Greenberg vs Koch Trial: Part 5

Day Three: Thursday 28th March 2013

Witness: Eric Greenberg – continued

On resumption, John C Hueston returned to the question of Royal Wine Merchants, and Eric Greenberg’s discovery in 2002 that they were known to be a prolific source of counterfeit wine.  Hueston asked Greenberg to confirm that, in addition to hiring a lawyer, he personally called Royal’s owner, Jeff Sokolin, which Greenberg confirmed.  Greenberg also confirmed that he had said that he wanted all his money back for every bit of wine that he had bought from them.  He denied, however, that he had threatened Sokolin’s life, although he confirmed he was aware that Sokolin had claimed this under oath.

Hueston produced a two-page letter from Greenberg’s attorneys to Sokolin dated 20 May 2002, stating that Royal had “misrepresented the provenance and quality of substantial amounts of fine and rare wine”  This letter requested a refund of over $2 million.  Greenberg confirmed that he wanted all his money back for everything they had ever sold him; he would have been happy to return the bottles.

Hueston then produced another letter, dated 24 May 2002, from Greenberg’s attorney Anthony Coles, to another attorney.  This letter included a list of wines purchased from Royal by Eric Greenberg that Greenberg had identified as fake, as of 19 May 2002.  Greenberg agreed that this is what his attorney had written; he could not vouch as to whether or not the contents were all correct.  The list contained eight pages of wines in Greenberg’s cellar at that time, totalling at that point $634,486.25, and the testing (a word Greenberg disputed) was ongoing.  This testing (or whatever he wants to call it) was done with Thierry Lovato, Greenberg’s cellar master and a sommelier, and Andrew Dombrowski, another sommelier.

Hueston then produced a further letter from Anthony Coles, to Royal’s attorneys, dated 5th June 2002, about the dispute (Greenberg preferred the term “issues”) with Royal.  In this letter, Coles writes “I shared your letter of May 29 with Eric Greenberg”.  Hueston noted that this indicated Greenberg had reviewed some correspondence from opposing counsel; Greenberg did not remember it.

The letter continued to state that Greenberg believed he had been defrauded over two years by Royal, as part of a scheme to profit from the sale of counterfeit wine, and that it was probable that other Royal customers had been similarly victimised.  In the letter, Coles further argued that Greenberg believed that the liability of $2.1million was both a corporate and an individual liability, and that Royal and its principals were jointly and severally responsible for those damages.

Hueston noted that the value of the fake wines had moved from over $600,000 to over $900,000, during the course of Greenberg’s investigation.  (It’s almost becoming predictable – Greenberg objected to the word “investigation”.  He prefers “review”.)  He then produced a letter, dated June 11 2002, with attachments, that Greenberg’s attorney, Frank Cialone, objected to, on the basis that incorrect attachments were produced by Royal.  Hueston agreed to remove the attachments, and Cialone agreed to admit the letter.  The letter was again from Anthony Coles to Royal’s lawyers, stating that Greenberg had now determined that approximately $912,301 (approximately?!) of wine is fake, that his review was continuing, and that he believed that there were a number of other wines that would turn out to be fake upon further investigation.

Greenberg noted that in the letter of 20 May 2002, there was a line stating that his preference was to settle out of court, and that he had authorised his attorneys to take the necessary steps to enforce his rights.  He continued “I never wanted to go to court with them, and after being in this litigation, sir, I never want to be in litigation again.  This has been the most horrible experience of my life.”  Hueston noted that he had not asked for the commentary.  (These two REALLY don’t like each other, do they?)

Hueston returned to the letter of June 11 2002.  In it, Coles had stated that Greenberg was “documenting each of the fakes by removing the capsule as appropriate, cleaning the necks of the bottles, and using high intensity halogen and incandescent lights in combination with two different types of magnifying glass to evaluate the bottle and other cork markings.”  Greenberg agreed that he was doing these things, in particular examining corks.

Hueston then entered a document entitled “Royal Fake Wine Summary Notes”, 10-page typewritten document that Greenberg had created setting out his methodology in examining the bottles he believed might be fake.  Greenberg agreed that he had been assisted by two sommeliers, but stressed that the conclusions in the document were his.  He had written that he had consulted outside experts, domaines and importers, but in fact he did not consult any outside experts, and only one domaine, and possibly only one importer (Chatterton, which imported Rayas).  The list was also not necessarily complete, and Greenberg had noted that there might be minor redundancies or understatements in it.  It comprised 86 different line items, in the range of 100 to 200 bottles.  These included 12 bottles of 1928 Beycheville, which turned out to be authentic.

Hueston then focused on a few individual items, starting with a 1950 magnum of Lafleur.  There were four observations made about it, including that the label was photocopied, there was no visible date on the cork, the cork appeared new, and there was no import strip.  Greenberg noted that he started with the cork, and if that had a problem, he would look at some of the other parts.  Hueston noted that in this case, the cork was the second and third item, and the label was the first point mentioned.  Greenberg claimed that sometimes, he put the most important things lower in lists.  (Really?  I have to say, a photocopied label would be my top indicator of counterfeit – pretty much definitive.)

Koch’s lawyer then produced the report prepared by Greenberg’s expert (his words, not mine – and wait until you read the cross-examination of THAT witness…) Gil Lempert-Schwarz.  In the report, Lempert-Schwarz also notes issues with the label and the cork.  Greenberg, although not asked, commented that Lempert-Schwarz had done this nine years later, and that corks degrade.  (Really?  That much degradation in nine years for a cork that was purportedly 50 years old and holding up fine in 2002?)  Hueston remarked that he had not asked a question, and then proceeded to read elements of the report referring to the magnum of Lafleur, including comments that the font was wrong, and there was no vintage legible on the cork, although the Chateau Lafleur emblem was legible.  Greenberg contested that this was the same bottle that he had consigned.  Hueston replied that he was not going into that point at the moment – he was just commenting on the similarity of the observations of Greenberg in his notes and the (supposed) expert in his report.  Lempert-Schwarz had, in fact, made the same observations on all five of the 1950 Lafleur magnums.  Hueston asked Greenberg to confirm that he had been able to look at the 1950 Lafleur magnums and determine that they had questionable labels.  Greenberg tried again to dispute the connection between the bottles in the report and the bottles of interest in the trial, but was asked by Hueston to give a yes or no answer, and then told by Judge Oetken to answer the question.

Hueston then progressed to an entry on the Royal Wine Fake Summary Notes describing three 1928 Latour bottles.  In all three bottles, the first observation is that there is a photocopied label.  The observations continue that one has a new cork with no markings, another has a new Latour cork.  Lempert-Schwarz had found similar issues with the 1928 Latour bottles in this case – stating clearly in several places that “The label is a photo-laser copy of an original”.

Again, Greenberg tried to say these were not the same bottles, and, again, Hueston remarked that he was simply looking at the factors that Greenberg and Lempert-Schwarz, the “expert”, had examined.

Hueston continued with a magnum of 1950 Petrus, in which there were again issues with the cork and label, as well as a new-looking capsule and the Nicolas stamp.  Greenberg denied he had any training to identify a wrong stamp from Nicolas, and when Hueston reworded it, also denied he had sufficient experience to feel comfortable with it.  He did not, however, explain why he had written it down as an indication of a problem with the wine.  Hueston directed Greenberg’s attention again to the expert’s report, with Greenberg saying he would read the paper version because he didn’t trust the one on screen not to be selective.  In this report, Lempert-Schwarz also identified a problem with the label, with the Nicolas stamp.

Discussion progressed to a complaint (or rather, according to Greenberg, a draft of a draft complaint), which Greenberg noted was never filed and he had had no intention of filing, sent by Anthony Coles to counsel for Royal Wine Merchants.  In this letter, Coles wrote “Please note that Mr Greenberg has authorised us to commence an action against Royal and its principals on or before May 30th.”  Greenberg claimed that this was just a typical lawyer’s letter.  Hueston asked if he was telling the jury that his lawyers were threatening to go forward when they had no intention of doing so; Greenberg replied that they were just keeping his options open.  Hueston asked Greenberg to confirm that his attorneys had acted with his permission and consent, which Greenberg did, grumpily.

The complaint states that it was an action for fraud and breach of contract arising from Royal’s “knowing and intentional” sale to Greenberg of counterfeit wine”.  There was then a dispute about the amount in question, although Greenberg eventually did agree that the letter said “more than $2 million of wine, of which all or substantially all is counterfeit or fake”, and that he had authorised his attorneys to make that statement.  The letter continues that in spring 2002, an auction house had inspected parts of his wine collection.  Greenberg agreed this was Sotheby’s, but disputed the word “inspected”, and tried to argue that, looking in retrospect, he should have been more careful about the wording of the letter.

Asked if his assertion was that “one international auction house inspected parts of this wine collection” was a false statement, Greenberg said “yes”.  Asked if the attorney who drafted the false statement was Mr Coles, Greenberg again said “yes”.

Hueston then commented that he was still here today, and he’s one of Greenberg’s “valuable top dog litigators”, in his words, which (predictably) Greenberg then disputed saying.  Hueston returned to the point, the Greenberg had not fired Anthony Coles for misrepresenting something on his behalf.  Greenberg retorted that Coles was a former deputy mayor of New York and an honourable man, and that Hueston should not be impugning his character.

Hueston replied that he was not impugning Coles at all – he just wanted to get the record straight.  Greenberg had said that the statement was false, and that his lawyer had written this.  Hueston asked if Greenberg had authorised Coles to make the statement, at which point Frank Cialone objected, on the grounds of attorney-client privilege.  Judge Oetken stated that Hueston could ask whether Greenberg had authorised Anthony Coles to make the statement.

Greenberg replied that he had authorised Coles to handle the matter, and he asked Coles to do so “in a way that he saw fit in an aggressive fashion”.  Therefore, he did not read carefully what Coles had written, and he cannot agree with it now.

Hueston retorted “Now in an aggressive fashion but an accurate fashion, right, sir?”  Greenberg replied that they never filed the complaint and so he didn’t see it as being dishonest.  Hueston clarified:

“if it has statements that are not true and it’s being attached as part of a settlement demand to Royal, it doesn’t matter if it I has false statements, is that your testimony?”

Greenberg replied “Like Mr Elroy’s falsification of evidence?” Hueston replied that he would get into Elroy later – he was asking about Greenberg.  He pointed out that the document did not just stay in the files of his attorneys – it was sent to Royal’s lawyers to try to extract a settlement.

Hueston progressed to another statement in the letter: “During that inspection the auction house representative, a recognised expert in the industry, raised questions about the integrity of certain bottles of wine.”  He asked if that was a truthful statement.

Greenberg replied that he would not use the word “inspection”.  He was angry about getting fake wines and wanted a refund – there was no more to it than that.  Hueston asked if he said anything about getting his money back, and Greenberg accepted that he had not done so.  Hueston then asked if it was a truthful statement, and Greenberg replied “I didn’t say that either”.  Hueston replied “okay”, and when Greenberg tried to elaborate (obfuscate?) added that he would accept the first reply as his answer.

They progressed (if that’s what you call it) to a further statement, claiming that as a result of the disturbing information from the auction house, Greenberg had retained an independent wine consultant to inspect the authenticity of a sample of the wines he had bought from Royal.  Greenberg replied that Anthony Coles had hired William Edgerton to review 108 bottles of wine.  Hueston continued that the letter continued that Edgerton had indeed reviewed 108 bottles of wine and found that those that had been purchased from Royal appeared, with reasonable certainty, to be counterfeit.

Greenberg stated that Hueston was misreading this statement: Edgerton had looked at 108 bottles in total, many of which were real.  Greenberg told Edgerton (he claimed) that the fake bottles were from Royal, and the others were not, which was an assumption he was making on the basis of his discussion with Serena Sutcliffe, but he is, today, not sure that is accurate.

Hueston retorted that today, as he was being sued, Greenberg was not sure it was accurate, but back then, he was sure enough to send it to the other side to extract a settlement.  Greenberg replied with a version of “she made me do it”, claiming it was because of what Serena Sutcliffe said, that she didn’t identify any other problematic sources, but just pointed out Royal.

Hueston noted that he did not get an answer to the question he had posed, so he would try it again.  The document stated that the independent consultant had reviewed a total of 108 bottles of wine, including some not purchased from Royal, to establish a baseline.  Greenberg replied that Edgerton had reviewed 108 bottles, a lot of which were real, and many which were inauthentic.  Hueston enquired where in the draft complaint it said that a lot of the ones Edgerton reviewed turned out to be real; Greenberg admitted it did not say so.

Greenberg then complained that he had not got any money from Royal – that what he got back all went on attorney’s fees.  He did not get a dime, but sent them back wine.  Hueston noted they would talk about that later.

Returning to the draft complaint (or was it a draft of a draft complaint?), Hueston noted that it stated that the consultant reviewed a number of different areas, including style and measurement of bottles of wine obtained from Royal compared to those of the style and measurement of bottles of wine known to be genuine.  He also inspected the labels and capsules

Hueston then submitted the report prepared by William Edgerton, with Greenberg stressing that the conversation had been handled through his lawyers to maintain privilege, as Edgerton was an expert witness.

Edgerton had put stickers on all the bottles he reviewed, numbered so that they could be cross-referenced to the report.  Hueston asked it if was possible that Greenberg had subsequently sold bottles that Edgerton had identified as counterfeit or suspect, and Greenberg admitted it was possible.  He also acknowledged that he had removed stickers from some bottles, because there was no need to keep stickers on authentic bottles once the dispute with Royal had been settled.

Hueston asked if Greenberg had kept a record of which bottles he had removed the stickers from; Greenberg replied that he had not.  Greenberg agreed that Edgerton had put sticker number 41 on a bottle of 1928 Latour, and that he had told Edgerton that the bottle was from Royal (although, of course, he is now denying that he was sure it was from Royal).  Edgerton listed various attributes of the bottle, and concludes it was “definitely counterfeit”.  Greenberg remarked that Edgerton had stated that “the authentication process is not a finding of fact; it’s a finding of opinion”.  Hueston, clearly fed up with the repeated dodging of the question, dragged Greenberg (figuratively, although I suspect he would have preferred to do so literally) back to the point, that Edgerton’s conclusion was that it was definitely counterfeit.  Greenberg repeated this was Edgerton’s opinion, and not a statement of fact.  Hueston replied that the statement “this bottle is definitely counterfeit” came under the caption “conclusion”, which Greenberg conceded was a correct reading of that part of the report.

Greenberg did not, however, concede that he admitted that the bottle they were discussing was a fake.  He remarked that there are experts who had come to conclusions on it, but he’s not an expert and really does not know.  At this stage in his life, he needs to follow the expert conclusions.  Hueston remarked that at that stage in his life, when he was looking to extract a settlement from Royal, it was definitely counterfeit, and was included in the total of the money he was demanding from Royal.  Greenberg agreed it was.

Hueston asked Greenberg to confirm that he had claimed that he had separated out all the wines in his cellar that he believe were counterfeit or even questionable.  Greenberg replied that he could not say so with absolute certainty, but he had tried.

Hueston asked if Greenberg had been involved in the selection of bottles for the October 2005 Zachys auction.  Greenberg claimed this involved listing some wines on a spreadsheet, and giving that to Thierry Lovato, his cellar master, to select and give to Zachys.  He did not choose the wines for inclusion, but proposed some for Zachys to review and authenticate, and then accept if they were authentic.

Hueston handed Greenberg a bottle of 1928 Latour with a sticker on it, number 41.  Greenberg agreed that if it was the bottle he consigned, this would be it, but that he had serious questions about the custody of the bottles in this case.  He agreed it was possible that this was one of the bottles Edgerton had examined and put a sticker on, but that it was also possible that Jim Elroy (a former FBI agent who has done a lot of private investigation for Bill Koch on the matter of wine fraud, most famously in the Jefferson Lafite bottles) had done something with it.  Greenberg claimed that Huston’s firm “has been found by courts to have destroyed data, to falsify data in this case”, at which point Hueston objected to what he called a “totally wrong accusation”.  Judge Oetken instructed Greenberg to limit his response to the question posed.

(It is significant that Marshall Camp, one of Koch’s legal team, wrote to Judge Oetken shortly afterwards to request that the court address Greenberg’s outbursts during this day’s examination, as allowing it to remain on the record would “unduly prejudice [the] plaintiff”.  There is no record of what Oetken’s reply was.)

Hueston asked Greenberg if there was anything on the bottle to indicate it was anything other than a bottle that Edgerton had examined.  Greenberg conceded that there was not, that it did have the same number sticker Greenberg had previously seen, and Edgerton had initialled the bottle.

Continuing on with the complaint (draft complaint? draft of a draft complaint?) sent to Royal, Hueston noted that Greenberg had requested the provenance of all the bottles he had purchased from them.  However, Greenberg was unable to provide any provenance for the bottles Koch purchased from him, despite being in the business of buying and selling wine.  Greenberg complained that Hueston was “confusing me with prior testimony”.  (It’s hardly fair to expect him to remember the things he’s said, is it?)  Greenberg did confirm that in his cellar if he had more than one source of a particular type of wine, in most cases he could not tell where any individual bottle came from.

Hueston noted that the draft complaint stated that “all or substantially all” of the wines Greenberg had bought from Royal were fake.  He noted that Greenberg had settled his dispute with Royal in early 2004, in which settlement they paid him some money and he returned some of the wine.  Greenberg agreed this is what had been said, but then tried to claim that he never claimed it was all fake, and his lawyers were just trying to get a settlement done.  (I keep asking myself how I would feel to be his lawyer right now.)

Hueston then submitted into evidence a further letter from Antony Coles to Royal’s lawyers, including a schedule of wines that he had purchased from Royal that were to be returned.  Greenberg accepted he had been personally involved in putting together the list, and had directed Thierry Lovato to pull certain wines to send back to Royal.  The value of the wines returned was $362,937, meaning that Greenberg kept between $550,000 of wine that he had earlier asserted was fake.   A 1921 magnum and a 1928 magnum of Petrus he had earlier identified as fake in his “Royal Fake Wines Summary” spreadsheet were not sent back to Royal.  Also not returned were the suspect magnums of 1950 Petrus, nor three magnums of 1950 Lafleur, nor seven bottles of 1928 Latour nor a bottle of 1864 Latour.

Greenberg acknowledged that Bill Koch is alleging that in 2005, a year after the settlement with Royal, he purchased suspect 1921 and 1928 Petrus from Greenberg, together with magnums of 1950 Petrus, and magnums of 1950 Lafleur, bottles of 1928 Latour and a bottle of 1864 Latour.  Greenberg claimed that he drank the 1864 bottle on his 40th birthday, and it was magnificent.

The jury was dismissed for lunch, at which point John Hueston complained to Judge Oetken about Greenberg’s accusations regarding his law firm’s actions.  Hueston stated that he believed that Greenberg was planning his outbursts, in order to prejudice the presentation of the case.  Hueston will go back to think about what can be done to address it, but requested that at the very minimum there be an instruction to Greenberg that he is never to make such an accusation unless it was called for in his questioning.

Oetken agreed that he would need to instruct the witness to limit himself to answering questions and asked if Arthur Shartsis had any comments.

Shartsis replied that he felt that on the specific issue of the accusation against Hueston’s law firm’s honesty, an instruction to the jury would suffice.  However, he felt that in some cases Hueston was cherry picking his way through the documents, and that the questions being asked were not fair or honest, because the witness was trying to say this is a complex matter and that was, for example, just one clause in a potential contract.

Oetken noted this was essentially cross-examination, and that he had given Greenberg some leeway to fill in his answers.  Greenberg had to answer the question – he could go beyond a simple yes or no, but he would not permit Greenberg to go into separate matters that are not responsive to the question.

Hueston noted that in the courtroom they were on a chess clock; if they were not, he could be a bit more relaxed about it. However, it should not be on his time that Greenberg is making his points.  His attorneys are not objecting that the questions are unfair, and they will have all the time they want to use to bring out what they want to bring out regarding the documents, but it should not be on the Koch team clock.

Oetken agreed that Greenberg has to answer the questions, and he will be watching out for it.  They do not need to be yes or no answers, but they must be responsive to the questions.  On the matter of the outburst regarding Jim Elroy, Oetken was not sure it made sense to call attention to something that was very fleeting, but he would consider arguments about a limited instruction or request.

The lawyers and judge now also broke for lunch.

Click here for Part 6.