the wine world. They gave themselves cowboy-like nicknames like “Big Boy” and “King Angry.” It was common for them to throw around tens of thousands of dollars on a bottle of wine. It became “my bottle is bigger than your bottle,” noted one critic.76
Wine auction frenzy was ratcheted up to a new level when Hong Kong decided in February 2008 to eliminate its 40 percent import tax on wine. While the economic downturn dampened the economies of the U.S. and Europe, Asia thrived. Asian buyers were enthralled with Bordeaux, particularly Château Lafite Rothschild, and the prices they paid at auction continually set new records. In 2010, for example, three bottles of 1869 Lafite Rothschild were expected to sell for $8,000 apiece; instead the bottles sold for $232,692 each.77 Auctions worldwide raised $92 million in 2000. By 2011, global auction sales soared to a record $478 million.78
The rush to acquire—and sell—rare and hard-to-find wine meant its provenance was not always scrutinized. “In the rare-wine world, doubts are endemic; murkiness is built into a product that is concealed by tinted glass and banded wooden cases and opaque provenance and the fog of history,” wrote Benjamin Wallace, the author of The Billionaire’s Vinegar, a book about one of the greatest wine frauds in history. “At the same time, the whole apparatus of the rare-wine market is about converting doubt into mystique. Most wealthy c
ollectors want to spend big and drink famous labels, not necessarily ask questions or hear the answers.”
It was in this world that Rudy Kurniawan thrived.
* * *
For more than a decade, Kurniawan was the boy wonder of the fine wine world. He was the kind of person who opened rare bottles of Château Cheval Blanc and Mouton Rothschild at parties, who treated his friends to thousands of dollars of wine—often in a single dinner—and who spent as much as $1 million a month to acquire coveted vintages. His penchant for Domaine de la Romanée-Conti—considered the most prized Burgundy in the world—was so well known among his circle of high-spending, heavy-drinking friends that he earned the nickname of “Dr. Conti.”
Kurniawan was a bit of a mystery when he first came to public attention in the early 2000s, but it didn’t take long before he dazzled the world of wine collectors. He said he had been born in Indonesia to a wealthy ethnic Chinese family and his father had given him the last name of Kurniawan to protect his identity. He had come to California to attend Cal State Northridge. Kurniawan seemed to have endless amounts of cash, but was vague about its origins. He drove a Ferrari and a Bentley, dressed in custom Hermès suits, and had a collection of expensive watches.
Kurniawan had an epiphany about wine in 2000 when he had a glass of 1995 Opus One, a Napa Valley Cabernet made in a joint venture by Robert Mondavi and Baron Philippe de Rothschild. The wine was a revelation, and it sent Kurniawan on a journey to learn more. He soon became fixated on wine and joined three Los Angeles wine-tasting groups. All had provocative names. One was called the BurgWhores and focused on Burgundy wines. Another was titled Deaf, Dumb, and Blind, and a third was known as the Royal Order of the Purple Palate. Its members included Hollywood directors, movie producers, and business managers for A-list stars. He started to meet movie stars, like Will Smith and Jackie Chan, and treat them to gourmet dinners filled with special wines. Within a few years, Kurniawan had become one of the most high-profile wine collectors in the U.S.—or at least one of the most willing to make a show of the wines he bought and drank.
At one notorious dinner in New York in 2004, Kurniawan and John Kapon, the then thirty-two-year-old president of the New York auction house Acker Merrall & Condit, and some friends went on a four-day eating and drinking binge at Cru, a restaurant just north of Washington Square in New York famous for its 150,000-bottle wine list. The guests consumed dozens and dozens of bottles, what wine writer Michael Steinberger called “a murderers’ row of legendary wines.” They included a 1945 Mouton Rothschild, a 1964 Romanée-Conti, and a 1971 La Tâche, wines so rare and expensive few had ever had the pleasure of drinking them.79 The wine critic Robert Parker had dubbed the 1945 Mouton Rothschild “immortal,” it was so good. At the end of the bacchanal, the bill came to $250,000. Kurniawan paid for all of it on his American Express Black card.
Kurniawan’s largesse soon became legend and it immediately elevated him into the upper echelons of the wine world. But the evening also provided a glimpse into Kurniawan’s baser instincts, although no one recognized it at the time. At the end of the evening, Kurniawan asked the restaurant to mail the empty bottles to his house near Los Angeles. It would only be years later that anyone understood the meaning behind the request.
The dinner cemented an increasingly close relationship between Kurniawan and Acker Merrall’s president Kapon, a relationship that critics would later say made the wine auction house fail to do due diligence on wines Kurniawan offered up for sale. Their closeness was no surprise; they were both young, brash, loved to drink, and regarded old and rare wines as trophies worth spending lavishly on. Plus, they were both so rich price did not matter. And Kurniawan led the way, spending as much as $1 million a month on his wine habit.
In 2006, Kurniawan decided to sell bottles from his collection, which was stored at his house near Los Angeles. He turned to Kapon, who decided, for the first time in Acker Merrall & Condit’s history, to hold an auction from just one wine cellar. In the glossy catalogue printed to promote the sale, Kapon extolled the collection, calling it “the greatest cellar in America,” a cellar “beyond compare.”
The wines were extraordinary—perhaps too extraordinary. They included six magnums of Domaine de la Romanée-Conti’s 1971 Montrachet, six magnums of the mythic 1947 Château Cheval Blanc, a case of the 1961 Château Latour à Pomerol, a case of Armand Rousseau 1962 Chambertin, a case of 1947 Château Lafleur, and three bottles of 1921 Lafleur, among others. The availability of such a large collection of rare wine prompted a bidding frenzy. The auction, held over two days at Cru restaurant, brought in $10.6 million—making it the largest single-owner sale ever by an American collector.80
Then Kurniawan and Kapon outdid themselves. They held another auction called Cellar II (the January auction was named The Cellar) and topped previous sales. Eager customers spent $25.7 million. Together, the Cellar sales brought in $36.3 million.81 Kurniawan instantly became known as one of the world’s greatest collectors and Acker a major player in the auction world.
Two years later, at yet another Acker auction held at Cru restaurant, doubts about Kurniawan exploded into public view.
Once again, a number of the moneyed drinkers who called themselves The Angry Men had gathered to bid on bottles of Champagne from the cellar of Robert Rosania, the partner in a billion-dollar real estate company, whose collecting handle was “Big Boy.” The crowd had been drinking for hours and raising their paddles time after time to bid on pristine bottles of bubbly. Never mind that Bear Stearns had collapsed a month earlier and the U.S. was on the brink of financial collapse. The men hooted and hollered during the telephone bidding war that broke out over two bottles of Moët & Chandon Dom Perignon Rose 1959, which had never been commercially released. The lot had been expected to sell for $5,000; it went for $84,700.82
At one point, Rosania stood on top of a table, told everyone to shut up and pay attention, and then used a saber to cut off the top of a $10,000 jeroboam of 1945 Bollinger Champagne.83 It was a trick he had performed many times.
Kurniawan had consigned 268 bottles from three French Burgundy estates, Domaine Georges Roumier, Domaine Armand Rousseau, and Domaine Ponsot, for the auction. He and Kapon must have had high expectations for the bottles, considering the success of the previous auctions, and Kurniawan had flown in from Los Angeles to watch the bidding. But before the auction had started, the proprietor of one of those estates, Laurence Ponsot of Domaine Ponsot, called Kapon. Someone had notified Ponsot that there was a 1929 Ponsot Clos de la Roche for sale. Ponsot was immediately alarmed. That wine could not exist. The Ponsot family had not started producing wine under its own name until 1934.
Ponsot insisted to Kapon that the bottle must be a fake. He demanded that Acker withdraw all of the 97 bottles of Domain Ponsot that were listed in the catalogue.
Kapon, to his credit, gave Ponsot his assurances that the disputed bottles would be withdrawn. But the French winemaker boarded a jet to New York anyway to make sure that those wines were not auctioned off. His plane landed at four p.m. He rushed to Cru and arrived shortly after six p.m., right as the auction was getting going. Ponsot sat quietly in the back of the restaurant and watched as others drank and enjoyed themselves. Right at the point the Ponsot wines were supposed to have been sold, Kapon told the would-be bidders that the Domaine had requested that Acker Merrall yank the wines. “I guess there were a couple of inconsistencies there,” Kapon told those assembled, “so we had to pull them.”
The announcement surprised the crowd, and angered a few who had hoped to bid on the wines. It got people talking, too. While it isn’t that uncommon for a few bottles to be pulled before an auction, Acker had just removed $1 million of wine. That was unusual. When a reporter later asked Kurniawan what happened, he downplayed any suggestion the wines were not authentic. “We try our best to get it right,” Kurniawan told Peter Hellman of the Wine Spectator, “but it’s Burgundy, and sometimes shit happens.”
One of the collecto
rs who had purchased wine from Kurniawan over the years was William I. Koch, a Florida energy magnate and brother of David and Charles Koch, who are well known for their financial support of conservative political causes. Koch is a great collector; his houses in Palm Beach, Florida, and on Cape Cod in Massachusetts are filled with paintings by Picasso, Monet, Degas, Modigliani, Homer, Chagall, and sculptures by Rodin and Botero. He loves to sail (he won the America’s Cup in 1992), and has a large collection of maritime memorabilia, including paintings of ships and seascapes, model ships, and antique nautical instruments.
Koch also has one of the world’s most impressive wine collections, with 43,000 bottles scattered across his two cellars. He has collected verticals of four of the world’s greatest estates: 150 years of Château Lafite, 120 years of Château Mouton Rothschild, 100 years of Château Latour, and 90 years of Château Petrus.
Koch frequently buys at auction and in 2006 spent $77,925 at the Acker auction of Kurniawan’s cellar. Koch paid $9,000 for a 1949 Château Lafleur and $30,000 for a 1947 Château Petrus, among others.84 Over the next few years, Koch kept acquiring wine from Kurniawan; he eventually spent about $2.1 million on 219 bottles of his wine.
When Koch brought in an expert to authenticate his wines—including a number of bottles from the 1780s that supposedly belonged to Thomas Jefferson—he learned that about 421 of them, worth around $4.5 million, were faked. It was only 1.8 percent of Koch’s collection, and for a man worth $4 billion, a small fraction of his net worth. But the discovery of the forgeries infuriated Koch. It sent him on a crusade. He hired former FBI agents, wine experts who used to work for Sotheby’s auction house, glass historians, cork experts, adhesive specialists, and label experts to examine his collection—and pursue those who cheated him. He has spent $30 million to $40 million so far.
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