Greenberg vs Koch Trial: Part 7

Day Three: Thursday 28th March 2013 (continued)

Eric Greenberg, cross-examination

Frank Cialone rose for the defendant.  (Once again, I am struck by the absurdity of the defendant being cross-examined by his own lawyer.  And yet, it is a masterful stroke – not the cross, but making him the plaintiff’s main witness.  When you have one who sets hackles raising so easily, who is so unnecessarily aggressive and confrontational, why not let him hang himself, so to speak.)

Cialone started with the Kapon question, and asked how many bottles Greenberg had sold to AMC.  He replied 35,000 to 38,000, in eight to 10 auctions, across eight years.  Greenberg testified that in his experience Kapon would not have sold a wine that he did not believe was genuine, even if it had been caveated with notes in the catalogue.

With respect to the corks on the Lafleur magnums, Greenberg also testified that he did not believe that a vertical brand on a pre-1966 Lafleur magnum was an indication of authenticity.  He had done nothing to prevent Zachy’s from looking at the corks on these bottles, and indeed they looked at them three times.

Greenberg testified that Jeff Zacharia and Fritz Hatton of Zachy’s came to his house to inspect all the rare and trophy wine, with about six people in total for about two weeks.  While at his house, they inspected the pre-66 Lafleurs, and enjoyed a 1947 magnum of Lafleur that Greenberg opened.  Greenberg’s reason for opening it, he claimed, was because it is “what’s in the bottle that matters”.  He describes it as one of his favourite wines, which he first had with Robert Parker who gave it 100 points.  (I often wonder if it was the 100 points that made it one of his favourite wines.)  Greenberg sent Thierry Lovato, his cellar master, to find one.  There were perhaps 15 such magnums at that point, with the ones suspected of being fake turned around in the racks.  Lovato picked one, which was served blind to Zacharia and Hatton, and they then showed them the bottle and cork.

Cialone asked if, as far as Greenberg knew, the Zachy’s team thought the 47 Lafleur they tasted was authentic.  Greenberg replied that he thought the best description was in the tasting note, which was “glowing”.

Cialone then asked how it was that Bill Koch and Brian Orcutt had tasted magnums of pre-66 Lafleur from Greenberg’s collection.  Greenberg explained about pre-auction dinners, and how in this case he had given about $200,000 to $250,000 of wine for them to open for their VIP clients so they could taste the collection.  There were different categories of wines included, and one such was old Right Bank wines, especially in magnum, as they are very rare.  In Los Angeles they served a 1947 Cheval Blanc and in New York a 1950 and 1947 Lafleur.  Cialone asked if the Lafleur wines had vertical cork patterns, and Greenberg replied “Horizontal”, to which Cialone repeated “Vertical, up and down” (leading the witness?).  Greenberg apologised, saying it had been a long day, and that what he had just been through wasn’t easy.  He confirmed that the wines tasted, just like the wines Bill Koch alleged he purchased in the auction, had vertical branding, so that the Lafleur goes top to bottom.

Greenberg confirmed that no one at the event complained about the wines and, in fact, Jeff Zacharia called him the next morning to tell him they were the hit of the party, and were all the rage.  When Cialone asked if Jeff Zacharia told him anything about what Orcutt or Koch had said, Hueston objected on the grounds of hearsay.  Judge Oetken allowed it on Cialone’s explanation that it would establish state of mind about the authenticity of the bottles.  A man whose wife was born in 1947 had wanted all the wines of that vintage; Zacharia told Greenberg that Orcutt said that Koch had told him (are you following this?  Not sure either I or Judge Oetken were by this point) to bid up the bottles as high as he could.

Cialone asked if Koch did buy magnums of pre-1966 Lafleur at the October 2005 auction, and Greenberg confirmed that, to his knowledge, all of them had vertical cork brands.  Not all of these form part of the suit; in fact, some were dropped the previous week.

Cialone then offered into evidence Michael Egan’s expert report.  (This case just gets screwier – the plaintiff offers the defendant’s expert report; the defendant offers the plaintiff’s!)  Egan comments on a magnum of 1945 Lafleur, noting that the length of the cork (5.2cm) was consistent for top Bordeaux chateaux.  The report continued, “The branding is clear and the first three digits of the vintage can be seen.”  Nowhere does he say that a vertical cork brand is an indication of inauthenticity.

Turning to one of the 1947 Lafleur magnums that had been dropped from the case, Egan wrote exactly the same thing.  For a magnum of 1949 Lafleur, he wrote, after noting the length of the cork, “The branding can be easily read.  The digits of the vintage are smudged.”  This continued in the same vein through two 1950 Lafleur magnums.  Again, Cialone pointed out that nowhere did Egan comment on the vertical branding of Lafleur magnums.

At this point, Hueston requested that for each of these, Egan’s conclusion that the wines were counterfeit be put into the record.  Cialone retorted that he believed “counsel is fully capable of presenting his own expert witness’s testimony.  He can do that with him.”  Oetken agreed.

Cialone then continued through various vintages of Lafleur, reading selective bits of Egan’s report, through to 1961, each effectively saying the same thing.  (He continued to ignore the conclusions.)

Cialone then asked Greenberg if he believed he needed to inform Zachy’s about John Kapon’s opinion when he believed that opinion was wrong.  Greenberg replied “No”.  He confirmed that Zachys had previously sold pre-1966 Lafleur magnums for him, starting in February 2003.  He believed these were genuine, because “I had tasted them and they tasted great.  I tasted those things with Robert Parker, who is the foremost expert on wine (well, one of them).  I had seen the corks.  I had seen the bottles, and I believed they were real.”  The ones he thought were fake were segregated.

Changing tack, Cialone moved onto background information.  Greenberg replied that he lives in Ross, in Marin County in California, with his wife and two children, aged 11 and seven, whom he stressed he loved very much.  He is an entrepreneur in technology companies, he has a health food company because of his own weight problems, and he is a philanthropist.  He noted that Worth magazine named him one of the top 10 most generous Americans under 45 a few years ago.  He also wrote a book, called Generation We, that was endorsed by Mohammed Yunus, winner of the Nobel Peace Prize.  (Interestingly, in this segment, Greenberg was showing the same disregard for his own lawyers questions as he had for Hueston’s.  The man clearly cannot help himself – in any sense.)

Cialone asked what Greenberg had done to build the wealth to amass his wine collection.  Greenberg replied that he was born in Brooklyn and grew up in Las Vegas (perhaps that explains it) in a poor family.  He put himself through college, and worked for what is now Accenture, before starting a business for a research company called Gartner Group in 1994.  He built two companies, Viant and Scient, that built hundreds of electronic businesses, both of which went public.  In 2000, he left Scient and started a venture capital company, and has also founded a medical publishing company, and many more, investing in over 20 start-ups.

Greenberg continued on the subject of his philanthropy, noting that there were three major targets of it: medical research; homeless shelters; and victims of genocide.  (I find myself liking him a little more here.)

Returning to the subject of wine, Cialone asked if all of his wines were “fine and rare”, to which Greenberg replied that the majority are.  He got into wine when he and his wife, in the early stage of their marriage, would go out to Napa and walk among the vineyards and taste and experience it all.  He loves wine – and it doesn’t need to be expensive.  In the right context, a $10 bottle of Pinot Grigio is enjoyable.  In 1998 Greenberg made a lot of money, which is when he started exploring Burgundy and Bordeaux, which he considers a natural progression from the starting point of California.

From the time he started collecting up to the point where Serena Sutcliffe visited his cellar, Greenberg had about 30 sources for his wines, although that later expanded to up to 60.  This included spending millions at auction, from AMC, Zachy’s, Sotheby’s and Christies, as well as Chicago Wine Company occasionally, and from Wine Bid for California wines in particular.  When he first started collecting, he would tell the merchants what kind of wines he wanted, the prices he was willing to pay, and to do worldwide searches for the wines and to buy every bottle they could get.  (I read this, and I think, no wonder.  If it hadn’t been Rudy and Rodenstock, it would have been someone else.  This market was so easy for a fraudster.)  The majority of his collection is French, from Bordeaux and Burgundy, together with Champagne.

To educate himself on wine, he read extensively: Parker, Michael Broadbent MW, David Peppercorn MW, and articles by Serena Sutcliffe MW.  He would also go to restaurants and taste a lot of wines with famous sommeliers.  (Side note: one of the major issues with tasting for authenticity is that many people’s palates were trained on fakes.  Serena Sutcliffe tells a story of a famous tasting Hardy Rodenstock did of Petrus.  She and David knew they were fakes, because of David’s father’s extensive cellar, and so got up and walked out.  But many other people were there, taking detailed notes, that ever since the “accepted” note for an older Petrus is often based on a completely erroneous precept.)

Greenberg also linked up with other collectors, for example going to every tasting that Bipin Desai hosted, and at times hosting tastings together.  He added “I was the biggest buyer in the world, so I was in the community.  I was invited to everything.”  (I wonder if this is what he was really seeking – not the wine knowledge, but the acceptance and recognition.)

Cialone then asked a very valid question: did Greenberg ever drink the rare wines in his collection.  Greenberg replied that that was the whole point; it’s what got him really hooked.  At the beginning of 2002, he had about “1500 bottles of wine that were considered to be 100 point wines, top wines, nearly impossible to find, and wines that would be coveted by the top collectors in the world.”  (Again, is that the point?  Being envied?)

At Cialone’s prompting, Greenberg explained the points system (or, specifically, the 100 point system).  100 points is considered perfect; 95 is remarkable, 90 would be the base point for a collector’s wine, and 80 for drinkability.  He targeted wines that were perfect or near perfect from the critics’ and collectors’ perspectives.

Greenberg believed, as of early 2002, that he could identify fine and rare wine by tasting it.  He can pick wines from blind, although not necessarily to the vintage.  To some of the tastings they had he would bring hundreds of bottles, sometimes worth six figures, and as old as 1807.  No one raised any questions about his wines at these tastings.  He would bring wines from his collection to tastings attended by experts all the way into 2010 in China, when they tasted about 500 of his bottles of his wine before the Acker auction.

Changing topic again, Cialone asked when the inventory of Greenberg’s cellar was first compiled, which was August 2003.  He confirmed that he did not have this when Serena Sutcliffe first came to his cellar in April 2002, although he did have a partial list, of wines he wanted to sell.  He had no inventory management system in place, and other than keeping his invoices, no other way of controlling his stock.  Greenberg confirmed that he got wines of the same type and vintage from more than one source for the vast majority of his collection.

Greenberg confirmed that, prior to Sotheby’s visit, he did not think that he had counterfeit wine in his collection.  He had been aware that counterfeits existed because of something in Robert Parker’s book, but did not think it affected him.  (In this, he is like the vast majority of collectors.)  He had no knowledge of the techniques that experts use to authenticate wines, nor had he ever gone to a chateau in France to ask what labels, capsules and corks they used over the years.  In fact, he had never been to a wine region in France.  (Sorry, what?!)

When he got his licence to sell wine, in August 2001, Greenberg did not have to show that he knew anything about authenticating it; he merely needed to show he was not a felon.  Since getting that licence, he has devoted only about 1 or 2 percent of his time to the business of buying and selling wine.

The jury was dismissed for the day.  The lawyers discussed various housekeeping matters, in particular the discussion of the bottles that had been excluded from the case.  Judge Oetken denied Hueston’s motion to exclude, subject to prejudice or if there is a waste of time.

Court was adjourned until Monday 1st April 2013.

Justice Oetken opened by noting that he had received two letters from counsel for the parties the previous day.  Mr Koch’s counsel had asked for an instruction regarding Mr Greenberg’s statement on the stand during cross-examination that Koch’s lawyer, John Hueston’s firm had been found by courts to have destroyed data to falsify evidence in this case, which is false.  Oetken agreed to grant a request for an instruction that the jury should disregard that testimony and that the plaintiff’s firm has not been found to have destroyed evidence in this case.

There was also a request relating to other litigation – the parties had agreed that the defendant was not going to use certain evidence of other litigation.  Oetken is not going to grant a limiting instruction a this point, because it was “just a gentle reference”.  However, if there is other evidence or arguments that come up trying to posit that Bill Koch is litigious, he will grant a limiting instruction that this may not be considered, as it is both irrelevant and prejudicial.

Arthur Shartsis, Eric Greenberg’s lawyer, then raised a procedural issue, which was whether all eight jurors will be seated for deliberation, which Justice Oetken confirmed.  Shartsis mentioned he raised this because one of the jurors seems to be sleeping a lot (!) and it would matter if they were not going to do that.  Oetken said that they could go down to six, if someone got sick for example, and if it’s a situation where they think the juror is really not participating, they could consider excluding that juror.  Shartsis replied that if the plan is to seat eight, it’s not a problem.

The jury entered, and Oetken instructed the jury to disregard the testimony of Greenberg that Hueston’s firm had been found to have destroyed or falsified data in this case.  He told them “Put it out of your minds.  The firm representing Mr Koch has not been found to have destroyed or falsified data in this case.”

Eric Greenberg resumed the stand, and Frank Cialone resumed what must be the friendliest cross-examination in legal history.

Witness: Eric Greenberg (cross-examination) – continued

Cialone asked when Greenberg first met Serena Sutcliffe.  Greenberg replied that it was in June 2000, when he was in London with his wife, and Sutcliffe invited them to lunch.  He had been a big buyer from Sotheby’s, and she offered to help him build his collection.  She told him that his tastes would change, and that whenever he wanted to sell wine that she should be the one to do it for him.

In early 2002, Greenberg was considering selling wine, for two reasons – that he had too much, and that Serena Sutcliffe was correct, and his tastes had changed.  He did continue buying wine “heavily” after 2002, focusing more on things that would store a long time, that he would want to have for a long time, and that were of an investment grade.

Greenberg confirmed that in April 2002, Sutcliffe, along with Jamie Ritchie and Robert Sleigh from Sotheby’s, visited his home, when he gave them a tour of his wine cellar, built in 2000 and 2001.  (Interesting – he denied they visited his home on day 1, emphasising it was his cellar only.)  On this tour, Sotheby’s said his cellar was “the best they had ever seen”.

On this tour, Greenberg asked Sutcliffe about some 1900 Margaux, from négociant Barton & Guestier, of which he had bought a number of bottles.  Sutcliffe said that she was involved in a European Union case where there were a lot of people who did not believe this wine was authentic – a view with which she concurred.  She also pointed out that the labels were photocopied.

Greenberg also asked if having bought from Royal, whom Sutcliffe had said had trafficked in problematic wines, was a big problem, and she said no, it was something that happens to every major collector, and is in every major collection – Sotheby’s deals with it every day.  They did a quick spot check of 1961 Latour and 1961 La Mission Haut-Brion, in total about 200 bottles, of which they identified one of each as problematic.  Greenberg opened these at lunch – the corks had the dates scratched off them and had photocopied labels.  They had tasted the contents, and Greenberg reported “I don’t know what was in there, but it wasn’t wine.”  (One reason one shouldn’t taste for authenticity! )

Greenberg started buying from Royal in 2000, having been introduced to them by Wilf Jaeger (hang on, don’t I remember him from all the pictures with Rudy Kurniawan?… )  who was also a big fan of the Wine Library.  (It is interesting at this point to reflect on an article Mike Steinberger wrote (http://www.slate.com/articles/life/drink/2011/01/drinking_with_the_enemy.html ) about Royal, fake wines, an article Steinberger had written on Royal’s propensity for selling Hardy Rodenstock wines, and Wilf Jaeger’s attempt to get Steinberger to back down.  I do wonder – does he have, as we say, a dog in this fight?)  Over the years, Greenberg had bought in the region of $2.2. million of wine from Royal, less than 5% of the volume and 5% of the value of his collection.

Greenberg denied that he had said to Jamie Ritchie that he could sell any counterfeit wines to Acker Merrall & Condit because John Kapon would take anything.  He had bought wine from Acker before that point, and continued to buy from them up until present.  He had done two single-owner auctions with Acker, in 2007 and 2010, as well as some other sales, and Kapon had rejected wines, on the grounds of authenticity.  They had also facilitated a return to Rudy Kurniawan of some wines that Greenberg believed were counterfeit.  Both the 2007 and 2010 sales Kapon described as “the greatest wine collection he had ever been exposed to in his entire professional career”.

According to Greenberg, Sutcliffe had, despite the Royal wines, expressed an interest in auctioning his wines.  She subsequently sent him a letter, which described his collection as one of the greatest she had ever seen, “breathtaking”.  She sent him a proposal for a single-owner, named sale, to build his prominence in the world off wine collecting.  He was never told that he would need to disclose that he had counterfeit wines in his collection – Sutcliffe had said it was very common, not a big deal, and a very small part of his collection.

However, Greenberg did not sell his wines through Sotheby’s, describing their contract as “onerous”.  He claimed they had made commitments regarding marketing promotion dollars, advertising, and other matters that were not in their consignment agreement.  For example, he disagreed with the clause stating that Sotheby’s did not have any obligation to enforce payment.  He also was not able to provide them with provenance information – he knew in general where he had purchased wines.  He also wanted a clause changed from saying he had “no reason to believe” that any lot was not authentic to “no reasonable reason” to believe that.  Greenberg claimed this was to protect himself from a frivolous lawsuit.  He also objected to the use of the low pre-sale estimates as the value should anything happen to the wine, and to the inclusion of private sales at the reserve price.  He also objected to Sotheby’s refusal to accept liability for errors and omissions in the catalogue, stating “I’m being sued today for things that are in the catalogue that I didn’t write”.

Cialone then took Greenberg through his actions following the Sotheby’s visit, starting with a spreadsheet based on invoices from Royal, which showed individual bottles, but not which bottle was which in the cellar – for example at one point he owned 30 bottles of 1928 Latour, of which only three came from Royal.   Once that spreadsheet was created, Greenberg went to his cellar with two of his staff and did a cross-sampling of the bottles he had bought from Royal, looking principally at capsules and corks.  Those that looked ok, they returned to stock, and those that did not, they segregated.

Greenberg did not know that all his fakes came from Royal, or that there were other purveyors of fake wine – he believed that if he had a problem with wine, it originated with Royal.  Some of the wines on his summary notes he later learned were in fact authentic, in particular two Coche-Dury Meursaults from 1978, the year Jf Coche-Dury started to produce wine.  Cialone moved the spreadsheet – with colour-coded highlights – into evidence.

Cialone then moved to discuss a magnum of 1945 Lafite, two magnums of 1949 Lafleur, two of 1921 Lafleur, all of which Greenberg confirmed had not been bought from Royal, nor did they appear on the spreadsheet.  There were also two 1921 Cheval Blanc magnums and three 1945 Lafleur, some of which were bought from Royal, but which Greenberg had thought were real.  There were a further 14 bottles that were at issue, which had not been described in the “Royal Wine Fake Summary Notes” spreadsheet.

Turning to five magnums of 1950 Lafleur, Cialone tried to establish that the wines in question in the trial were not the same as those Greenberg had identified as fake in his spreadsheet, by comparing Greenberg’s notes on them to Michael Egan’s report, which had comments on the corks which Greenberg claimed did not match his notes, and then did the same with two 1950s magnums of Petrus.  In the second of these, Greenberg’s notes were that the cork had been manipulated where the date should be.  Egan’s said “It is fully branded.  However, the last digit of the vintage is damaged and cannot be read.”  Greenberg claimed this was completely different.

For a magnum of 1921 Petrus (in and of itself, an unlikely bottle) Greenberg had noted that it was a badly obscured cork with no visible date or domaine markings.  Bill Koch had claimed that this was lot 443 in the Zachy’s auction of October 2005.  Greenberg claimed that he had seen part of the vintage visible on the cork.  There was a similar tale regarding two 1928 Petrus bottles, and an 1864 Latour that the lawsuit claimed was sold as lot 401 in that auction.  Zachy’s catalogue said the cork had been fully stamped, but had been probably recorked as 1980 was also visible on the cork (which Zachy’s person thought this was a reasonable statement?)  Greenberg claimed that he had drunk his 1864 Lafite for his 40th birthday instead of 2004.  This was actually before the lawsuit was filed.

Cialone finished this part of his cross-examination with two 1928 Latours, of which Greenberg had approximately 30 in his cellar, from five or six sources, seven of which were included in his analysis of fakes.  Again, Cialone argued that the Egan report did not match the summary notes that Greenberg had prepared.  Cialone concluded that Greenberg had not identified as fake any of the 24 bottles at issue in the case in his Royal Fake Wine Summary Notes.

Cialone then asked if Greenberg, after his conversations with Sotheby’s, had spoken with Christie’s about auctioning his wines.  Greenberg confirmed he had spoken with Richard Brierley, then head of North American sales.  Brierley came to Greenberg’s home with Ian Mendelsohn, also of Christie’s, where Greenberg revealed to him the details of the conversation he had had with Serena Sutcliffe of Sotheby’s.

Greenberg explained how he had segregated the wines he thought were fakes in three main ways, by putting some in a boxes marked “don’t touch” in a separate room in the cellar; by setting up a section in the racks for wines where there was a potential problem; and finally for larger formats, which are harder to move, simply turning them around so the punt was in the front.  He showed this system to Richard Brierley of Christie’s.  Brierley said, according to Greenberg, that Greenberg’s collection was the best he had seen in his entire career.

Cialone moved into evidence an email from Brierley to Greenberg, giving some estimates for the bottles.  Greenberg explained what the reserve was, saying that if $10 is the retail price, the low estimate is $8, and the reserve is 80% of that, so in this example $6.40.  Christie’s, however, offered to set the reserve at the low estimate, which Greenberg claimed was unprecedented.

There were also a number of trophy wines that Brierley expressed an interest in auctioning, including magnums of 1921 and 1928 Petrus, and Lafleur magnums from the 1940s.  Christie’s proposed advertising nationally, including in the New York Times and the Wall Street Journal.

Greenberg confirmed that he had told other people – “just about everybody I could” – about his dispute with Royal, including Wilf Jaeger.  Jaeger told Greenberg he had overreacted, and that he didn’t think Royal had sold him fake wine.  To Greenberg’s knowledge, Jaeger continued to buy from them.  (Which does make me wonder – what exactly was Jaeger’s connection to Royal?  Don’t forget he was the one who suggested that Greenberg should buy from them in the first place.)

Referring back to the timeline, Cialone noted that the next step was William Edgerton’s visit, late November 2002.  At this visit, he inspected 108 wines, selected by Greenberg, including both wines believed to be counterfeit and those believed to be real.

In his report, Edgerton said that certain wines came from Royal.  It emerged that this was because Greenberg had told him so, which is because, he claimed, Serena Sutcliffe told him they were his only source of fake wine.  (Not quite what his previous testimony said, which is that they were a source…)  Other than the bottle of 1928 that Greenberg claimed was in the auction by mistake, Edgerton did not find that any of the other bottles in this case were counterfeit (according to Greenberg).  He put a numbered sticker on every bottle – good or bad – on the advice of Greenberg’s attorney, which corresponded to a particular section of his report.

Cialone turned back to the Royal draft complaint, nowhere in which does it say that the wines Edgerton reviewed turned out to be real.  However, he had appended a schedule of bottles found to be fake that was annexed to the complaint, and sent the Edgerton report to Royal’s attorneys.  At this stage, early 2003, Greenberg did not yet have a complete inventory of his wine collection, which did not occur until August 2003, and included only the genuine bottles.  When complete, it included over 4500 different individual line items, some of which had multiple numbers.

Greenberg confirmed that he did his first wine auction with Zachy’s, in February 2003.  His wines were designated the Eric Greenberg Collection within a larger auction.  Zachy’s visited him in “Fall of 2003” (sic – surely he means 2002), with Jeff Zacharia and Fritz Hatton.  He had told them about Royal at that visit – explaining what Serena Sutcliffe had said, and the actions he had taken to segregate the wines.  Zachy’s did not ask him which wines he’d bought from Royal, nor for invoices, nor for a declaration in the catalogue.

Asked why he was interested in having Zachy’s do the auction, Greenberg replied that Zachy’s had been trying to get him to do one with them for over a year.  He realised that they had changed the wine industry by making auctions fun social events, and the prices they got as a result were very impressive.  He also realised that they had been the retail partner for Christie’s since 1990, so had a lot more experience than he’d previously known.

Cialone moved into evidence the catalogue from that first, February 2003, auction, in which the introduction to the Greenberg collection had been written by Jeff Zacharia, in which he refers to the collection as “one of the most impressive private collections in the world”.  Cialone confirmed that this had been done knowing that Greenberg had bought from Royal, and that he had counterfeits in his collection.

Cialone then moved into evidence the auction estimates for the wines Greenberg submitted to Zachy’s for inclusion in the auction, subject to authentication.  Greenberg confirmed that he had more than one bottle of those submitted – for example about 10 bottles of 1947 Cheval Blanc.  He chose the number he wanted to sell of each, and then Thierry Lovato and he would look at them to make sure they had cork markings, and then send them to Zachy’s.  Lovato had strict instructions not to include any bottle where there was a question on authenticity, as did JJ Cortes, Greenberg’s house master.

Greenberg testified that at this point, late 2002 to early 2003, he could not tell which bottles were from Royal.  He was willing to consign wines from Royal to Zachy’s because he thought they were real as, indeed, most of them were (he testified).  He subsequently discovered that Royal was not the only source of counterfeit wine.

Greenberg confirmed that even if he had known with certainty that he had bought a fake bottle from someone other than Royal, he would never find out the provenance, saying, “They never tell you who they get it from”, in order to protect their sources.

Returning to the bottles selected for sale, the wines were sent to Zachy’s in New York, where they were – according to Zachy’s – inspected painstakingly.  Under the Zachy’s contract they had sole discretion to reject any bottle for any reason, be that a question of authenticity or not.  For the 2003 auction, for example, they rejected a bottle of 1990 Jayer Cros Parantoux.  (Judge Oetken stressed that this was an earlier auction, not at issue in this case.)  They had asked Martine Saunier, Jayer’s importer, to come and look at Greenberg’s Jayer wines, because he had a lot of them, of which he had consigned 12, and they are rare.  Ms Saunier found six of them to be fake, particularly because of the cork, but also the labels.  Greenberg had over 30 of these bottles – worth $10,000 each, which are fake.

After reaching the conclusion on the Jayer wines, Greenberg tasted a bottle.  He agreed that it was most definitely not the Cros Parantoux; and indicated that the cork supports the view that it is a village-level wine.  When asked why he had kept the bottles if they are fake, Greenberg said that the wines might not be worth $10,000, but they probably are still worth $1000.

Nevertheless, Zachy’s did accept six bottles of the Cros Parantoux, and Greenberg confirmed they did not mention the rejected bottles – their philosophy is that a bottle is either real or it isn’t, so there was no need to mention fakes in connection with the real ones.

In the February 2003 auction, Greenberg sold some so-called “trophy wines”, in order to establish, according to Zachy’s, his credibility as a collector.  This included magnums of Petrus from 1921 and 1928, and 1950, and some Lafleur magnums from the 40s, 1950 and 1961.  Zachy’s had not asked the provenance on these bottles.

There were also a number of wines included that were not top quality wines, and the sale of these was part of culling the collection – from less good vintages and less good producers.  The term used in the industry (according to Greenberg) is “garbage wines”, and when he told Richard Brierley in 2006 or 2007 that “all the garbage” had been sold, he meant that the lesser value wines he had had owned had now all been sold.  He did still, however, have millions of dollars’ worth of counterfeits in his collection at this time.

After the February 2003 auction, Greenberg did a number of other auctions with Zachy’s, in total seven, ending in October 2005 (which is at the centre of this case).  In each of these auctions except the final one, the process was the same – he prepared a list, the wines were pulled, shipped, and inspected by Zachy’s, who had the sole right to accept or reject each bottle as they saw fit.

Cialone then moved on to ask about Rudy Kurniawan, whom Greenberg met in summer 2003, at a Bipin Desai tasting.  Sometime after that, Greenberg bought wine at auction on Wine Bid that Kurniawan had consigned.  Greenberg was very angry about this – threatening to sue Wine Bid for punitive as well as regular damages.  He then had a conversation with Rudy, and went back to Wine Bid in a much more emollient tone, saying about Kurniawan, “He and I have known each other, done tastings together, and I am convinced that he did not know what he was selling was not right”.  His threat to sue Rudy and Wine Bid, therefore, lasted a little less than 48 hours.

Cialone then asked how Greenberg knew the details he was referencing for the fake wines.  For example, for a 1999 magnum of Romanée Conti, he had said it had a different bottle and punt, and the label was not printed by the right method.  Greenberg replied that he had got some of the same wine on release from the DRC importer, Wilson Daniels.  He was thus able to compare the two and document what the differences were.  However, he did not have any wines straight from the importer that matched the 24 bottles at issue in this case.

Wine Bid proposed that, instead of destroying the wine, they have it authenticated by Martine Saunier, which Greenberg accepted.  Rudy Kurniawan responded to this by representing that the wines had already been authenticated by her, and she did not have a problem with them.

Greenberg continued to deal with Kurniawan after this, both selling wine to him, although not much, and buying from him.  Cialone reminded him of the email presented the week before, in which Greenberg had said to Kurniawan that they should let each other know when they were looking to move certain wines.  Greenberg testified that when he wrote that, he had just bought four or five magnums at auction from Acker Merrall & Condit, paying the 20% buyers’ premium.  He then found out that it was Rudy who had consigned those wines, and thought that when each of them had trophy wines they were looking to sell, they could cut out the middleman and sell to each other, saving 20% each time.

Greenberg marked the wines he acquired from Rudy Kurniawan because they had been represented to him as coming from Nicolas cellars, which implied, in Greenberg’s mind, a special provenance, and greater long-term investment value than other wines.  He confirmed that none of the 24 bottles in the case had been bought from Rudy Kurniawan.

In 2004, Greenberg reached a settlement with Royal, under which he returned $362,000 of wine to them.  Greenberg agreed this was less than the amount of fake wine he thought he had, sending back only the ones he called clear and “egregious” counterfeits.  He had kept a number of other ones, which he would drink.

Greenberg had kept a number of bottles that he believed were counterfeit, which he segregated.  According to Greenberg, Jamie Cortes asked him for some of the fake bottles, to which Greenberg responded absolutely not.  (Ah… setting the scene here to try to discredit a potentially key witness.)  According to Greenberg, “Mr Cortes is always trying to make an extra buck”, and he did not want that going on, nor that liability.  Greenberg categorically denied that he had told Cortes he intended to sell counterfeit wine, nor that he had promised to do to someone else what had been done to him.  Jamie Cortes no longer works for Greenberg, having not shown up for work after Thanksgiving in 2004 one day.  He called later in the day, and they decided to part ways.

Cialone then moved to the October 2005 auction.  Prior to this point, Greenberg had sold about 3000 to 5000 bottles, but in this one, there were c. 17,000 representing about a third of his collection.  Consistent with the other auctions he had done with Zachy’s, there was a clause allowing them to withdraw any wine at any time if there was doubt as to its authenticity or quality.  There was also a clause saying that Zachy’s would not taste any wines or cut capsules without the prior written consent of Greenberg.  Greenberg testified that such consent had never been withheld, and, in fact, he had cut many capsules himself.

The October 2005 auction was slightly different, in that Zachy’s came to Greenberg’s home to inspect the old and rare wines.  Greenberg had given Zachy’s an initial working list, but when Jeff Zacharia and Fritz Hatton came before the 2005 auction, they had a list of the wines they wanted to look at, specifically old and rare “trophy” wines.  Zachy’s had six or seven people at Greenberg’s home for about two weeks, packing pallets.  These wines were (according to Greenberg) inspected at his home and again in New York.  (Note: my experience of auction houses packing for a sale is that the wines are NOT inspected on site.  The more high risk wines may well have been but the goal is to get the wines safely packed and shipped, and then have a real look once back at base.)  While Jeff Zacharia was there, Greenberg made sure he was with them so he could answer any question they had.  The rest of the time, Thierry Lovato was working with the Zachy’s team.  Greenberg did not watch this part – except for occasionally visiting or bringing food when he got home from work.

Greenberg then testified that when he watched Fritz Hatton and Jeff Zacharia looking at the rare and older wines, the 1928 Latour with the Edgerton sticker#41 on it was not one of the wines that were looked at.  In fact, they did not look at any of the wines that Edgerton had deemed fake, because those were segregated.  Greenberg reiterated that had he known the 1928 Latour was on the racks it was, and not segregated, he would never have let it get into the auction.

Cialone then asked about the wines that were returned to Greenberg from the Chicago Wine Company, which Hueston had asked about earlier in the trial.  Chicago wine had told Greenberg “that some unidentified customer couldn’t see a date on the corks”.  At no stage did Simon Lambert, one of the owners and Greenberg’s principal contact, ever indicate that he had personally looked at these bottles.  Although Greenberg and Lovato had looked at the wine, and seen a date, Greenberg nonetheless processed a refund, as “I always stand by my wine”.

Cialone then noted that the Zachy’s contract had an “as is” clause in it, noting that they were making no representations about the wine.  Greenberg confirmed that he had had nothing to do with the inclusion of this clause, and that Zachy’s would not let them make any changes to any of their contracts.  All of the auctions he had sold at – and indeed bought from – had similar clauses.  It is industry standard.  He was willing to buy in this way because if there is a problem he has always had his money back or had the situation rectified – it has never been an issue.  (Note how Cialone and Greenberg are trying to work in the refund offer here…)

Cialone then turned to the catalogue, which included a line saying that “On occasion Burgundian and Rhone rarities were purchased directly from domains”.  The auction nevertheless had wines from all over the world and Greenberg agreed that the representation was not meant to imply that all of the wines had come directly from domaines, nor that any of the Bordeaux ones have, although several of the 2000 Bordeaux had been bought en primeur.  Cialone noted that of the 24 wines in the case, none was from Burgundy or the Rhone.

The trial broke for lunch.  Unusually, for this case at least, there were no legal rows between the lawyers for Judge Oetken to referee on their return from lunch.

Returning from lunch, Cialone noted that the introduction to the Zachy’s catalogue called Greenberg’s collection “the best of the best”.  Greenberg felt this was a fair description, because not only Zachy’s but also Sotheby’s, Chrsitie’s and Acker Merrall had called it so, as had known collectors Bipin Desai and Wilf Jaeger.

Cialone then returned to the email that Greenberg had sent to David Smydo of D. Sokolin, in which he spoke about a fake bottle, and commented that “Bordeaux Wine Locators is the worst counterfeiting operation in the world”.  Greenberg denied actually thinking that, saying that he thought what they did was just not actually look at the wines they brought in, simply sticking their strip (i.e. import) label on the bottle and then send it off to someone who then sold it to Greenberg or another consumer.  Greenberg claimed that the email was simply part of the normal banter one engages in between friends.  Greenberg continued to buy from them.  In addition, when Bill Edgerton inspected many of the wines, he concluded that some of these were genuine.  Cialone moved into evidence Edgerton’s report, and highlighted bottles 76, 79, 81, 83, 90, 91, 96 and 97, all of which were, according to Edgerton, “presumed genuine”.

Returning once again to the auction, Cialone referred to an email from Jeff Zacharia to Eric Greenberg and others on the Zachy’s team in which he stressed the importance of provenance, noting that statements such as “European private collection and European trade” do not satisfy many of their buyers at the moment.  People are happier if they can trace the bottles back at least to the previous owner.  This is particularly relevant for wines from the 19th century.  Cialone noted that nowhere did it say provenance was required to determine authenticity, nor to determine suitability for sale.

Greenberg responded to Zacharia that he could not provide it – he had many sources, and could not tie them to individual bottles.  He had said this to Jeff Zacharia at all seven auctions.  Shortly afterwards, he sent another email with a few definite bottles he could trace – an 1805 and 1832 Lafite from Eddie Gelson at Wine Library, and an 1893 Margaux from D. Sokolin in Southampton.  This was possible because they were the only bottles he had.  There were a number of other 19th century Bordeaux that were not mentioned in that email, because he had multiple sources.

Greenberg confirmed that Bill Koch had bought 20 bottles of 19th century Bordeaux in that auction, of which only one is at issue in this case.

Cialone concluded his cross by asking if Greenberg had intended to sell counterfeit wine in the 2005 auction, if he knew if he had consigned any counterfeit wine, or if he believed Zachy’s would sell counterfeit wine on his behalf, to all of which Greenberg replied “no”.  Greenberg confirmed that he had believed Zachy’s would inspect the wine carefully, that he trusted their professional judgement, and that he believed the wines they accepted for sale were authentic.

Click here for Part 8.