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The Wine Trials: An Update

2013 April 12
by Mike

Late yesterday, Bill Koch won his lawsuit against fellow collector Eric Greenberg; a jury in New York ruled that Greenberg had defrauded Koch by knowingly selling him counterfeit wines. The jury took just two hours to reach its verdict and awarded Koch $379,000 in compensatory damages; it reconvened this morning to decide on punitive damages. If the eight jurors want to really stick it to Greenberg—and based on the speed with which they returned the verdict, they clearly did not think well of the onetime billionaire (much of his fortune apparently evaporated when the tech bubble burst)—this loss could be a brutally expensive one for him, especially if he’s forced to cover Koch’s legal fees. Koch reportedly spent $10 million pursuing the case. After this experience, I wouldn’t be surprised if Greenberg gave up wine and switched to beer. It might be all that he can afford now.  (For those of you with time to spare and a taste for legalese, here’s the transcript of the closing arguments and the verdict.)

It is a huge victory for Koch, who filed the lawsuit in 2007. Although the Florida energy tycoon won a default judgment three years ago against Hardy Rodenstock, who sold him four of the so-called Thomas Jefferson bottles, Koch has had mixed results in his campaign to rid the wine market of fraud. A lawsuit he filed against Christie’s in 2010 was dismissed, and he has also had some setbacks in cases that he’s brought against Acker Merrall and Royal Wine Merchants. The Greenberg complaint was the first Koch lawsuit to reach a jury, and as such, it was an important test. The wine fraud issue doesn’t generate a lot of public sympathy; rich guys buying $30,000 bottles of wine and getting swindled by other rich guys is an issue that is more likely to provoke Schadenfreude than outrage. The challenge for Koch’s lawyers was to not only prove their case, but to convince a jury that even billionaires purchasing obscenely expensive old wines are entitled to consumer protection. Koch’s attorneys succeeded in doing that, and the fact that a jury found in Koch’s favor is no doubt very encouraging to the prosecutors preparing the case against Rudy Kurniawan. Indeed, from what I understand, Jason Hernandez, the Assistant U.S. Attorney who is the lead prosecutor in the Kurniawan case, was in the gallery for much of the Koch v. Greenberg trial.

But Hernandez wasn’t taking a break from the Kurniawan matter. On April 8th, the government obtained a superseding indictment against the alleged counterfeiter At a hearing two days ago, Hernandez told Judge Richard Berman that the new indictment consolidated some of the claims contained in the previous indictment and added two more wine sales to the charges against the 36-year-old Indonesian collector. In addition, the new indictment includes a list of assets that the government wants Kurniawan to forfeit, including two homes in the Los Angeles area, nearly $750,000 worth of jewelry, a Lamborghini, an $18,000 Montblanc pen (for his handwritten tasting notes?), a stake in an unnamed restaurant, and a stake in a land management company in Burgundy (as I reported in my Vanity Fair article about Kurniawan, he invested in a business set up by winemaker Étienne de Montille to finance the purchase of vineyards in Burgundy, notably de Montille’s acquisition of a parcel of Vosne-Romanée Malconsorts).

Kurniawan pleaded not guilty to the new indictment, and it was during Wednesday’s hearing that Judge Berman tentatively scheduled the trial to start on September 9th. Hernandez indicated that he may have to ask the judge to push back the start of the trial because several winemakers he intends to call as witnesses will be tied up at that time with the harvest. Presumably, one the government’s star witnesses will be Burgundy winemaker Laurent Ponsot. As you may recall, Kurniawan’s undoing began with the allegedly fake bottles of Ponsot  Clos Saint-Denis and Ponsot Clos de la Roche that he tried to sell at an Acker Merrall auction in April 2008. Ponsot traveled to New York to prevent those bottles from being sold and thereafter embarked on a quest to find the source of the fraudulent wines. He soon concluded that Kurniawan himself was the counterfeiter, the FBI eventually got involved, and Kurniawan is now sitting in a Brooklyn jail cell awaiting trial.

In other legal news from the wine world, Robert Parker posted a video last weekend in which he said that The Wine Advocate will be publishing Antonio Galloni’s Sonoma report in its next issue. Galloni’s failure to turn in that report, and his stated intention to post it instead on his own site, led The Wine Advocate to file a lawsuit against him last month. If Galloni has indeed had a change of heart, I assume the lawsuit will be dropped. But I’ve seen no updates yet on the status of the case. Stay tuned!

7 Responses leave one →
  1. Elfida permalink
    July 19, 2013

    Clos de la Roche that he tried to sell at an Acker Merrall auction in April 2008. /o\

  2. Jack Bulkin permalink
    April 13, 2013

    Mike the WA lawsuit against Galloni and All Grapes Media has been resolved. Parker posted it today.

  3. Jack Bulkin permalink
    April 12, 2013

    It is a lot of money Mike. Trial lawyers are like architects. If a client gives them an umlimited budget they may well still go well over that budget. That is how architects and litigators win. A good litigation firm with a large budget can pummel an opponent who could have the facts on their side though extensive discovery and expert testimony. That is a major problem with our justice system. However, I feel no sympathy for Greenberg here.
    Maureen Downey who has been enlisted to examine questionable bottles in these cases was at the trial. She stated that Greenberg was determined by the verdict to be responsible for …
    “‘wanton recklessness or malicious acts that were made deliberately with knowledge of the rights of his victim’
    ‘he displayed a conscience indifference to the rights of others’
    ‘he failed to disclose information with an intent to defraud’
    ‘he willfully made misrepresentations that he knew were false that resulted in damages suffered’ …

    Its MUCH more than an innocent bad purchase that he accidentally let slip through…. That was his defense and it failed miserably!”

  4. April 12, 2013

    It’s a hell of a lot of money that this jury assessed in punitive damages. Peter Hellman of the Wine Spectator put forward the claim that Koch spent $10 million pursuing the case against Greenberg. But the fact that Koch spent millions more than was needed to pursue this complaint presumably didn’t influence the jury’s decision–or might it have? At any rate, they must really have hated Greenberg to have sanctioned him this severely.

  5. Jack Bulkin permalink
    April 12, 2013

    I haven’t reviewed the trial record so I can’t comment on whether it will be reduced. Punitive damage awards have been reduced frequently of late, but when it comes t allegations of fraud in the marketplace, they tend to be sustained. (except against New York Banks in the New York Court of Appeals). The bigger question is the defendant’s ability or inability to pay the verdict if it is sustained.

  6. April 12, 2013

    That’s a massive award; do you think it will hold up on appeal, Jack, or will they reduce the amount?

  7. Jack Bulkin permalink
    April 12, 2013

    The jury awarded Koch $12,000,000.00 in punitive damages. That’s a lot of tea for Koch’s brothers next party.

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