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Counterfeit wine: A vintage crime

A high-stakes courtroom drama played out in New York City pitting wealthy wine collectors against a man accused of intentionally making and selling millions of dollars’ worth of fake rare wine
The shadowy world of counterfeit wines 09:33

It's unlikely you'll encounter this problem for your holiday toasts, but distinguishing a truly fine wine from a fake can require "CSI"-like skills. Without them, collectors are clay pigeons for the devious masters of a vintage crime. Our Cover Story is reported now by Martha Teichner:

"Jawdropping" just barely describes the art in billionaire energy executive Bill Koch's Palm Beach home. You may have heard of his brothers, Charles and David, who bankroll political causes.

Bill Koch is a man willing to spend a great deal of money on the best of everything, including wine.

He is also a man who doesn't like getting cheated.

He says he has spent $4.5 million on 421 bottles of wine that turned out to be counterfeit. "So it's a pretty big swindle."

Counterfeit wine bottles. CBS News
What we're talking about here is a world where a bilked billionaire says he's spent nearly twice as much on fake wine as the average college graduate will make in a lifetime. 

He show Teichner a "nice old bottle," a 1737 Lafite. Its label reads "1737 Chateau Lafite Rothschild."  "You know, the Rothschilds didn't own Lafite in 1737," Koch said. 

There's still wine in the bottle, too -- what could it be?  "Moose piss?" Koch suggested.  

It doesn't take a genius to figure out that it's the money that attracts counterfeiters to these wines, usually from France -- Burgundy or Bordeaux. The older, the better.

"Unless you have a good magnifying glass and know what you're seeing, it's easy to be fooled," said Maureen Downey, a San Francisco wine consultant and wine detective. 

She showed Teichner a bottle purporting to be a 1961 Chateau Lafite Rothschild, which would cost $3,000-$3,500. 

"The problem with this bottle is that when we look at this cork, where it says 1-9, the six has been squished," Downey said. "It's all squished up because it's been reinserted.  And the 1 used to be a 4.  So this is not a 1961, Somebody took a 1964, which would only be worth $200 or $300."

Taste? Not bad, but not a 1961 Lafite.

What's so special about this particular fake?  It came from Rudy Kurniawan, who's been described as the Bernie Madoff of the wine world.

An Indonesian citizen, he came out of nowhere in the early 2000s.  In 2006, in a now-infamous pair of auctions, he sold $35 million worth of the rare wines he supposedly had collected.

The FBI arrested Kurniawan in March 2012. Investigators found a regular fake factory in his home near Los Angeles -- bottles, labels, capsules, glue, a re-corking device.

A star witness for the prosecution, Bill Koch himself identified Kurniawan-sourced fakes he bought.

On Wednesday, Kurniawan was convicted of fraud, and faces up to 40 years in prison.

Outlandish as all of this may be, the Rudy Kurniawan case is only the latest controversy over the authenticity of wine. It so happens Koch was involved in another one, equally sensational. 

"I used to bring people down here and brag and say, 'You wanna see Thomas Jefferson's wine?'" he said. "Well, then when I found out it was fake, now what I have to do is say, 'Come on down and see my fake Thomas Jefferson bottles!'"

Koch owns four of them. They were part of a couple of dozen or so, sourced originally to a German -- now reputed to be a master counterfeiter -- who calls himself Hardy Rodenstock (not his real name). His collection seemed to be so impressive, he made the cover of Wine Spectator magazine. 

The sale of the first so-called Thomas Jefferson bottle in 1985, at Christie's in London, was such a big deal that it made the "CBS Evening News."

Correspondent Steve Kroft reported that the hand-blown, amber green bottle of Lafite 1787 "had become the most famous bottle in the world."

Was it really, Kroft questioned, part of a 1790 order Jefferson split with his pal George Washington?

At the time, Christie's said, "There is an immense amount of circumstantial evidence supporting the ordering of this wine and its identification, but of course no proof."

The bottle sold for more than $157,000 -- a record then -- to Christopher Forbes, acting on behalf of his well-known father, Malcolm Forbes of Forbes magazine.

In 1988, Bill Koch bought his own Hardy Rodenstock "Th.J." bottles, although not from Christie's, which had never even seen them.

For four bottles he spent just under $400,000.

"And there was no question in your mind that this was authentic?" Teichner asked.

"Yes, at that time," he replied.

Soon he began to have doubts.

Eventually, he hired investigators, including an ex-FBI agent, who informed him his Th.J. bottles were counterfeit. Those initials, they told him, were made with an electric engraving tool -- nonexistent in the 18th century. 

Was Koch furious? "Absolutely," he said. "I said I'm going after him. If it takes me to the end of the world, I'm going after the fraudster."

And how does one go about doing that? Teichner asked.

"Well, spending a lot of money, unfortunately."

Koch says he's spent $25 million so far on the eight wine-related lawsuits he's filed against Hardy Rodenstock and others. "I want to shine a bright light on this whole fraud to show how bad it is," he said.

We repeatedly attempted to contact Hardy Rodenstock, but received no reply.

The prices paid at auction for "collectible" wines can seem staggering, but actually worldwide sales dropped 19 percent -- by nearly $100 million -- last year. Industry observers say counterfeiting -- the Rudy Kurniawan case, particularly -- has made buyers gun-shy.

Faking fine wine is rampant, and growing, especially in China. 

One target is California's Opus One, a wine that aspires to the status and price of the most counterfeited French wines; each bottle has a market value of around $300 to $400 a bottle.

So Opus One's CEO, David Pearson, is fighting counterfeiters with a tamper-proof capsule that changes color, and with a flat chip behind the back label you can scan with your phone.

"The chip, once it's scanned, sends a message back to our computer server that the bottle was scanned," Pearson said. "It also is capable of geo-locating the bottle anywhere in the world."

That's right, like GPS tracking.

"I think counterfeiters are very clever," Pearson said, "and I think that the technology will shift. Once we put something out, they will adapt to that, and we'll need to change our strategy and it'll continue onward."

As for Bill Koch, with more than 40,000 bottles in the cellars of his various homes, he's stopped buying.

"I'm tired of the aggravation of being violated by these con artists and crooks," he said.

Teichner asked, "Has it been worth it to go after these people?"

"Probably, probably yes," he said. "Maybe I'm a Don Quixote, you know, attacking windmills of sorts. But it brings me great satisfaction."

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