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Six Degrees of Cru, and Why AMC=SAC

2013 December 20
by Mike

Rudy Kurniawan wasn’t the only wine enthusiast convicted in a Manhattan federal court on Wednesday. Just hours after jurors returned a guilty verdict against Kurniawan, another jury announced that it had found a 41-year-old portfolio manager named Michael Steinberg guilty on four counts of securities fraud and one count of conspiracy to commit securities fraud. It is a little surreal when someone whose name is almost identical to yours is in the news for a crime (okay, maybe it isn’t all that unusual if your name is John Smith, but if your name is Michael Steinberger….). It is jarring when you also happen to know the person. Through our mutual interest in wine, I was casually acquainted with Steinberg, who worked for SAC Capital Advisors, the embattled hedge fund run by billionaire investor Steven A. Cohen. Steinberg’s trial took place across the street from Kurniawan’s, but I didn’t see any of it; courtroom voyeurism isn’t my thing, and frankly, I would have been embarrassed had Steinberg caught me gawking at his trial.  He was charged with securities fraud, Kurniawan with wine fraud, yet their cases were strikingly similar in how they unfolded and how they concluded. They were also noteworthy for what they failed to achieve.

I met Steinberg five or six years ago, either at a wine tasting or a wine auction. I had first seen his name on erobertparker.com, where he would occasionally post. He was familiar with my name, as well, and we had a good laugh when we were finally introduced. I liked him instantly: he was smart, personable, and didn’t seem to have any Wall Street, monster-of-the-universe swagger. The longest I spent with him was at an Acker Merrall & Condit (AMC) auction at Cru in 2007. Cru, of course, was the scene of some of Kurniawan’s wildest nights, and also the site of his unmasking. It was an evening auction, and Steinberg, spotting me across the room, invited me to join him and some friends for dinner at their table. He was a Burgundy guy and treated us to a 2002 Lafarge Volnay Clos des Chênes off the list (Cohen apparently has a taste for Burgundy, too; from what I gather, he takes a hefty annual allocation of DRC from a retailer in Greenwich, Connecticut, where he lives). While I knew that Steinberg worked for a hedge fund, I had no idea that it was SAC, and he didn’t mention it. Only later did I learn that he was said to be Cohen’s right-hand man. It was undoubtedly a very lucrative position, but it was also a dangerous one when his boss became the primary target of a government crackdown on insider trading.

If you aren’t familiar with Cohen, you can read about him here.  He is known to be a brilliant trader, but his results have been so phenomenal that they have long aroused suspicion. Over the last two decades, SAC has notched 30 percent average annual returns, a performance that struck many observers as too good to have been achieved without cheating. Rumors of insider trading have dogged Cohen for years, and SAC, which manages around $14 billion, has been under investigation since the mid-2000s. But the pressure on the firm ratcheted up considerably when Preet Bharara became U.S. Attorney for the Southern District of New York four years ago. In the wake of the global financial meltdown, Bharara launched a sweeping assault on Wall Street corruption. Since 2009, he has won 77 convictions for insider trading without a single loss.

It no secret that the man Bharara most wants to take down is Cohen, and he and his team have been using the time-honored strategy of going after little fish in order to snag the big one. Before Steinberg’s arrest in late March, seven SAC employees had been charged with insider trading and six of them had pleaded guilty (the other case is still pending). Just two weeks before Steinberg’s arrest, Cohen agreed to pay $616 million to settle insider trading charges brought against his firm by the S.E.C. In July, the Justice Department indicted SAC on five counts of insider trading. The hedge fund pleaded guilty last month and agreed to pay $1.2 billion in penalties and forfeited profits in order to settle the case. It also agreed that it would no longer take money from outside investors; SAC is now being converted into a family office that will primarily manage Cohen’s personal fortune, estimated at $9 billion.

However, the guilty plea and the enormous fines are all tied to misconduct by Cohen’s underlings; what prosecutors have yet to come up with is evidence proving that Cohen himself broke any laws, and that is clearly what they are after. But Cohen has repeatedly proclaimed his innocence, and he has certainly not been acting like a man who thinks his days of fresh air, sunshine, and private showers are numbered. In fact, his conduct has struck many as defiant, almost taunting. On March 26th, 11 days after SAC agreed to pay the SEC the $616 million and just three days before Steinberg was arrested, Cohen, a major art collector, paid $155 million to purchase Picasso’s “Le Reve” from casino magnate Steve Wynn. A week after Steinberg was led from his Park Avenue apartment in handcuffs, Cohen purchased a house in the Hamptons for $60 million. Correctly or not, these acquisitions were widely construed as Cohen essentially mooning the prosecutors (not a pretty image, I will acknowledge, but you’ll have forgotten it by Christmas Day—I promise!).

Steinberg’s arrest was said to mark a dramatic escalation in the government’s pursuit of Cohen; his stature at the firm seemed to bring the investigation perilously close to Cohen. Prosecutors clearly hoped that Steinberg, facing up to 85 years in prison, would provide them with incriminating evidence against his boss in exchange for leniency. But either because he didn’t have anything to offer the government or wasn’t willing to turn against Cohen, he opted to fight the charges instead.  Cohen was not asked to testify during the month-long trial, and Steinberg’s defense team didn’t call any witnesses. Given Bharara’s undefeated record on insider trading cases, going to trial was a very risky move for Steinberg and it backfired, badly. He seemed to know that even before the jury announced its decision: on entering the courtroom Wednesday afternoon to hear the verdict, he fainted.

Kurniawan, by contrast, remained impassive when the jury forewoman read the guilty verdict against him late Wednesday morning. But the two cases otherwise played out in similar fashion. I have to assume that when prosecutors ordered Kurniawan arrested last year, they thought they were pulling a thread that would unravel a broader conspiracy. Given the enormous number of counterfeit bottles that Kurniawan appeared to have sold, it seemed very unlikely that he had acted alone, and speculation about possible accomplices quickly focused on one person in particular: John Kapon. For what it’s worth, I never believed that Kapon had been in on the plot. He was certainly guilty of greed and gross negligence. It still blows my mind that Acker tried to sell those fake Ponsots; my 12-year-old son, seated at his computer, could have done all the due diligence that was required in probably two minutes or less (a visit to the domaine’s website quickly reveals that Ponsot didn’t make Clos Saint-Denis prior to the 1980s). Evidently, Acker’s authentication process went something like this: if it came in a dark green glass bottle, had a cork, and contained a liquid that looked like wine, it was deemed authentic.

But I thought Kapon was too smart and had far too much to lose to risk it all in a counterfeiting scheme, and the emails that he exchanged with Kurniawan at the time of the controversial Spectrum auction in London last year did not suggest they had been partners in crime; quite the opposite, in fact. If you recall, Kurniawan had defaulted on $10 million in loans from Acker, and as part of a deal to work off that debt, he had agreed that he would not sell any wines without first obtaining permission from Kapon. When it was reported that Kurniawan had consigned wines to the Spectrum sale through a third party, Kapon was furious; in the emails, he demanded to know if the rumors were true and sternly reminded Kurniawan about the terms of the agreement (“You know you can’t do this, Rudy, without our written consent”). Based on those emails, and based on what I knew of Kapon, I never bought the idea that he had conspired with Kurniawan.

However, it was easy enough to understand why others made that leap. Kapon called Kurniawan his best friend, the two seemed inseparable, and to say it was a mutually beneficial relationship would be an understatement: John made Rudy, but more importantly, Rudy made John. In 2005, Acker was a middle-of-the pack auction house; then came the two Kurniawan sales in 2006 that together grossed $35 million, and suddenly, Acker was atop the league table, a position that it has maintained pretty much ever since. No one profited more from Kurniawan’s emergence on the wine scene than Kapon, and when Kurniawan was arrested, it was inevitable that people would wonder whether he had somehow been involved. But even before Kurniawan was caught, there were doubts about Kapon and Acker. It was the startling size of the sales ($24 million here, $15 million there) and all the record prices; it was the extreme rarity of some of the wines being sold and the improbably large quantities in which they were being offered; it was the boisterous atmosphere at the auctions and the fact that they so often seemed to consist of friends selling to friends through a friend; it was Kapon’s youth and brashness—to a lot of people, something just didn’t seem right (and at least with regard to the Kurniawan wines that Acker sold, we now know that something was very wrong).

In essence, the two big Kurniawan sales turned Acker into the SAC of the wine auction market, and Kapon became the wine world’s answer to Steve Cohen. And like Cohen, Kapon has been defiant in the face of controversy. He didn’t lower his profile after the fraudulent Ponsot bottles were pulled from the Acker auction in 2008, he didn’t do it after Kurniawan was arrested last year, and he didn’t do it even as his former best friend went on trial this month. Kapon would surely say that he did nothing wrong and thus had no reason to become less visible, and it’s certainly true that he has not been charged with any crime in relation to the wine counterfeiting scandal. Still, it was surprising to see him tweeting photos from a Lafite tasting the weekend before Kurniawan’s trial began, and as I noted in my previous post, Kapon tweeted a provocative photo on the night that Kurniawan’s case went to the jury: it was hard not to interpret that one as a raised middle finger aimed squarely at the prosecutors and at Laurent Ponsot, too. Whatever the explanation, Kapon, like Cohen, has not been acting like a man who fears that he may be headed to a federal prison anytime soon.

Kapon didn’t testify at Kurniawan’s trial, and the defense called just one witness. This was the first time the government had pursued a criminal case involving wine counterfeiting, and it was a big win for Bharara’s office, and in particular for lead prosecutor Jason Hernandez. But I very much doubt that investigators believed, when Kurniawan was arrested, that the counterfeiting probe would begin and end with him. (That’s where the Steinberg case differs: the government’s pursuit of Cohen didn’t commence with Steinberg’s arrest and won’t end with his conviction.) I am sure they hoped that the prospect of spending as much as 40 years in prison would lead Kurniawan to name any co-conspirators that he had. But evidently, Kurniawan wasn’t willing to play ball: he either refused to talk or didn’t offer the government enough information to justify making a deal with him. (Given the apparent scale of his operation, I don’t think there is any chance that he acted alone; he had to have had help.)

Kurniawan will be sentenced on April 24th, and Steinberg will be sentenced the following day. Both intend to appeal their convictions.

 

 

40 Responses leave one →
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  3. Josh permalink
    May 17, 2014

    @SFJoe: Is it safe to say to say that Acker also “took considerable pains not to consider quality too carefully” by, apparently, doing nothing to verify authenticity? Or could that be called malicious neglect? And drop the “their long-term reputations” part out of your last sentence and you have Acker to a “t” as well.

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  5. Matt F permalink
    March 2, 2014

    off topic:

    Mike,

    I enjoyed the brief article on wine-searcher. Very adroit use of one of Freud’s better aperçus.

    Also enjoyed the balance shown in re Parker.

    I would argue that you can extend your general argument all the way down to “grocery store” wine. The $10 bottle of wine that most people enjoy with dinner at home is a great improvement over basic wine sold as recently as 20 years ago.

  6. January 17, 2014

    This is something we don’t hear everyday. It’s just pretty unusual to have this kind of case involving wines. When I hear the word wine, I almost think right away about unwinding, and relaxing.

  7. Matt F permalink
    January 12, 2014

    Keith having some fun:

    http://cellarbook.wordpress.com/

  8. Ben permalink
    December 28, 2013

    Question – what does all this mean for auctions in general? I know that people are lambasting Amc – and rightly so – but how much of the crap that got into circulation is just going to come up at other auction houses around the world ? I feel that I can’t trust another auction!

  9. Scott permalink
    December 25, 2013

    Another informative and enjoyable piece. I loved the analogy as I just ended a paper about SAC and Steinberg for law school. I just can’t figure out Cohen’s middle finger to the gov; it’s just too much, and I’m usually a fan of excess. Kapon’s refusal to move from the spotlight makes way more sense to me.

  10. December 24, 2013

    Wilfred, I’ve already got the contract to ghostwrite the book. It is titled Wine Counterfeiting for Dummies and should be out this time next year.

    Claude, I guess word of the Rudy trial never reached CNBC; maybe the carrier pigeon got lost en route to the newsroom? In all seriousness, though, I’m sure this just reinforces John’s sense of impunity. Even if you assume, as I do, that John was not Rudy’s accomplice, it is less than a week since John’s best friend and biggest client was convicted in federal court of crimes tied to the sale of fraudulent wines, many if not most of which appear to have been sold through Acker. It is indeed interesting that CNBC would go to him for a discussion about the state of the wine market. I suspect this was another case of inept due diligence.

  11. Claude Kolm permalink
    December 24, 2013

    Apparently the rest of the world has no knowledge of Kapon’s role. He’s going to be on CNBC today as head of the number 1 wine auction house talking about which is a better investment, wine or stocks.

  12. Wilfred permalink
    December 24, 2013

    I love Maureen’s comment about Kapon including recipes in his tasting notes book. If he needs to raise capital for legal fees, he could publish a “Rudy’s Greatest Wines” recipe book and make a fortune! Who cares about his silly manic-like tasting notes; publish recipes! Personally, I want to be there to taste Rudy’s Conti45.

  13. December 23, 2013

    I completely agree, Claude. The moral of this story is the moral of the Madoff saga and the moral of so many other tales of fraud: if it looks too good to be true, it almost certainly is. And yet, people never seem to learn that. Human nature, right?

  14. Claude Kolm permalink
    December 23, 2013

    Mike – My point simply was that although one should be very skeptical of all these bottles coming out of the woodwork (and I am much more skeptical that most and have been for a long time — going back to the original ThJ bottles), there are very occasional, freak instances of very rare bottles that have survived (rather like finding a Caravaggio in a Dublin dining room: http://en.wikipedia.org/wiki/The_Taking_of_Christ_(Caravaggio) ).

    In the case of the Musigny offered at auction in 1998, the provenance was easily established and, at least to anyone who knew the consignor, the explanation was simple: Ken Kew was amazing at finding little-known (at the time) very great wines. The consignor considered himself a collector of great wines, Ken must have said, “you must have this for your cellar, it’s super great,” the consignor said, “OK, I’ll take a case,” and then never again thought of the wine. But without such bullet-proof provenance, one should not accept the genuineness of such wines.

  15. December 23, 2013

    Claude, you make some good points, particularly with regard to Rudy’s role in creating a boom market for old Burgundies. But the larger point still stands: Roumier only produced 400-450 bottles of the 59 Musigny, which makes it highly unlikely that there were dozens of bottles still floating around by the mid-2000s. Indeed, the fact that a) Roumier wasn’t a cult name until very recently and b) the Musigny vineyard wasn’t nearly as revered a site 40 years ago is all the more reason to be skeptical. If neither Roumier nor Musigny were exalted names a generation or two ago, people who owned bottles of the 59 would have been less inclined, not more inclined, to hoard them. The Petrus folks made that very point with regard to all the magnums of 21 Petrus that suddenly started turning up in the late 1990s. They pointed out that Petrus was considered an everyday, inconsequential wine in the 1920s, and the Right Bank at that time was considered a viticultural backwater. The chateau would have had little incentive to produce magnums of the 21, and it was very unlikely that people back then were cellaring Petrus for any extended period of time. While I appreciate the information you’ve provided re the 59, I’m not quite sure what your larger point is. Are you suggesting that people shouldn’t have been so skeptical of Rudy’s bottles of the 59 Roumier Musigny, that it was possible that he found dozens of legitimate bottles of the wine (and between the auction sales and the private sales, it was dozens of bottles)?

  16. Claude Kolm permalink
    December 23, 2013

    Mike — I think you have to keep a few things in mind.

    1. Although Musigny has long had a high reputation among grands crus, in the 1960s, 70s, 80s, and even into the 90s, it was less exalted than it is today. It’s now often considered one of the three greatest red grands crus, but in my copy of Alexis Lichine’s Guide to the Wine and Vineyards of France from the late 1970s, for example, it’s number 7 on Lichine’s grand cru hit parade.

    2. Roumier’s Musigny was not well known. Most people in that era thought of de Vogüé first, then perhaps Faiveley (who at the time was exploiting Mugnier’s vineyards), then probably Prieur, Drouhin, and maybe one or two others and had no idea that Roumier made Musigny.

    3. Burgundy wasn’t very fashionable during this era (1960s through 1990s). The consignor of the Roumier Musigny could and did offer his guests the likes of Bordeaux first growths from 1961 back to at least the beginning of the century, which he had in abundance and which they almost all would have happily chosen (if offered the choice) over Burgundy. Notice some of the other holdings in this cellar at the auction, such as a case of 1961 Hermitage (the online listing does not specify it, but I’m pretty certain that this was La Chapelle). In the instances where the consignor or his guests wanted Burgundy, they probably opted for DRC, de Vogüé, or one or two other domaines that were available from the consignor and had higher reputations than the relatively obscure Roumier. Remember, it is Rudy to a large (but not exclusive) extent who made Roumier into a cult name. You’d be surprised how recently one could still score a case or even two of (genuine) Roumier Musigny on release through the right commercial channels if that’s what you really desired! Even as late as the 1998 auction, the 1959 Musigny was estimated at $200-300 a bottle and went for a little over $350/bottle. Compare that to what the clarets were going for from the same auction, and I think you’ll see what I mean (and get a dramatic illustration of how the market has shifted to Burgundy in the last 15 years, again thanks in no small part to Rudy).

  17. December 22, 2013

    I stand corrected, Claude; thanks for chasing down that info re the 59 Roumier Musigny. I’m amazed that anyone in the 1990s still had the wine, let alone a full case of it. If I’m not mistaken, just 400-450 bottles were produced, so there was even less of it floating around than the 45 RC we’ve been discussing. This much I know: Rudy sold a case of the 59 at one of the 2006 Acker auctions and six bottles at the other. I also know that he was selling the 59 privately, and in similar quantities. So while there were, apparently, a few sightings of the 59 prior to Rudy’s emergence, there was certainly not enough of it around to suggest that Rudy’s bottles were legit.

  18. December 22, 2013

    Some of the things written here about some of the big names in wine are fairly damaging, not because they are loose accusations but because they seem to be generally accepted facts.

    As an org development buddy of mine often asks his clients “What is it you are walking around pretending not to know?” Perhaps we can get him a contract at AMC.

    Maureen’s comments alone should be the death knell for AMC. Kapon’s two choice’s here seem to be a) I’m really terrible when it comes to basic knowledge of wine and an idiot when it comes to independent verification of bottles – which gets you fired or b) I was complicit, either from the outset, or once I knew what was going on – which also gets you fired. I don’t see whatever middle ground he has been able to find and, surprisingly, survive. Why anyone would ever take him at his word or buy wine from him is beyond me. I feel like I need a shower just reading about him.

    In any case, this is the exact sort of direction/crescendo we all envisioned, more facts leading to more explanations, and inevitably more arrests. Why the justice dept wouldn’t pursue the seemingly bigger fish here is beyond me. I suppose I should stop, lest I start making banking analogies myself.

    Regarding the recipe book – YES! Though not sure who here remembers the old show Northern Exposure, when Shelly breaks a bottle of Maurice’s wine (cant remember, but I think it was a Latour, maybe ’61?) Anyway, Adam, barefoot epicure that he is, rebuilds it perfectly. Maybe he was Rudy’s original muse.

    - James

  19. Claude Kolm permalink
    December 22, 2013

    More on the sale of the 1959 Musigny that I discussed below. A little internet research makes it look to me as though the wines from the collector I helped was sold at Christies sale number 8980 (October 2-3, 1998), lots number 2046 and 2048. (http://www.christies.com/lotfinder/lot/musigny-vintage-1959-6-bottles-per-lot-1315582-details.aspx?intobjectid=1315582 . The wines bear the Esquin Imports strip.) The former lot was six bottles, the latter was five (the twelfth bottle of the case being the one we drank). Perhaps someone such as Maureen has access to the catalog and inform us what collection that came from, and I can then confirm whether those are the wines I was talking about.

    At any rate, since this auction presumably was before Rudy came on the scene, it demonstrates the incorrectness of the statement that wines such as 1959 Musigny had never been seen at auction until Rudy came on the scene.

  20. Claude Kolm permalink
    December 22, 2013

    Mike — You know, it’s funny that you mention the 1959 Roumier Musigny, because I have seen a whole case of it that was undoubtedly genuine (and been served from one of the bottles in that case) in the late 1990s, and I know of another case or part of a case that was genuine that went to auction. Hugh Johnson in his memoirs writes about six doctors out here in California that had amazing collections of wine and I knew a few of them.

    In the late 1990s, I helped one of them, who by then was elderly and no longer in good health, move his wines from one location to another in eventual preparation for their going to New York for auction (I think it was either Sotheby’s or Christie’s.). We uncovered some amazing things in that cellar, especially Burgundies, because this doctor’s true love (as I think was the case with most or all of them) was for Bordeaux and he rarely drank Burgundy. One of the Burgundies we uncovered was a case of 1959 Roumier Musigny that had not even been opened! The wine came from Esquin Imports (no relation to the current business that bears that name) that was run in the 1950s and 1960s by a man named Ken Kew who did an amazing job of rounding up wines for sale in San Francisco. There is no doubt that the wines were genuine. Unfortunately, the storage had not been great, and the one bottle that we opened was pretty much shot (as was a 1959 Remoissenet Musigny, probably sourced from de Vogüé, that we drank beside it).

    Another one of the doctors also sold his wine in the early 2000s at auction in New York and I recall seeing that he had some bottles of 1959 Roumier Musigny; those bottles, too, undoubtedly were genuine. So yes, there are occasional fortuitous and extremely improbable surprises that come to light (although in this case, it was the existence of the wine, and not the experience of drinking it), just much, much, much less frequently than most collectors want to believe.

    Re conspiracy, I was not a criminal lawyer and had only one criminal law course in law school and that is so far behind me that I no longer remember the elements of conspiracy, but my instincts tell me that there need not be an actual verbal or written agreement to constitute a conspiracy as long as the parties work in tandem. Maybe someone here with experience in criminal law practice can help us out.

  21. December 22, 2013

    But isn’t blatantly lying about the owner and the provenance of the wines “conspiring”? If his writings set forth falsehoods intended to encourage victims to purchase, resulting in them sustaining a financial loss, that is fraud.

    I sat through every day of both the Rudy and the Koch v. Eric Greenberg trials. Even though I am no lawyer, it seems to me that the bold-faced lies that JK created and put his name to, are strong enough to at minimum suggest conspiring.

    Like stating that a 24 yr old Rudy had had ‘just under 3 cases [of 1961 Latour-a-Pomerol] all from the same importer and in his possession for decades.’ That was a bold-faced lie, written to give buyers confidence in the provenance so they would bid with confidence. And they did, and the wine was fake.

    Isn’t that is conspiring to sell fake wine – through lies? From everything I have heard in court and understood about the 5 elements of fraud, I would not be surprised more legal action brought against him in the future.

  22. Dan McCallum permalink
    December 22, 2013

    Mike,
    Their boilerplate essentially proclaims them as ‘disengaged’, a host or forum if you will. Their doings? Well, different. I think that their greatest regulatory vulnerability is not bad goods, rather it is the financial creativity they employed, which is in all probability a violation of their own published terms. The art guys were smarter, they created a bank.

  23. December 22, 2013

    Claude, you may well be right. My guess is that Kapon didn’t “conspire” to sell fraudulent wines but that he simply didn’t want to know what he didn’t know–like, where was Kurniawan getting all this wine; how was it that Kurniawan was able to procure wines that had never before been seen at auction, such as the 59 Roumier Musigny, and in such significant quantities (a case here, a six-pack there); etc. Ignorance was bliss for Kapon; or, as Upton Sinclair might have put it, you can’t get a man to see something when his salary depends on his not seeing not. I realize my comments are being interpreted as a “charitable” explanation for Kapon’s role in all this, but it’s certainly not my intent to exonerate him; he has a lot to answer for, and he is by no means in the clear here. As Dan McCallum points out, the Kurniawan verdict could have some grave repercussions for Acker. Given the fact that Royal Wine Merchants remains in business, one does wonder what it takes for a wine purveyor to get sanctioned in New York State–dead bodies in the warehouse? But Acker may yet be punished for its dealings with Kurniawan and for the gross negligence it displayed.

  24. Dan McCallum permalink
    December 22, 2013

    Mr. Kolm has deftly thread the needle here imo.
    The media plaster their pages with “RK guilty of counterfeiting”. But that is not precisely so. His conviction relates to false representation (as real) in a collateral agreement with a bank; and in sales representation, primarily in auction. And, the actual charges and conviction are one more degree of separation from that- wire & mail.
    So, the crimes are in the direction of representation and conveyance of representation, not the manufacturing operations. And that is in fact the business of the auction house. However, we’ll probably have to wait out a stream of civil and regulatory proceedings for the denouement at that level. Although, looking back to your original theme Mike, since the beginning of civilization it has been not uncommon for a family or clan to toss up a favorite son for sacrifice, in order to augment their ongoing prospects for prosperity.

  25. Peter Doherty permalink
    December 22, 2013

    Great article and a nice series of well written comments where people can disagree / agree on a very sensitive subject without going hyperbolic.
    I’m a keen wine enthusiast living in the UK and have been collecting and drinking Burgundy for some time. Any auction obviously stuffed with wines that nobody could have sourced legitimately even with unlimited resources tells you all you need to know about the auction house. I’ve been approached by Acker from time to time but would never ever touch them. Unfortunately the growers and wine trade in general have been too slow and hopelessly uncoordinated on the issue of provenance, even on what “defines” OWC etc. Brokers in the UK portray DRC as OWC even when it is loose bottles, non consecutive numbered, but sitting in a DRC box. It isn’t OWC.

  26. Claude Kolm permalink
    December 21, 2013

    Mike — You’re effectively saying that you think Kapon did not manufacture fraudulent wine, but he was (or may well have been) part of a scheme to sell it. And we’re saying the evidence seems to be that he knowingly was part of that scheme. In which case, the distinction really is without a difference.

  27. December 21, 2013

    I do.
    I do.
    He does.
    & I do.

  28. December 21, 2013

    Claude, Maureen, and Bill, I didn’t say that Kapon has no culpability; I simply said that I do not believe that he was involved in a counterfeiting scheme with Rudy. As I said in my post, I can understand why there is so much suspicion about Kapon–suspicion that runs so deep that several people at the trial asked me if I thought Kapon had paid Rudy to keep silent (no, I don’t–I very much doubt that Rudy agreed to spend the next 8-10 years of his life, and possibly even longer, in the big house in return for a couple of million from Kapon). Kapon clearly has a lot to answer for; whether he is in legal jeopardy, I have no idea. But based on what I know of the Kurniawan case and what I know of Kapon, I do not believe that John was involved in the production of fraudulent wines.

  29. December 21, 2013

    JThomG
    I was not a witness in this trial. I did go through a bunch of the evidence with Jason Hernandez and the FBI over a year ago, and it was fun to hear some of things I explained to them come out as evidence in the trial. I have also been in fairly regular communication with the FBI on all this since at least 2008. But, as I have been highly outspoken (if mostly ignored) about Rudy being a fraud, and even a counterfeiter for well over a decade, I had ‘too much to gain’ personally and professionally to be the govt’s expert witness. There could have been a conflict of interest perceived that could have undermined my testimony. So it was best to get someone more neutral to the story. I adore Michael Egan!

    The deleted comment may have been on Wine-Searcher. For some reason they do not want me to comment on anything as I am a contributor there. I only learned this when I had a comment deleted. I don’t really get it but I am not a journalist – so it’s fine with me.

    The critics: I do not think you can lump ‘the critics’ together here. Parker & Broadbent were certainly played by Rodenstock and the “Sexy Boys” at Royal Wine Merchants, but I don’t think that makes them culpable. It was a different time, and I think it is unfair to judge them based on the view with today’s knowledge of the scope of wine counterfeits. Don’t forget that Robert Parker was out in front of this issue long ago- before anyone else, and has always helped authorities in any way he could. I get angry when people rag on him, as he has always been on the side of the consumer in my eyes.

    Allen should have split cleanly from Acker years ago. He was paid to validate Rudy, and Eric Greenberg and their wines, much of which have been proven to be counterfeit. He allowed himself to get paid to substantiate fraudulent sales, the owner John Kapon, and the entity that he owns that sold them, Acker Merral & Condit. I was horrified to learn from Don Cornwell that he is still under contract with AMC. I have always loved Allen, and I am stunned to hear this. We had a strong conversation in 2010 at La Paulee. I took him to lunch and pleaded with him NOT to go on the Imperial Cellar/Greenberg pre-sale tour with AMC all over Asia to pump that sale. He indicated he was on his last legs with them, and thanked me for having been right in 2002 about a warning I gave him about Royal Wine Merchants. I literally pleaded with him and said that if he was thanking me for being right back then, would he please trust me and step away now…. I am not sure what more I can say about that.

    What scares me the most about the use of these critics by the fraudsters, is that the benchmarks for these wines in many cases, are now understood to have been built on false realities as the wines that were tasted to make the benchmark tasting notes, were at least sometimes fakes. I know all the critics, just like big collectors and even ‘professionals’, will continue to insist they were served “the real thing”, but I bet in many cases, they were not. So that takes the floor out of the whole thing, doesn’t it? It also is just one more reason that I do not believe that anyone but producers, and really multi-generational owners at that, can taste for authenticity. Tasting for authenticity is a joke. As has been proved by JK & his merry crew of lumber strokers.

    I recently tweeted that if Rudy would just publish the recipes for the wines in JKs RIDICULOUS tasting book – all my Christmas shopping would be complete!

    Cheers,
    MD

  30. December 21, 2013

    Mike, thanks for the update, I missed the real name – at least that’s sorted!

    Maureen, I actually posted in response to a post of yours recently (maybe Decanter, Wine-Searcher? Can’t remember) asking if you were, or why you weren’t, a witness. Then all comments were strangely deleted. Did you respond? Would you here please? Also, as you and Bill both seem to think Kapon was in on things (the evidence would seem so) what about the critics who were taken for a ride, are they equally culpable? At what point do you feel like 1) they knew the game was up and 2) realized they were complicit in it?

    Curious on your opinion is all.

  31. Bill Klapp permalink
    December 21, 2013

    Mike, I am going with Maureen on this one. It is your opinion that Kapon was merely reckless and negligent, but you have no real evidence to support that. Likewise, there is no evidence that Kapon or anyone working for him had any direct involvement in Rudy’s wine fraud. However, were I willing to risk a libel suit, I could take what is known about Kapon’s life and lifestyle and fashion a pretty convincing, if perhaps a bit fanciful, scenario that might indeed drive him to be Rudy’s partner in crime. Like you, I doubt that it happened, but Kapon’s hands are dirty enough in all of this that I will chide you for making unsupported conclusions on his behalf! :)

  32. December 21, 2013

    Mike –
    If JK had not blown off friendly warnings, supported by those of Henri Jayer and Martine Saunier, about not selling fake Greenberg wine in 2002, I might be able to side with you.
    BUT HE DID.
    There is so much JK was doing at AMC, according to his past, and in one case now current employees, including padding the books with fake underbids to raise prices on absentee bids, chandelier biding from the podium and deciding that fake wines were “good enough” for him despite producers opinions to the contrary, that I cannot believe he is anything but culpable.

    As we have discused, and you have written, JK created Rudy, JK funded Rudy and in turn became #1 – a position he tragically has just regained. Some credit might go to the huge consignments from Eric Greenberg as well – some of which was wine purchased from Rudy, and some was wine they were working together to “move.” When Rudy needed more money, JK got his ‘friends’ to loan Rudy money through AMC (how weird is that!) and then when he needed even more – well AMC bestie Ed Millstein was not far away.

    I do not think there is any way that one can find JK anything but complicit.

    MD

  33. SFJoe permalink
    December 21, 2013

    Mike, as far as Kapon selling to Stott goes, I imagine it was more doublethink than anything else. The authenticity of the wines gets put in a carefully compartmented piece of the brain, the key is turned, and the auctioneer looks away to the question of whether the wine will sell, and the happy thought of commissions.

    Or at least that’s how I’ve seen it done by equity players.

  34. Claude Kolm permalink
    December 21, 2013

    Mike — With respect to AMC offering Ponsot Clos St-Denis before it was ever produced, notwithstanding the fact that the catalog gives the date of first production of the wine, I can believe that is just a case of gross negligence. But what about describing certain wines in Rudy’s cellar as having been there for decades and others as having been the sum of many years of collection? Certainly, Kapon never believed, his own representations notwithstanding, that Rudy had any long experience with wine.

    And what about Kapon continuing to claim that he was drinking real 1945 Romanée-Conti when he knew, and admits in his cellartracker commentaries, that only 600 (or 608) bottles were ever made? Rudy showed up in NYC in 2004 with two cases (!!) of alleged 1945 Romanée-Conti according to William Wallace’s article in New York magazine last year. It may have been gross negligence at first, but after a time, Kapon knew of the small production, and it’s more than gross negligence not to do the (simple) math.

  35. December 20, 2013

    James, great observation, and I completely agree. The trial was compelling mostly because it was just so surreal to see those winemakers in an American courtroom, to see bottles of DRC, Petrus, and Ponsot being displayed for a jury, etc. I noticed that quite a number of court employees were stopping in to watch–the Kurniawan trial was something a little different from the usual mix of insider trading cases and drug cases. But the outcome was never in doubt, and the fact that the case went to trial was an indication that Kurniawan had not offered much if any cooperation to the government. So, yes, it is very frustrating that we don’t know more, and I suspect there is a lot more to know–who helped him (as I said in my post, I’m convinced he had help), where the seed money came from, how many counterfeit bottles he sold, and so forth. We do know his real name, but that information came out a while back: when Bill Koch sued Kurniawan in 2009, the complaint alleged that his real name was Zhen Wang Huang. Given all the factors at play here, and all the personalities involved, the trial was indeed anti-climactic, and it’s hard to imagine that this is really how the story ends. At any rate, I appreciate the kind words, and let’s hope we get answers to those questions at some point in the not-too-distant future.

  36. December 20, 2013

    Joe, that email exchange about the mid-80s Bordeaux was a tantalizing morsel, wasn’t it? I’ve offered my opinion about AMC’s role in all this, but a few more emails like that and I might have to reconsider! On a more serious note, I think the fact that Rudy’s fakes ended up in the hands of people like Don Stott is evidence that AMC was just grossly negligent. Stott was a big client of AMC’s, it’s my impression that he and Kapon were quite close, and I have to believe that if Kapon had really known the wines were fake, he wouldn’t have risked seeing them end up in Stott’s cellar. Kapon was reckless, but I don’t think he was crazy.

  37. SFJoe permalink
    December 20, 2013

    That’s fair, Mike, AMC probably didn’t run the printing press for Rudy (though you wonder if they came through with the dozens of cases of mid-’80s Bdx for him). More the situation of an investment bank selling IPO shares of a company it knows to be crap to unsuspecting investors. Say, ML during the Blodget years of the first dotcom bubble selling sushi.com or what have you to your grandmother.

  38. December 20, 2013

    Mike, your reporting has been as brilliant as the case itself has been fascinating. With the conviction now, why then do I still feel unsatisfied (as a remote viewer, not someone with any dog in the fight)? We knew (assumed is probably better, but with a high degree of certainty) that Rudy was guilty when they found all of the evidence at the time of arrest, and so in a strange way, the verdict has done nothing, other than corroborating that simple fact. What we really wanted were the real answers: who was in on it? Auctions? Critics? Asian mafiosi? For goodness sakes, I still don’t even know Rudy’s actual name, nor the source or reason for those huge money transfers. A trial, full of wine superstars, and I know roughly the same as I did before it ever began. Surely you must feel the same, you have more invested in research and attendance – hey, I only login and read for 20 minutes – so where do you go from here?

    I feel like we’re 45 minutes into a Dateline NBC special and I don’t know if this is a commercial, with the truth coming after the cliffhanger, or if in fact, the show is actually over! The most prestigious domains, critics, and auction houses in the world were involved, the buying/selling/sharing culture of fine wine itself, indelibly changed forever, and all we get is a whimper? No way this ending is this anti-climactic.

    - James

  39. December 20, 2013

    Hi Joe, thanks for stopping by. The analogy was indeed rooted mainly in legal circumstances and personalities. Your analogy is an interesting one, and I think there’s some truth to it. I guess the key distinction I would draw is that the big banks created those products, whereas AMC (and other auction houses) had no hand in creating what they were selling. AMC was guilty of negligence, but the CDO that Goldman cooked up with Paulson, to cite just one example, went well beyond negligence.

  40. SFJoe permalink
    December 20, 2013

    In personality and legal situation, the analogy with SAC is not bad, but in financial terms AMC (and the other crooks) were more in the position of the big banks selling bundled securitized mortgages in 2006. They were trying to max out their volumes, and took considerable pains not to consider quality too carefully. And they were not much concerned about their long-term reputations, customers, or the rest.

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