99 Bottles of Plonk on the Wall

When California wine collector and dealer Rudy Kurniawan was convicted of fraud in December 2013, the details of his elaborate scheme sent shock waves through the wine world. At last, a jury had confirmed what some in the industry had known for years: Kurniawan was a con artist whose too-good-to-be-true wines were in fact counterfeit. He was, as Assistant U.S. Attorney Stanley J. Okula, Jr., put it, a "prolific purveyor of plonk."

Kurniawan was sentenced on Thursday, August 7, to ten years in prison. In addition, he was ordered to forfeit (to give up as a penalty) $20 million worth of property and pay $28,405,502.50 in restitution to seven of his victims. I was fortunate to be able to attend the sentencing hearing. As I listened to the arguments from each side, I realized that this case was a legal smorgasbord and that I could use Kurniawan’s story to answer that frequently asked question, “What does law have to do with wine?” In this blog, I will explore legal issues and other interesting topics in the wine industry. My next few posts will highlight some of the areas of law implicated in the Kurniawan saga. Below is a summary of the twisted tale, which I have been talking about non-stop for the past month or so.

Kurniawan rose to stardom in the fine and rare wine market as a connoisseur with a discriminating palate, deep pockets, and mysterious friends in high places. Inexplicably, he was able to procure wines that other collectors could not.  It turns out that he was producing those wines in his own kitchen by mixing lower-cost wines (though not always “plonk”) to approximate the taste, color, and feel of vastly more expensive and sought-after ones.  Using empty bottles of authentic rare wines and some creative labeling techniques, he created finished products that he passed off as some of the most coveted vintages in the world, including 1934 Domaine de la Romanée-Conti, 1945 Château Lafite Rothschild, 1947 Château Pétrus, and 1962 Clos de la Roche from Domaine Ponsot. His wines sold for thousands of dollars a bottle. Kurniawan swindled the likes of William Koch, Quest Software founder David Doyle, and real estate mogul Michael Fascitelli out of more than $20 million.

Kurniawan’s fraudulent activity afforded him a lifestyle that he had only dreamt about. Although his family is alleged to have considerable wealth, his undeniable talent for tasting and evaluating wines catapulted him to another stratum. Wearing Hermès suits and Patek Philippe watches, Kurniawan rubbed shoulders with the ultra rich and quickly gained the respect of many elite oenophiles. He hosted exclusive, lavish parties at his home, where fine and rare wines—both real and fake—flowed profusely. Just as Jimmy Gatz became the illustrious Jay Gatsby, Kurniawan became known as “Dr. Conti” (as in “Romanée-Conti”).

Although a few skeptics sounded the alarm early on (most notably, Maureen Downey in 2002), their allegations were largely ignored.  It was not until 2008, when William Koch sued Kurniawan, and Laurent Ponsot, the proprietor of Domaine Ponsot, blocked the sale of Kurniawan’s fake wines by the auction house Acker Merrall & Condit, that the skeptics began to be heard. Mr. Ponsot personally appeared at the Manhattan auction to ensure that the fake Clos de la Roche and Clos St-Denis wines, purported to be from Domaine Ponsot, were not sold. Ponsot, who would later testify at the federal trial, identified blatant inconsistencies between the labeling of the bottles acquired by Acker and that of genuine Domaine Ponsot wines.

Upon Kurniawan’s arrest in March 2012, the FBI raided his home in Arcadia, California. They found bottles, labels, wax, corks, capsules, bottling equipment, and of course, wine. Ultimately, Kurniawan was convicted in federal court of one count of mail fraud and one count of wire fraud. Specifically, he used the United States Postal Service and a private carrier, FedEx, to ship his fraudulent wines between states. He also used USPS and FedEx for interstate shipment of empty bottles, and to ship auction catalogues containing descriptions of his fake products. In the course of his dealings, Kurniawan used the telephone and wire transfer to defraud a New York financial institution and obtain a $3 million loan. He underreported his expenses and personal debt, and even lied about his immigration status to the lender. Like the lone partygoer who attended Jay Gatsby’s funeral, only one witness took the stand in Dr. Conti’s defense.

By now you can probably see some of the legal implications of Kurniawan’s actions. Using someone else’s brand to sell his products? Agreeing to sell one product and knowingly selling another? Securing a loan? Intentionally mislabeling beverages? Obtaining an interest in land? Trademarks, contracts, and regulatory compliance are just a few of the concepts that arise in this intricate tale. Each of Kurniawan’s activities implicates some area of the law, and I will explore some of these areas in my coming posts.