Energy-industry billionaire and wine collector Bill Koch announced on July 15 that he has settled his six-year lawsuit against New York auction house Acker Merrall & Condit. Koch claimed that he had purchased over $2 million worth of old wine from Acker that he later discovered was counterfeit. Yesterday’s settlement terms, according to Koch, include a “substantial” cash payment and an agreement that Acker will change its terms of sale to allow purchasers to return wine suspected of being counterfeit. Neither side would disclose the size of the payment nor the exact language of the deal.
"This is a big victory for consumers," said Koch, in a statement. "I am pleased that the auction industry is changing the way business is conducted. Consumers will now have more protection from unscrupulous collectors as a result of this settlement. We have cast a bright light on a dark industry."
Under the deal, auction customers can return wine if it is "suspect or counterfeit." Like many wine auction houses, Acker catalogs state that the auctioneer is not responsible for the accuracy of its descriptions of wines, something Koch has called a license to sell fakes. Acker also agrees to submit pre-1970 vintage wines to independent inspection prior to sale.
“While we are certainly pleased that we were finally able to find common ground with Mr. Koch,” Acker CEO John Kapon told Wine Spectator, "our business practices will remain largely the same [though] the criteria will be tweaked a bit. Acker has for many years subjected all pre-1962 wines to third-party inspection.”
Kapon also notes that Acker’s “rescission policy” in its conditions of sale permits the return of “materially incorrect” wine purchased by a customer within 90 days at the auctioneer's sole discretion. "Materially incorrect can mean counterfeit," said Kapon, adding that “while the language regarding returns will be slightly changed going forward, the general concept, in principle, will remain largely unchanged.”
The founder and president of Oxbow Group, a Florida-based energy conglomerate, Koch spent millions of dollars on a growing wine collection in the 1980s and '90s. But since he discovered some of the bottles were fake, he has led a campaign to clean up the auction business, filing suits against several auction houses, retailers and collectors and spending upward of $25 million on lawyers and private investigators.
Once a quiet wine shop on Manhattan's Upper West Side, Acker has become one of the world's top sources for collectible wine, holding record sales in New York and Hong Kong, under the supervision of Kapon. But there have been questions about Acker's standards ever since one of its top consignors, Rudy Kurniawan, was accused of counterfeiting millions of dollars worth of fakes. Kurniawan was found guilty by a federal jury last year and awaits sentencing.
Koch's suit, filed in April 2008, stemmed from five bottles he purchased in 2005 and 2006, described by Acker as a 1949 Château Lafleur, a 1947 Château Pétrus, a 1945 Comte Georges de Vogüé Musigny and two bottles of 1934 Domaine de la Romanée-Conti Romanée-Conti. He paid $77,925. Koch later tried to add 204 more bottles to the complaint, purchased for $2.1 million, claiming that he had only belatedly learned that nearly all the additional bottles, like the original five, were fake. Nearly all had been sourced from Kurniawan.
Koch's claims against Acker included fraud, deceptive business practices and false advertising under consumer protection sections of the New York General Business Law (GBL) and breach of contract. Acker denied all the allegations. After Koch rejected Acker’s offer to refund the full sales price of the original five bottles, the auctioneer fought vigorously against Koch’s lawsuit.
In 2009, Acker's attorneys succeeded in getting a New York trial court and appeals courts to throw out most of Koch's claims, with the appellate court ruling that “a reasonable consumer,” alerted by catalog disclaimers that all lots are sold “as is,” would not have been misled by Acker’s “alleged misrepresentations concerning the vintage and provenance of the wine it sells.” But New York’s highest court reinstated Koch’s right to press his claims that Acker’s business practices and advertising had been deceptive in March 2012.
With this settlement, the 74-year-old Koch’s decade-long campaign to root out fakery may be winding down. His only pending lawsuit is one in California against Kurniawan.
News of the deal with Acker was greeted with dismay by fellow anti-counterfeit crusaders, who hoped that a trial would expose the details of Acker's relationship with Kurniawan. “I can’t believe this got settled," one told Wine Spectator. "Koch’s lost his enthusiasm for bringing Kapon to justice and is walking away.”
Koch's spokesperson, Brad Goldstein, disputed that. “If the case had gone to trial and Bill Koch had won, he’d have been the sole victor. And he may not have won. By this settlement, he got Acker to change the small print that sticks it in the eye of every consumer. From that perspective, consumers are the victor.”