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Lawsuit Alleges $340,000 of Bordeaux Wine is Fake

California collector and New York auction house targeted in new lawsuit by billionaire collector

Mitch Frank
Posted: October 30, 2007

Billionaire collector William Koch has made good on his threat to shake up the wine auction world. The Florida energy executive, who is suing German wine dealer Hardy Rodenstock over the authenticity of four bottles of Bordeaux that may have belonged to Thomas Jefferson, filed a federal lawsuit Friday against wealthy California collector Eric Greenberg and Zachys Wine Auctions. Koch alleges that 11 bottles he bought at Zachys' single cellar auction in October of 2005 consigned by Greenberg are counterfeits. Moreover, he accuses Greenberg of knowing they were fakes and accuses Zachys of either knowing they were fakes or negligently passing them along.

"The allegations are absolutely false," said Greenberg's attorney, Anthony Coles. "Eric Greenberg would never knowingly offer wine that he knew to be counterfeit."

Koch additionally claims that eight bottles of Bordeaux he bought at a different Zachys auction in 2004, are also counterfeits. In all, he paid $340,000 for the 19 bottles he claims are fake.

"We have been in the wine auction business for seven years and have held over 40 auctions and sold more then 55,000 lots of fine wine," said Jeff Zacharia, president of Zachys Wine Auctions. "We have very strict policies about wines that we will offer for sale and would never sell wines that we know or believe to be counterfeit."

The new suit comes at a time when counterfeit wines are repeatedly popping up in headlines, threatening to undermine confidence in the auction and retail market. The FBI's art fraud squad sent subpoenas asking for information to Christie's, Zachys and Sotheby's in March on behalf of a federal grand jury investigating possible crimes. And producers, who once turned a blind eye, have begun researching anticounterfeiting technology. Château Petrus owner Christian Moueix even told Wine Spectator that he regrets not moving quicker to make bottles more difficult to fake. He added that he had spoken with the FBI five times about fraud.

On Aug. 14 of this year, a U.S. federal magistrate entered a default judgment in Koch's favor against Rodenstock, who refused to contest the charges, claiming the court had no jurisdiction over him. After the decision, Koch told Wine Spectator that he planned further action because he felt the auction industry was in sore need of reform; he hired experts to examine all 35,000 wine bottles in his collection. "Rodenstock is just the tip of the iceberg. I plan to put people in jail, I plan to get my money back, and I plan to force the auction houses and retailers to make serious changes," said Koch.

Greenberg is a Silicon Valley investor in technology firms and owns an extensive wine collection. Zachys auctioned off 17,000 bottles from his cellar over two days in October, 2005. In the complaint filed Friday, Koch alleges that Greenberg originally approached Sotheby's to handle the sale. Serena Sutcliffe, the head of Sotheby's wine department, inspected Greenberg's collection, according to Koch, concluded many bottles were fake, and refused to auction the wines. Greenberg then approached Zachys.

Coles denies the allegation. "Sotheby's in fact made a proposal to sell Mr. Greenberg's wine at auction, but Mr. Greenberg chose to go with Zachys," he said.

"While it is true that Sotheby's visited Mr. Greenberg's cellar and made a proposal to sell a portion of his wines, Sotheby's informed Mr. Greenberg that there were authenticity issues with various wines which Sotheby's would not have been willing to sell," said Jamie Ritchie, North American wine director for the auction house.

The wines Koch purchased at the Zachys sale are an impressive roster of old Bordeaux, including a magnum of Chateau Petrus 1921 for $29,500, a magnum of Chateau Lafite Rothschild 1870 for $33,150 and a bottle of Lafite 1811 for $29,172. Koch said he spent a total of $3.7 million at the sale.

Koch said he approached both Zachys and Greenberg before filing suit. "We tried to work with Zachys, but Zacharia never offered to take the wine back. Greenberg never offered to take the wine back."

Both Greenberg and Zachys deny that. "Mr. Koch did not ask us to refund his money," said Zacharia. "If he had, we would have assessed the wines a second time and if we felt that there was any validity to Mr. Koch's concerns we would have gladly refunded his money." Zacharia said Koch only claimed he was concerned about some of the wine and wanted to speak to the consigner. Once Zachys had obtained Greenberg's approval, they gave his contact information to Koch.

"Mr. Koch never presented any evidence of any problems and never asked to return the wines before bringing this lawsuit," said Coles. "The auction involved 17,000 bottles from Mr. Greenberg's collection, and Mr. Koch is talking about 11. As a matter of principle, if anyone had any question about his wine, Eric would address it immediately."

Portions of Greenberg's collection, which at one point contained more than 60,000 bottles, have been auctioned off by other houses. A former employee at a leading auction firm siad that house passed on putting wines from Greenberg's cellar on the block because of suspected counterfeit bottles.

Greenberg was also the "Man with the Golden Cellar," the consignor for Acker, Merrall and Condit's $15.56 million/11,474 bottle auction on Oct. 26-27 at Le Bernardin in New York. Acker President John Kapon confirmed that, adding, "I think what Bill [Koch] is trying to do is a good thing, but no one is trying to sell fake wines purposefully. None of the major auction houses wants to do that—not Zachys, not anyone.

"Eric Greenberg is still responsible for one of the greatest collections of all-time," Kapon continued. "When collections get up to $10, $20 or $50 million, there will always be a few lemons, unfortunately. It is up to whomever represents these cellars to filter out the lemons and only offer what they are most comfortable with, as well as stand behind every bottle that they sell."

Koch told Wine Spectator that his experts had so far only examined 10 percent of his cellar—work continues. They've put together a computer analysis of which auction houses they believe are distributing the most counterfeits. "Zachys was on that list," said Koch. He added that he wants several things: a new code of conduct by auctions houses and retailers on when to take back wines; a better job of authentication; and industry transparency about whose wines they're auctioning off. "And I want some people—like Rodenstock—to go to jail," said Koch.

"When you go to an auction, you're relying on their reputation and expertise," said Koch. "You can absolutely expect more lawsuits. I've been duped, and a lot of other people have been duped."

No court date has yet been set for responses to the complaint.

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