American Greed

The Greed Report: 'In Wine There is Truth—and Scams! Don’t Get Bamboozled by Bogus Bordeaux'

Wine is more than just a drink. It's a way of life. And collecting fine wines is more than just a hobby for many.

The world of wine is populated by people of discerning palates. It affords an endless journey to some of the most glorious wine producing regions on Earth, and through centuries if not millennia of winemaking history. It can also be lucrative for the most astute collectors, with the most expensive vintages selling for tens of thousands of dollars per bottle.

Think you have what it takes to make it in the world of wine? Wine expert Maureen Downey has some words of warning.

"Anybody who has purchased fine and rare wine at auctions or through some retailers in the United States and even in Europe, especially in Asia, in the last 15 years probably has fakes," she told CNBC's "American Greed."

That's right. Even the best collectors get duped. Counterfeit wine is gushing through the system.

"Anybody who is buying a lot of very expensive wines that doesn't think it's a problem has their head in the sand," she said.

Downey, founder of Chai Consulting, a San Francisco-based wine collector services firm, helped bring down one of the most prolific wine counterfeiters of all time.

Rudy Kurniawan, 38, who had become a sensation in the wine-collecting world while still in his 20s, was sentenced to 10 years in prison on two fraud counts.

Kurniawan, who came to the U.S. from Indonesia, passed off vast quantities of relatively worthless wine — much of which he bottled in batches in his own kitchen — as rare vintages worth millions. And he got away with it for years before his arrest in 2012.

Wine collector Rudy Kurniawan, of Arcadia, wine tasting. Photo to illustrate a column about Pierre Henry Gagey, CEO of Maison Louis Jadot in France, about his wines and about a dinner at Campanile restaurant, where several wine collectors were tasting his wines dating back to 1959.
Ricardo DeAratanha | Los Angeles | Getty Images
Wine collector Rudy Kurniawan, of Arcadia, wine tasting. Photo to illustrate a column about Pierre Henry Gagey, CEO of Maison Louis Jadot in France, about his wines and about a dinner at Campanile restaurant, where several wine collectors were tasting his wines dating back to 1959.

Like all of the great con men, Kurniawan succeeded by making his victims want to believe.

"Rudy Kurniawan was definitely motivated by greed, but there are others that profited from this, too," said Jason Hernandez, the former assistant U.S. attorney in New York who prosecuted the case. "People were bidding. They were buying. The economy was good. So it was really the right time for Rudy Kurniawan to come onto the scene because people weren't asking too many questions."

It also helped that Kurniawan was good at what he did.

"Rudy did a lot of things well," Downey told "American Greed." "Rudy used a lot of very good materials. He was careful in making sure that many of the details that we find on regular labels and authentic labels are accurate. There, are a lot of things that he did right. Fortunately, there are a lot of things that he did wrong."

And those fatal flaws in Kurniawan's work provide some useful tips for amateur and professional collectors alike.

Downey, a sought-after advisor and speaker who claims to have developed the world's largest database on counterfeit wine, wrote in 2012 about some of the telltale signs of a fake. Now, after helping to put Kurniawan behind bars, she is sharing more secrets exclusively with " American Greed."


Truth in Labeling

Customer looking at wine bottles
Getty Images

The first thing wine detectives look at is the label — not just what it says, but how it looks. A label that appears to be new on a wine that is purported to be old is a dead giveaway. Even the paper itself can tip off an expert to a possible fake, since paper produced at particular times will react to light differently.

Downey says Kurniawan went to great lengths to make the labels on his counterfeit bottles look the age that the wine was supposed to be.

"One of the things that he actually did was, I believe, he toasted the labels in the oven, because I can clearly see, when I look at all of these labels, overlay marks and you can see where the ink may have seeped up on the back of a particular label," Downey said. "But he also did old fashioned things like tea, tobacco, dirt."

But one of Kurniawan's fatal mistakes was not matching the aging on the label with the aging on the bottle itself. She showed how a stain on one Kurniawan bottle somehow did not continue onto that bottle's label.

"So he applied stains to try to make things look aged, but when you actually look at it closely or you look at it under magnification or when you look at it with other tools like blue lights or flashlights, they don't make sense," she explained.

Time Capsule

Experts also look closely at the capsule — the material that covers the top of the bottle and the cork to make certain it appears age-appropriate, including checking to see what it is made of. An aluminum capsule on a wine supposedly bottled in the 1940s — when tin was the norm — is a sure sign of fraud. But even the untrained eye can spot other capsule issues.

Check to see how the capsule is applied to the bottle. If the edges don't line up — as was often the case on Kurniawan's bottles — it could be a warning sign.

"What he often did, what counterfeiters often do, is they reuse capsules which causes this folding, which is why they end up having to glue them on. And you can see here this should be perfectly aligned, but it's not aligned at all," Downey said.


Put a Cork In It

A bin of corks used as evidence in the trial of wine dealer Rudy Kurniawan is on display in Federal Court on December 19, 2013 in New York. Kurniawan was found guilty of masterminding a lucrative scheme to sell fake vintage wine in New York and London.
Stan Honda | AFP | Getty Images
A bin of corks used as evidence in the trial of wine dealer Rudy Kurniawan is on display in Federal Court on December 19, 2013 in New York. Kurniawan was found guilty of masterminding a lucrative scheme to sell fake vintage wine in New York and London.

The natural properties of cork, including its ability to expand and form a perfect seal in the mouth of a wine bottle, have made it an integral part of wine bottling for centuries. So it is somewhat surprising that fraudsters tend to overlook key details in their corks when counterfeiting a bottle of wine.

Downey says a common wine scam is to take an authentic bottle of wine, enjoy the contents, then refill it with something else and put a new cork in it.

"Corks always have a stamp, the same way that these have the stamp with the vintage," she demonstrated. "This cork has absolutely no stamp on it. So that tells me that there's no way that it actually came from this famous chateau in France."

Another scam — one Kurniawan was especially fond of — was to alter the stamp to change a wine's vintage, as he did with a 1964 Lafite-Rothschild that he magically turned into a 1961 vintage.

"It's important for Rudy to continue this scam to make sure that his wine tastes somewhat like it's supposed to so, that would make sense. But a bottle of 1964 would only be worth $4 to $500. By changing that to a '1' and putting a 1961 label on it, he can now get up to $2,000 for this bottle," Downey said.

In Vino Veritas

AG ep 105 Rudy

Of course, it all boils down to the wine itself, which experts scrutinize as well.

In wine there is truth, the old saying goes. There should also be some sediment. An older vintage that looks completely clear may not be what it purports to be.

If you are at the point where you are finally opening your wine — and it is one bottle and not part of a case — it may be too late and you may already have been scammed. Besides, tasting the wine may be one of the least reliable ways of determining if it is fake, because taste is so subjective.

Also, even Downey admits Kurniawan's fakes were pretty good.

Wine glasses, cheers
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"I have tasted fakes that Rudy made, and some of them were very impressive," she said. "He did have a good palate, he figured out how to make master blends; we actually have photographs of bottles with his formulas on them. But in the end when you compare them side-by-side against the real deal, they stick out like a sore thumb."

Still, in the world of wine, which includes some premium egos along with the premium vintages, Downey says many people don't want to admit to falling for a fraud.

She says one of the best ways to combat fraud — and avoid being scammed — is to set pride aside and recognize the potential that you too could get taken.

"You know, if consumers would be wise enough to recognize that when a story is too good to be true, it is, that would be great," she said. "But, you know we've been warning people of that since time immortal."

She says the rest of the wine industry has a role to play as well.

"I think that wine retailers, vendors, brokers need to take more of an aggressive step to be part of the solution instead of part of the problem. And that doesn't just mean paying lip service. It means actually getting educated about the issues and making sure that what you're selling is not counterfeit and it's not stolen."

But until then, if you're a would-be wine collector, arm yourself with information, and don't be afraid to ask an expert. That way, you may avoid pouring your money down the drain.

Watch "American Greed," Thursdays at 10p ET/PT on CNBC Prime.