Maureen Downey’s article on wine fraud in auctions and at retailers just dropped:
http://www.wine-searcher.com/m/2012/08/wine-fraud-in-defense-of-auction-houses
Nice work Maureen.
Must say Acker and Spectrum look more and more guilty with every bit of information that comes out.
Spectrum with that particular sale seems to have outright lied about knowingly selling fraudulent wines, and even though they finally pulled some, still continued on to sell other wines in that sale that they knew were from Kurniawan also and were fakes as well, despite all the evidence and warnings.
I can’t see how they are not anything but absolutely guilty in this respect. Hopefully the law catches up with them soon…
Very understandable not to make negative statements about a retailer in a public forum. But saying one needs to be wary of the retailers not on her list seems way over the top. Her list of trusted auction houses is well more than half of the big players, while her list of 11 retailers (I think I’ve bought from all of them except Noe, who I’ve never heard of) is a tiny percentage of fine wine retailers. Everyone between CA and NY is shady? I’m fine with her saying she trusts these people, but someone else extrapolating that one should mistrust others isn’t warranted. Especially since some of these retailers aren’t really “rare and fine” places. Astor usually has a few old bottles around (mostly Italian), but not really what they do, and what they have seems to match other retailers when a batch of old stuff shows up in NY (I like the store a lot by the way). Maybe Morrell has a private list, but mostly they seem to have a list of fairly recent stuff at very high markups. Same with S-L(though unlike Morrells sometimes they have great deals at least on Burg). Personally, I’m happy with buying from most of the retailers listed, but I have at least as much confidence buying from CSW, Grapes, or Zachys, just to name a few.
There is no way that I could either list the retailers with whom I have had issue (legal), nor all those that I trust (time). I did list some, but not all with whom I do/have done business. These are some of my go-to’s. Omission is not necessarily equivalent to a lack of confidence…
The point of the article was that fraud is not just an auction problem. Retail can be just as problematic. Though there are clearly, IMPO, some auction houses that are doing a better job than others… Other than collections of wines that came primarily from ‘particular single seller sales’ the vast majority of fakes I have seen in the past 6 years are from retailers. Thus, the vilification of the auction industry as a whole is unwarranted.
I appreciated your article Maureen and that was indeed what I took away from it. The auction fraud was well publicized but given the frequency of auctions, relatively rare. I have always been a bit concerned about retail, especially when I purchase wines site unseen based on typically vague info on source.
OK, I agree that my statement was over-broad, especially with respect to retailers. OTOH, if one is buying old or rare wines, it pays to be wary regardless of the merchant.
As many of you know, Maureen and I are friends, but not infrequently we agree to disagree about matters that involve wine counterfeiting. The issue about the significance of auction houses in the current wine counterfeiting crisis is one of those issues.
We are in complete agreement however that the counterfeit wine problem is by no means limited to the auction houses and that a considerable amount of counterfeit wine has been sold via retailers and brokers and, in some cases, in private sales. But to argue that auction houses are not a major source of the counterfeits in circulation, or that looking at auction house practices is “grabbing the wrong end of the stick”? No way.
Unlike Maureen, I’m not in the wine business. What Maureen unfortunately didn’t disclose in her Wine Searcher article is that her business (Chai Consulting) has significant commercial relationships with both Zachys and Christie’s. In my view, that presents a very real conflict of interest and I think it explains Maureen’s otherwise inexplicable recommendations of both Zachys and Christie’s as wine auction houses. I do not concur with either recommendation.
For the reasons detailed in the Eric Greenberg story (mostly in Part VI), Zachy’s is not an auction house that I am comfortable with at the present time. I have great personal respect for several people employed by Zachys auctions, and a couple of them are seriously concerned about wine counterfeiting and improving auction house practices. Nevertheless, for the reasons explained in the Greenberg story, in my opinion way too many bottles of clearly counterfeit wines have gone through the Zachys vetting process completely undetected since 2004 and very old wines with absolutely no provenance have been sold against the advice of their most senior and experienced staff, with no disclosure of the complete lack of provenance. Also, as I’ve noted previously, Zachys accepted wines consigned by Antonio Castanos on behalf of Rudy Kurniawan from 2008 through 2011.
In my opinion, Christie’s should not be on anyone’s recommended list of auction houses. As I’ve noted much earlier in this thread, and as partially outlined in the initial Federal criminal complaint against Rudy Kurniawan, Christie’s directly contracted with Rudy Kurniawan to sell his wines in at least seven different auctions spanning the period from September 12, 2009 through December 10, 2010. These seven sales are confirmed by UCC-1 security interest filings in New York by Acker Merrall against Rudy Kurniawan. (There are also some preliminary indications that Christie’s may have auctioned additional wines directly on behalf of Rudy Kurniawan in the post-April-2008 time period that are not included in the Acker UCC-1 filings.) What particularly distinguishes Christie’s from all other auction houses is that only Christie’s dealt directly with Rudy Kurniawan after April of 2008. Spectrum and Zachys dealt with Antonio Castanos and thus at least had plausible deniability of any connections with Rudy Kurniawan.
It seems like scores of pages ago that I explained that it was the October 2009 Christie’s auction in New York which Geoff Troy and I and others tried to stop – but to no avail. At that time, we informed Christie’s that Rudy Kurniawan stood accused of selling $2+ million dollars worth of allegedly counterfeit wine to Andy Gordon (described in the initial Federal criminal complaint as “California Collector”), that Gordon had tried to consign a substantial number of the wines to auction, which had been refused by Sotheby’s on authenticity grounds, and that Gordon had demanded and Kurniawan had agreed to issue a refund on all of the wines. We explained to Christie’s that the Gordon Family Trust had filed UCC-1 security interests in California against the wines in the Trust’s possession which were to be returned to Kurniawan and that at least some of the wines on the Gordon UCC-1 list were also included in the list of wines which had just been sold in the Christie’s September 2009 auction, for which a lien release had just been recorded by Acker Merrall, and others were listed in the catalog for October 2009. What we didn’t know at the time, and didn’t discover until the initial Federal criminal complaint was filed in March 2012, was that Christie’s already knew all or most of what we were telling them. Christie’s already knew that Kurniawan and Andy Gordon had entered into a series of written agreements which provided, among other things, that Christie’s would conduct a series of auctions throughout the fall of 2009 and into 2010 at which at least $2.5 million worth of Rudy’s wines would be sold and against which Gordon would have a first priority security interest to secure the repayment he was due. After stalling us until the last minute, Christie’s refused to withdraw the Kurniawan wines and proceeded with the sale. At least five more sales of Rudy’s wines were thereafter conducted by Christie’s (of which I was unaware at the time.).
Even if one could ignore Christie’s ‘inside’ knowledge about the Andy Gordon counterfeit claims, Christie’s obviously knew, like every other auction house, about the well-publicized April 25, 2008 Acker Merrall auction where the fake Ponsots were withdrawn. Christie’s and every other auction house also had information about Rudy’s prior sales or attempted sales of wines alleged to be counterfeit, including (i) the authentication tasting of the Cellar I and Cellar II wines that had been written up in the NY Times article in March of 2007, (ii) Christie’s April 2007 auction in Los Angeles in which Chateau Le Pin requested that the magnums of 1982 Le Pin consigned by Rudy Kurniawan and shown on the cover of the catalog be withdrawn because they were not authentic, (iii) the allegations made in May 2007 at the Taste III conference in Napa by David Molyneux-Berry (formerly head of Sotheby’s wine department) that a single unnamed consignor (Rudy Kurniawan) had sold eight magnums of 1947 Chateaau Lafleur in a single auction (Cellar II—it was actually seven magnums sold with the eighth consumed at the pre-auction tasting and three more were sold at the Cellar I auction) despite the fact that the former chateau owners insisted that only five magnums were ever produced; and (iv) the lawsuits filed by William Koch against Acker Merrall and Rudy Kurniawan alleging that Rudy sold counterfeit bottles to Koch via Acker.
Despite all of the information in its possession and the repeated warnings from Geoff and I and others, Christie’s elected to sell Rudy’s wines anyway. Most importantly, Christie’s chose to sell Rudy’s wines without disclosing to anyone that Rudy was the source of the wines and without disclosing what they knew about Rudy’s prior sales of wines alleged to be counterfeit. Under the circumstances, Christie’s is not only an auction house that I would not recommend, but one which I believe should be avoided at all costs.
As I’ve mentioned before, there are only three major auction houses which, to the best of my knowledge, have never sold wines on behalf of Rudy Kurniawan or his “straw man” consignors such as Antonio Castanos: (1) Sotheby’s; (2) Hart-Davis-Hart and (3) Bonham & Butterfields.
Thanks, Don, for that vivid, pointed summation.
To the list of stains on Christie’s record, I would just add its negligence in “authenticating” and auctioning the Thomas Jefferson bottles of Hardy Rodenstock a few years further back.
“Plausible” seems generous. 
Are the same people working at Christie’s today that were there before?
Richard Brierley left to form Vanquish.
Don:
As usual, extremely well stated. I’d be interested to hear the rebuttal from Maureen on your very specific points.
Barry
Don, as usual an excellent post. I was not aware of Maureen’s close relationship with Christies and with Zachys, but your comments now help me to understand Maureen’s staunch defense of those auction houses notwithstanding the direct evidence of their (at best) turning a blind eye to Rudy’s machinations. Nevertheless, I’ve bought at auction from Zachy’s and have been very satisified with my purchases in the past. I do concur in your comments about Hart Davis, Bonham’s, and Sotheby’s. Just terrific auction houses.
The reason I ask is that it is entirely possible they have cleaned house. I don’t know that but it is possible and that is what Maureen is basing her recommendation on. Just to be clear, I’ve never bought from Christie’s nor sold through them so no dog in this fight. Guess we’ll have to wait and hear from Maureen.
In speaking of “Christie’s” - I presume they have a US operation and that is what is being referred to here? What about UK?
Someone can correct me if I’m wrong, but I think it’s a fairly unified operation. They’re not run independently.
If I recall correctly from Don’s postings, the Rudy wines that went through Christie’s were auctioned mostly or all in the UK. Also, it was Michael Broadbent in London who handled the Hardy Rodenstock Jefferson bottles.
Good post Don. Not familiar with too many company business cultures that change overnight, and think the advice is sound to cautiously deal with companies that have a track record of less than honest dealings. Another area of discussion I would be curious of your input (and the boards in general):
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Should as much detail as possible be put out in the public domain, what are the things to look for in authenticating specific wines?
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Should restraint be used putting out authentication information for the fear of creating a better wine counterfeiter?
The thread lists a lot of specific suspect wines, specific auction houses, and dates they were held. Surely there are many honest people who bought these wines, and are now in the uncomfortable position of what to do next? My guess is, the auction houses are not going back in time, attempting to contact purchasers and informing them of the possibility they may have received less than real bottles. Is it a good thing for the board to help arm these folks with information or should the expectation be, they must hire an independent company to authenticate? Curious of the boards thoughts?
I am not going to engage in a point-by-point refutation with Don. But I will make a few statements that put this matter to bed where I am concerned:
I write a monthly article on Wine-Searcher.com because of my expertise in wine collection management. I am going to continue to tackle wine collection management related topics, and my bi-line will continue to describe me and provide a link to my website for anyone who wants to read/understand more. So the disclosure info is right there if you want it, or if you are paying attention.
I find it interesting that Don continues to lambaste his “friends” while failing to disclose that until about 2-3 months ago he was regularly buying and selling through Acker Merrall & Condit, a house with whom I have refused to work since the 2002/2003 Greenberg incident.
Yes - I am proud to work with both Christies & Zachys. Most of the folks at Christies have turned over since they had issues with Rudy’s wines (or Rodenstock for that matter) and those junior folks that may have made mistakes have learned from them – as most people do as they become more experienced. The difference between Don and me is that I believe that people are human and can learn if they simply made a mistake and were not willfully plotting to defraud, which I do not believe Christies was. (I have A LOT more inside information than just the few legal docs made public…) I have also been dealing with this matter professionally for a considerably longer period of time than that for which Don has been interested as a passionate enthusiast. Further, I understand the inner workings and systems of the auction process. By his own writing, it is clear that Don does not posses this knowledge - nor should he be expected to as he has never worked in wine professionally. Another MAJOR difference between us is that Don believes, as he has stated directly to me, that the entire wine auction industry has to be brought down to the ground - as in destroyed - in order to be ‘cleansed’.
Now, were that to happen, the best folks in the business (and YES, at this point in time Zachys is DEFINITELY one of the best teams in the business- again, those with whom I would have issue are now elsewhere (Spectrum) and I am confident that those who are there today have learned from their errors) would be replaced by retailers or brokers, many of whom don’t even bother (or know how) to vet wines for condition, much less authenticity. Currently auction houses at least have a process and an expectation of due diligence - something frequently lacking from the secondary retail market in my experience. Zachys and Christies might have screwed up a few times - but they didn’t create a false collector through colorful descriptions, false accolades, impressive events, possibly fund the fraud then dump wine into the market wholesale. Z&C f-ed up and they learned from it. I do not see the situations as the same at all. Don does.
In Don’s world, he is the single arbiter of all things wine: Who is and is not a critic. What those critics can and cannot do or say. He even went so far as to claim once that Jancis was somehow guilty of being anything but an amazing journalist. He apparently gets to decide who is and is not a “collector”, and what I am and am not allowed to do with my business… (He has informed me that none of my clients are “true collectors”, and that anyone who needs my firms service is not a “true collector”. BUT that it is clients like mine that have destroyed the market for “real collectors”, especially those that are not even buyers at auction.) He would dictate what markets should and should not be available for the rest of the world to buy wines. So clearly - we disagree on many fronts.
Finally – my colleagues and I work with every major house I mentioned, and currently have consignments at most of them. We are not married to any one or two houses. We negotiate on behalf of clients to get the best possible terms in the best possible market for every bottle. By spreading our business out – we create a competitive advantage for our clients. Sometimes, we land at Christies, sometimes its Bonhams and sometimes, it’s Hart Davis Hart. Sometimes we sell direct to a reputable merchant or broker. The wine and the client needs dictate the venue and that is the only motive that drives us. That’s about as open a model as I can imagine. But yes – we do enough business that we are courted by all. Does that make me evil – or successful?
I find it unfortunate that in his quest to please you all here on wineberserkers.com, Don continues to alienate the people that for years have been his allies and trusted sources of information. I am one of the last of those standing by him. And I am not sure how many more blows I care to take in the name of “friendship”.
What were “junior folks” doing verifying these extremely high-end wines? While I will admit to know nothing about the auction market,
I would expect the top people to be checking out the kind of wines that Rudy (and others) slipped by some of these auction houses.
This is my only post here, and it is not specifically about the topic at hand as it concerns an issue I have no experience in. However, it relates to the concept of institutional inertia. When the stock market crashed circa 2000 it was noted that essentially all the major investment houses were heavily promoting stocks they knew where doomed to fail. The famous soundbite found in an e-mail from one of these investment houses (and I paraphrase), “time to put lipstick on this pig”, highlighted the inherent greed with which these investment houses acted. After the crash everybody was reassured that these investments houses had “learned their lesson”. But easy profits are impossible to ignore when the opportunities present themselves. The second stock market crash we recently had, which nearly caused a depression, again highlighted the inherent greed and short term thinking that permeated the financial industry. When you can make enormous short term profits, and are reasonably confident you can get away with it, it is the rare business person who will put principles first.
Feel free to correct me if I am wrong, but I am unaware of any significant changes to wine auctioning law that have been either enacted or asked for by the major auction houses. I remain unaware of any corporate governance changes that any of the auction houses have enacted that produce powerful disincentives for an employee to foster, either through action or inaction, fraudulent sales (eg, double or treble damages, criminal prosecutions, black balling from the industry). To claim that the people who are in charge today are “honorable” and/or have “learned their lesson” and that this is sufficient to bring back credibility to the auction houses is laughable and short sighted. Without major and powerful institutional changes that harshly penalize fraudulent auction sales we are guaranteed to allow the next “Rudy” to successfully play their game in the not so distant future.
As best as I can tell, auction houses still function under the rule of “buyer beware” and do not take seriously enough their responsibility to thoroughly vet what they are auctioning. For those items they have not thoroughly vetted it is likely rare for them to clearly label in big bold letters that what they are auctioning is “provenance not verified, buyer beware”. The former is likely too cost prohibitive and the latter would scare away too many buyers. Hence, history is doomed to repeat itself. Not just in wine, but in every auction category.
Given that even Sotheby’s has had its own scandals (http://en.wikipedia.org/wiki/Sotheby’s#Controversy) I would submit that there is not a single auction house I would place complete confidence in (for any item) given then current legal and corporate auction climate. There simply is too much money to be made in they grey zone to assume that profits will ever be placed second to principles.
For the typical wine buyer, assuming you are not an expert yourself, hiring your own expert to make sure that what is being auctioned is legitimate is unrealistic and still requires one to know which expert can be trusted.
Paul:
The answer is that most of the people in question remain with Christie’s. Richard Brierley, head of the US wine department from approx 2002 until the summer of 2009, left, went to the UK and joined Vanquish (which already existed).
Charles Curtis, the head of the NY wine department from mid-2009 until the end of 2010 (and the one who negotiated the agreements with Rudy) was transferred to Hong Kong in the Spring of 2011 and now heads up Christie’s wine operations in Asia.
Scott Torrence, formerly the wine department manager in Los Angeles (including during the time when the Aril 2007 auction was held) and then No. 2 to Charles Curtis until November 2009 briefly left Christie’s to work with a retail operation based in Napa. Scott returned to Christie’s in 2011. He is currently based in Los Angeles, reports directly to London, and has the title Vice President and Lead Specialist of the Americas.
Christie’s NY operations are presently run by Per Holmberg (since 2011).
David Ellswood has been the Director of Christie’s worldwide wine operations since 2003.
In answer to the other question that was posed, one of the seven confirmed auctions of Rudy Kurniawan’s wines by Christie’s in 2009-2010 took place in London – in November 2009. At least one auction took place in Hong Kong, in November 2010. The Federal criminal complaint refers to another auction which was to take place in Hong Kong in the fall of 2009, but the Acker UCC-1 records don’t list any bottles sold there until November 2010.