Billionaire Koch brother's crusade against counterfeit wine

Bill Koch, sibling of the famous Koch brothers, Charles and David, spent $35 million investigating what began as $400K in wine fraud. Turns out, Koch was the wrong guy to swindle

As long as there have been collectors, there have been people trying to cheat them. The world of fine wine is no different. Forgers have made millions of dollars fooling collectors thirsty for rare and interesting "trophy" wines. With lots of money, big egos and often no intention of ever drinking the wine, they're an easy target.

At first, no one seemed to be an easier mark than Bill Koch, an avid wine collector with deep pockets. He is the sibling of the famous Koch brothers, Charles and David, who are known for their philanthropy and support of conservative causes.

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Billionaire Bill Koch and 60 Minutes correspondent Sharyn Alfonsi

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But as it turns out, Bill Koch was the wrong guy to mess with. Driven by an obsessive aversion to being cheated and fueled by a billionaire's budget, the "other Koch brother" has become the country's leading crusader against counterfeit wine.

SHARYN ALFONSI: Who are you in this family? Where are your interests? What makes you different than the other brothers or like them?"

BILL KOCH: I could-- how much time do you have?

SHARYN ALFONSI: Sixty minutes.

BILL KOCH: Well, I've chartered my own way in life. My brother Charles likes to collect money. My brother David used to like to collect girls until he got married. And people say, "Well, what do you collect?" I collect everything I can.

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Koch owns millions of dollars of prime real estate -- including this 45,000 square foot mansion in Palm Beach, Florida. 

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And that's a whole lot. Koch owns millions of dollars of prime real estate -- including this 45,000 square foot mansion in Palm Beach, Florida. The house -- like the Botero sculptures on the lawn -- is busting at the seams. Hundreds of millions of dollars of masterpieces, elbowing for wall space. Degas, Monet, Cezanne. 

BILL KOCH: My twin brother says that my home here is a museum disguised as a house.

Koch is a billionaire whose money comes from his family. His father, Fred Koch, founded the Kansas-based oil and gas conglomerate, Koch Industries, now the second wealthiest privately-owned business in the country with annual revenues of over $100 billion. Bill Koch was fired from the company, after he tried to gain control of it. He sued his brothers Charles and David for his share and  went on a multimillion dollar spending spree, collecting not just art, but trophies – including the America's Cup in 1992 – and a cellar full of the finest and rarest wine in the world.

SHARYN ALFONSI: And how many bottles do you think you have in here?

BILL KOCH: Oh gosh, probably 15,000 or something like that.

His finest wine and those most desired by collectors are from centuries-old chateaus in the Bordeaux and Burgundy regions of France. Bottles with an interesting backstory fetch especially high prices. Christie's auction house sold one bottle supposedly owned by founding father Thomas Jefferson for a record price of more than a $156,000.

BILL KOCH: When I saw that Malcolm Forbes or actually his son, Kip Forbes, bought a bottle of Thomas Jefferson wine, I said, "I gotta have that." So I went out searching for it, and low and behold, I found four bottles.

In 2005, Koch decided to include a photo of one of his prized Jefferson bottles in an exhibit of his collection. Koch asked Brad Goldstein, his private investigator -- when you're a billionaire you have one -- to reach out to historians at Thomas Jefferson's  home, Monticello.

BILL KOCH: That's one of those phone calls that always-- I'll never forget.

SHARYN ALFONSI: What happened?

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A materials expert analyze this bottle of wine and found Elmer's glue was used on the label, which wasn't available in 1870.

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BRAD GOLDSTEIN: I got the curator of the museum on the line and she said, "I have some bad news for you. These bottles have nothing to do with Thomas Jefferson." And I said, "Uh oh. Uh oh. This isn't gonna go well."

Monticello historians told them Thomas Jefferson didn't have his wine bottles engraved and this is not his signature.

SHARYN ALFONSI: How many bottles of the Thomas Jefferson wine did you purchase?

BILL KOCH: I purchased four bottles.

SHARYN ALFONSI: And what did you pay for 'em?

BILL KOCH: I paid $100,000 per bottle. So $400,000 for fake bottles.

Koch dispatched his private investigator, Brad Goldstein, to Germany -- to track down Hardy Rodenstock, a wine spectator cover boy and collector who claimed to have discovered the Jefferson bottles. Rodenstock wouldn't talk to Brad Goldstein, or 60 Minutes for that matter. But there was someone who was prepared to talk to Koch's private eye about wine forgery; a man who said he had crafted fake labels for Hardy Rodenstock for years.

BRAD GOLDSTEIN: I would bring him pictures, and we would go through like going through baseball cards, "Which one did you do?" and he would pick them out.

SHARYN ALFONSI: How many did he do?

BRAD GOLDSTEIN: He did about a dozen plates, but that's not how many he printed. He printed thousands.

SHARYN ALFONSI: Thousands.

BRAD GOLDSTEIN: He would say, "OK, blow up this looped L and-- you'll see here I had a hard time with my-- with my knife, and I made a nick here, and that's how you're gonna be able to detect that on the La Fleur, it's-- it's a fake." I mean, the little details like that are just, like, gifts.

Rodenstock refused to come to the United States to answer Bill Koch's lawsuit, and Koch won a judgment against him anyway for more than $1 million. It hasn't been paid.

BRAD GOLDSTEIN: The wines that he was importing into the United States-- first of all, he-- some of 'em they never made, so that-- never made--

SHARYN ALFONSI: Never existed--

BRAD GOLDSTEIN: --Never-- never existed.

SHARYN ALFONSI: What a bold thing to do.

BRAD GOLDSTEIN: And nobody bothered to check

BILL KOCH: When I first heard about it I said my gosh, I gotta look at my whole wine collection then I began to find more and more fake bottles.

BILL KOCH: This is a bottle of Chateau Lafite Rothschild 1870. And we had a materials expert analyze this and he said, the glue behind here is Elmer's glue. And that wasn't made in 1870.

SHARYN ALFONSI: Oh my goodness.

Bill Koch traced more than half of his 400 fake bottles to this man -- a wine dealer in Los Angeles named Rudy Kurniawan…

Rudy Kurniawan: But you know, only the great Burgundys go up in price.

…Who was dazzling Hollywood with his superior palette and lavish wine tastings.

Rudy Kurniawan: It dances in your mouth. To me, you know, it's like, ohh la la, you know.

Koch bought this footage of Kurniwan to use against him. He also alerted the U.S. attorney's office. Jason Hernandez was assigned to investigate.

JASON HERNANDEZ: Rudy was a new money guy that no one really knew where he was from, he was flashy, he liked nice cars, he had, you know, Hermes suits. He traveled on a private jet. And he spent millions of dollars a year on wine.

SHARYN ALFONSI: Was he fueling his lifestyle with the money that he was making selling fakes, or did he have more income coming in?

JASON HERNANDEZ: It was all from making counterfeit wines. He didn't have a day job. His day job was to work in his kitchen and make $10 - $20,000 bottles of wine.

In 2012, the FBI raided Rudy Kurniawan's home in California where he was blending high-end wine with cheaper wine and rebottling it behind expensive labels.

BRAD GOLDSTEIN: This was, like Santa's workshop. It was, like, all that was missing was the elves. He had the bottles laid out. He had the labels stacked and currency. "This is where he made everything."

JASON HERNANDEZ: These wines were made by Rudy Kurniawan in Los Angeles, they're not from France- they're from his kitchen.

SHARYN ALFONSI: Chateau Rudy.

JASON HERNANDEZ: Chateau Rudy.

Rudy Kurniawan made tens of millions of dollars fooling wealthy buyers. He was convicted and sentenced to prison for 10 years.

BILL KOCH: There is a code of silence in this business because obviously, the faker doesn't want anybody to know that he's making fake wine. The auction house doesn't wanna know that, and then, the collector himself generally doesn't wanna know it. Or if he finds out, he wants to find a secret way to dump it and get his money back. And that's why, you see, I was very unique in being the one who said, "I'm gonna stand up for it. I'm gonna shine a bright light on these fakers."

SHARYN ALFONSI: How much money did you spend tracking down who sold you those bottles?

BILL KOCH: I spent over $35 million doing all that.

SHARYN ALFONSI: $35 million--

BILL KOCH: Yes, more.

SHARYN ALFONSI: Why?

BILL KOCH: I was a dog gone-- on a bone. I wasn't going to give up.

He sued Christies, which sold one of the Jefferson bottles.  But the court ruled the statute of limitations had expired. Christies declined to be interviewed for this story.

Bill Koch told us even when the wines are genuine, the stories that sell them may not be. The details are often a mystery. In one of his lawsuits, Koch had to contend with this man, an expert witness and wine consultant named Gil Lempert Schwarz. Koch's team challenged his credibility in court and suggested we look at a 2015 auction where Lempert Schwarz offered a trove of wines that he said were discovered in a Swedish nobleman's cellar. Just the kind of story that can drive prices up.

SHARYN ALFONSI: Is it true? Is this story true?

GIL SCHWARZ: Of course it is.

SHARYN ALFONSI: I'm going to read from the catalog. You wrote that you discovered a Swedish nobleman's cellar. "While the early morning mist hovered outside the 19th century manor house, it quickly became apparent that this wasn't any old Swedish wine cellar lurking directly underneath." Did you find that cellar?

GIL SCHWARZ: Of course.

SHARYN ALFONSI: What can you tell me about it?

GIL SCHWARZ: Nothing other than what I use in the description. It was an old family house. It was a cellar that was brought to me by a family friend.

SHARYN ALFONSI: He was a Swedish nobleman is what you said?

GIL SCHWARZ: Well, this-- this-- this was-- this is the family-- that owns the house.

SHARYN ALFONSI: Who was that family?

GIL SCHWARZ: I can't disclose who that family was. They were clients of mine. There are binding, non-disclosure agreements as are signed with every client. That's why no names will come out. And in the auction business, there are no names.

SHARYN ALFONSI: You say in your catalog, "In fact as records show, at one point the king himself had presented several cases of good French drinking wine to the head of the family as a gift for their fine services." What records are you talking about?

GIL SCHWARZ: The family presented this to me. That was the story they told me. It was not something that I needed to go and check with Swedish government records. I simply listened to a story told to me by the family.

SHARYN ALFONSI: Could you ask them and say, "Hey, 60 Minutes wants to know if this story's true, would you mind confirming it?"

GIL SCHWARZ: No, I will not do that.  I will not because I don't think it's important.

SHARYN ALFONSI: Because there are people in the business saying you whip up fairy tales to sell wine.

GIL SCHWARZ: I disagree with you. 

SHARYN ALFONSI: You didn't weave a tale –

GIL SCHWARZ: Why would I?

SHARYN ALFONSI: - about this cellar?

GIL SCHWARZ: Why would I?

SHARYN ALFONSI: Because you can make a lot of money.

Validating stories about fine wine is hard. But as a result of Bill Koch's $35 million crusade, it is now easier for buyers in New York – where a lot of fine wine is sold – to sue auction houses that sell fakes.

SHARYN ALFONSI: What is it about the fraud element of this that you can't let go? There is something deep there.

BILL KOCH: Well, there is, you know. Then, I'd have to go to a deep shrink and find out where in my childhood-- probably 'cause I had bigger brothers who were always beating up on me, faking me, cheating me a little bit. Maybe that's a part of it. And so I said, "I gotta establish a reputation that if you cheat me, I'm gonna be tough."

SHARYN ALFONSI: It's almost enough to make you wanna buy beer? Have you hit that point yet?

BILL KOCH: No.

Produced by Sarah Koch. Sarah Turcotte, associate producer.