A Multi-Part Feature on the trial of Rudy Kurniawan, including the transcripts, testimony and evidence that put the largest wine counterfeiter of our time behind bars.
THE TRIAL - PART 7
DAY 5: FRIDAY 13TH DECEMBER
The trial opened for its fifth day, and went straight to the next witness.
Witness: William (Bill) Koch
Jason Hernandez called Bill Koch, President and CEO of Oxbow Carbon, with three degrees in science, including a ScD, Doctor of Science, from MIT. His company is headquartered in West Palm Beach, Florida, and he himself lives in Palm Beach. He said that his wife describes him as a hoarder, but that he is a collector of numerous things, including art, both paintings and sculpture, antiquities, especially Western items, and wine.
Koch has a cellar of 43,000 bottles. He likes to collect wines that are the very best, that he loves drinking. There are four types of wine that he tries to collect every year, just to satisfy his obsession with collecting. He has tried to have every year of Lafite (he has c. 150 years of it), of Mouton (120 years), Latour (100 years) and Pétrus (90 years). Unfortunately, about half of these are fakes.
Koch was a big drinker at MIT – so much that he got hepatitis and could not drink for a number of years, which he thinks saved him from being an alcoholic. He then found he could drink wine. He started with Mogen David, moved onto Lancers because it had a nice bottle, and then gradually moved up. In the 70s and 80s, he became a voracious collector.
He has two different types of wines – the drinking wines, and the collection wines that he just wants to brag about. The latter include the Thomas Jefferson wines that he thought were very historical, but then discovered were fakes. Now he shows people the fake Thomas Jefferson bottles! 99%of his collection is drinking wines, because he loves to drink fine wines with his friends, with new people he meets whom he knows love wine. He will also sometimes sell a wine dinner at his house for the Police Foundation or for other underprivileged children charities.
Koch says he generally likes drinking with other people, not by himself. One of the great things for him is if he could have good friends, good music, beautiful paintings, great food and great wine, and to appreciate the love all the artists had in creating their beautiful creations.
He has once sold wine at auction, which he did because someone said to him that they would sell a load of second rate wine to give him space for more top rate wine. But this guy put a lot of very good wines in and Koch wishes he had not let him sell it. (Note: This is NOT something Chai Consulting would do. The selection for sale is always your decision, although we do advise which bottles should be included.) He has no plans to sell any more in the future; he will give whatever he is unable to drink in his lifetime to either drink or sell.
He has bought wine primarily from auction houses, then from dealers. Sometimes he has bought directly from the vineyards. The authenticity of the wine matters very much –the whole value is in its authenticity. It would matter very much to him if the bottle had been reconditioned by someone other than the chateau. The only reason, Koch said, to have the bottle reconditioned is drink it or sell it. The way they recondition it is to open the cork, and put the real wine back in – you wouldn’t want Duckhorn going into a Lafite – and if it wasn’t at the Chateau, you don’t know what the guy who was reconditioning it did.
4-2 1934 La Tache
Hernandez approached to show Bill Koch three bottles, a double magnum of 1947 Pétrus, and two bottles of 1934 Romanée-Conti. Koch recognised that these were his bottles because he barcodes every bottle he puts in his cellar, and these have his barcodes on them. He purchased the Pétrus from Acker Merrall & Condit (AMC) in May 2005, as the jury had been previously told and seen evidence of. Jason Hernandez asked Koch what he thought he was buying when he bought it. Koch replied, “I thought I was buying 1947 Pétrus for a high price.” He said that he was expecting the price: ’47 was an outstanding year, and so he believed he really was buying 1947 Pétrus in a double magnum. He would not only not have paid that high price, but would not have bought the bottle at all if he had even 10% of doubt it was not real.
Turning to the 1934 Romanée-Conti, Jason Hernandez explained to Koch that the jury had already heard that he had bought these through the AMC THE Cellar auction in January 2006. Hernandez showed Bill Koch the catalogue for that auction; Koch confirmed
“I read the introduction to it and the verbiage in it about how Acker Merrall was praising these bottles and this collection and saying they’ve inspected it and saying they’re wonderful, et cetera et cetera. And then I went through it and picked out certain bottles that I thought would fit in my collection and then I read all the details that were entered about those bottles.”
Hernandez asked him what he thought he was bidding on when bidding on the two bottles in front of him, and Koch replied, “Exactly what they said in the catalogue”. He confirmed that, as with the Pétrus, he not only would not have paid what he did, but that he would not have bought them at all had he had any doubts about their authenticity.
When he learned that these bottles were fakes, Bill Koch was disappointed and angry, because he got conned, and cheated. No one likes to be conned or cheated. He discovered that Rudy Kurniawan had consigned these bottles to AMC and then looked in his cellar to see if he had other potentially fake wine that was consigned by Rudy. In Burgundy alone he has over 219 bottles that he paid $2.1 million for. However, he has not yet gone through all the Burgundy or the Bordeaux. He estimates that there are another 50 to 100 bottles for which he paid between $500,000 and $1 million. In doing this, he has had six to eight experts going through them – experts in glass, labels, glue, corks, and one who studied fake wines. He has even taken wines to the chateau to ask if they have ever made these kind of wines. He has even taken the wines to France to have the cesium content measured – there was a cesium of 178 (I believe he actually meant cesium 137) that did not exist until the atomic bomb was exploded, so finding bottles from 1933, or 1858, with this cesium isotope that would just not have been possible at that time.
Hernandez asked about the wines that Koch believed were consigned by the defendant, which Koch noted that he knew they were through discovery for other lawsuits that are ongoing. He confirmed that the total price paid for the 219 bottles was in excess of $2.1m.
Bill Koch, cross-examination
Jerome Mooney cross-examined for the defence. He confirmed Koch’s doctorate in science, but noted that he did not invent the cesium 178 test. Mooney asked if Koch looked at the science to see how the test works. Bill Koch replied that they measure the rays that came off, adding “I mean, it’s fairly clear cut.” He could not cite, however, a peer-reviewed journal article on it. (If you are particularly interested, you can read about it in Hubert, 2007, or Hubert, Perrot, Gaye, Medina and Pravikoff, 2009). Mooney then implied that Koch had simply heard about the test and decided to go off and have it, and there’s nobody in the trial who can testify about how it works. Koch said he could get someone to do so right away if Mooney wanted, and Mooney replied “I imagine you could”.
Mooney asked how many bottles Koch had tested in total. Koch replied about two dozen or so. He confirmed that he had his collection inspected to find fake wines, from whatever source, and then traced whence it came.
Mooney commented that there’s a lot of fake wine in Koch’s collection; Koch replied about 500 fake bottles; he has confirmed 443. From these, the purchase price was $4.4m. It could go up to $6m. There are 43,000 bottles in his collection, and Judge Berman asked roughly what percent that meant was fake. Koch replied it’s less than 1% of the bottles, but probably 25% of the value of the collection. For example, if he paid $100,000 per bottle of Thomas Jefferson wine, that’s 4 bottles out of 43,000, but $400,000. Koch commented that the counterfeiters fake the very old, highly expensive bottles, because they make the most money that way.
Mooney asked if Koch recalled meeting SA James Wynne on 18 September 2013, which Koch did remember. Mooney asked if he had not said $6.6m at that meeting; Koch said he did not remember.
Mooney then said that when Koch first started collecting wine, he would buy from just about any source he could, which Koch confirmed was a fair statement. At that stage, as Mooney said, he was not worrying too much about the authenticity – whatever they said it was, that’s what he would accept and buy. Koch noted that initially he would buy from retail stores, and occasionally restaurants. And then, when he got some more money, he started buying at auctions. Initially, he didn’t go to auctions to buy wine, but to buy art. He would then get wine catalogues from the auction houses, and then buy directly from the catalogues. In contrast, most of his Western memorabilia has come from buying four different estates (of what he called hoarders) directly from the executors.
They discussed the state of the Western memorabilia that Koch bought. Some of it is in pristine condition – such as a case of Winchester rifles that were never opened. Other stuff is in a distressed condition, which if Koch is refurbishing a pioneer cabin is just what he wants. Many items have been through a number of owners, but Koch noted that, contrary to Mooney’s suggestion, he would try to avoid buying anything to which someone has made a modification. If, for example, someone reconditions a gun, or puts carvings on it, that diminishes the value. If it’s a $100 gun, it’s not a big deal. But if it’s a $10,000 gun, it’s very important. It’s even important if someone has replaced a broken stock. If it was Indians replacing it at the time, with rawhide, for example, that adds significance, but a guy replacing a broken stock on his father’s gun, that diminishes it.
Judge Berman asked if Mooney could please move from guns to wine.
Mooney asked for one more gun analysis, to which Judge Berman agreed. He asked if people clean up an old gun, to bring back the shine. Koch confirmed that this does happen, but that what also happens is that people “antique” a gun, forge the documentation that goes with it – so that is a misrepresented – what he calls a fake – gun. Mooney said that that is different from someone who says “I’m going to shine up the barrel and make it look pretty again.” (This feels like an odd line of questioning, given that Kurniawan ‘stendency was to try to make things look older.)
Judge Berman asked again to get to the wine.
Koch confirmed that he has two different categories of wine – for drinking and for collecting – and that the Jefferson bottles were for the latter category. He had no expectation of drinking them, and no idea if the liquid inside would be drinkable. However, the best wine he had ever had was an 1853 Latour, direct from the Latour cellars, which was absolutely fantastic. Some of the old wines can last, although the probability is they will not. However, the value of the Jefferson bottle was not in the drinkability of the liquid, but in the fact that it supposedly belonged to Thomas Jefferson.
Mooney then said that many people are buying wine for the purposes of drinking them. Koch replied that people buy wines for a whole lot of different reasons, including reselling them, to brag, as he likes to do, or drinking them. He confirmed that he bought the double magnum of 1947 Pétrus in Exhibit 4-1 to drink. Mooney argued that in that case, it could say anything on the outside, what was important was the inside. Koch replied that you do not buy a Mercedes with a Volkswagen engine in it. Mooney then phrased a rather convoluted question, to which Bill Koch replied, “Wait a minute, I kind of lost that logic there”, and Judge Berman added “So did I”. (At this point, if I were Mooney, I get the feeling I’d be finishing up and stopping annoying His Honour Judge Berman.)
Mooney then asked if Koch’s cellar comprised primarily Bordeaux wines. He replied that no, there was everything in there from New Zealand to California, with all stops in between. The four he collects (Lafite, Latour, Mouton and Pétrus) are Bordeaux, and that is principally to satisfy his need to collect. He would probably have done La Tâche and Romanée-Conti as well, but he got stung with most of the older wines (pre-1945) being fake, so he stopped with those four. However, he stressed that his principal passion is collecting outstanding wines that he could drink and share with his friends.
Mooney asked when Koch started to question the authenticity of what was in his cellar. Bill Koch confirmed that he did not buy them knowing or suspecting they were fakes. He started to question the authenticity in 2005, when he found that the Jefferson bottles were fake, proved they were fake, and got some information that there were other fake wines around, such as magnums of 1921 Pétrus.
Koch he spoke with auction houses about fake wine. He got a good response from Sotheby’s. The others, which included Acker Merrall Condit, Zachy’s and Christies, were “gobbledygook: ‘We verify everything. Everything that we sell is true.’” They claimed to be concerned, but were not helpful, and when he pressed, they pointed to a clause in their contract which said that you buy as is, that anything in the catalogue is only an opinion, and you cannot rely on it. He filed a lawsuit on that, and got that particular “get out of jail card” modified or abolished.
Koch confirmed that he has sued a bunch of auction houses, and has sued Rudy Kurniawan, which lawsuit is pending. He has also sued Eric Greenberg, who bought a lot of wines from Rudy.
Judge Berman intervened, and asked them to focus on this lawsuit. (As I said, if I were Mooney, I’d have wrapped this up sooner…)
Mooney then asked Koch to confirm that he had a couple of different wine cellars, one 1300 square feet, and the other 1700 square feet. Koch commented that he didn’t know where Mooney got his information from – he’d never heard those numbers. They are, whatever size they are, big cellars, and there are actually four of them. He bar codes the bottles so he will be able to figure out where they are. (Hernandez objected as to relevance, and Judge Berman urged Mooney to focus in on the case.)
Koch confirmed that he has used wine motif to decorate areas of some of his houses – specifically, two bathrooms. He has a sort of door that’s made out of wine bottles, bottles that he has drunk with friends. The ceiling is made out of corks, which came out of the bottles they’ve drunk. He also has a wall that is partially wallpapered in labels, of wines they have drunk. But it’s a small bathroom. Bill Koch emphasised that these are all from wine that he and his friends have consumed, and it reminds him of great times and great wine. Mooney commented that as they got to their age, they needed reminding more and more, to which Koch replied that Mooney was “a young stud… I’m a fat old man”. Mooney remarked that they were probably closer in age than Koch thought.
On questioning, Koch confirmed that he had employed five or six different experts to look at the bottles, and some had been sent to the chateaux, and some had been sent for cesium testing. Mooney then said that some of the experts haven’t been able to determine things that the other experts have, which Koch confirmed. He then continued to emphasise that they have hired experts in different fields, so some will look at a label and tell you when the paper was made, others when the print was made, others what kind of glue it is, etc. They have found 1858 labels that were put on with Elmer’s glue, for example. Depending on the expert, and what they are looking at, it can take 20 minutes to 90 minutes per bottle.
Mooney asked if the reason that Koch hired these experts is because he cannot be confident in his own eye. Koch replied that this was absolutely true – he can’t event ell a fake dollar bill. He added “I don’t want to be a wine expert; I want to be a wine consumer.” (I like this man’s style.)
They then discussed reconditioning. Bill Koch confirmed that he had had some bottles reconditioned by the chateaux. He said that if someone else cleaned up and fixed things on the bottle of wine, it would not only affect the value, but whether or not he wanted to buy it at all. He added “I’ve seen guys, Eric Greenberg in particular, who did clean up the bottles and his idea of cleaning it up is considerably different than my idea of cleaning it up”, including putting new labelling on the bottle.
Mooney said that it might change whether or not Koch wanted the bottle, but that the liquid would remain the same. Koch said that it made one suspicious of what really was in the bottle – why would a person want to change the label unless he was trying to sell you something, unless he had a huge economic motive to sell it for a much higher price than he acquired it for.
Bill Koch, redirect
Jason Hernandez redirected the witness, initially by going back to the rifles. (I wish I could have seen Judge Berman’s face.) He asked if, for example, Bill Koch was bidding on an old Winchester rifle that had been recently modified, would he expect that fact to be disclosed by the person consigning it, or by the auction house. Koch said that he absolutely would, and if it were not disclosed, it would be to him verging on fraud. It would affect the value of the rifle by at least 95%, and remove his interest in bidding on it.
Hernandez then asked about two different parts of the rifle, and asked if someone had modified, say, just the trigger on an old Winchester rifle, if it would be possible to examine the other parts of the rifle to see if they are original, and Koch confirmed that it would be. However, with a bottle of wine, if someone changed the label or the cork, you cannot tell with the same ease if the wine is authentic. If, for example, you extract the cork to change it, you’ll destroy the wine because it deteriorates when it is in contact with oxygen.
Jason Hernandez then noted that Koch had said the Pétrus had not been sent for cesium testing, but he had not been given a chance to explain why. Bill Koch replied that because the atom bomb went off in 1945, all caesium testing can do is tell you whether it was pre or post 1945. Therefore, it is used only to test wines purporting to be older than 1945. And testing the liquid in wine otherwise doesn’t prove much, because wine has over 100,000 different chemical components. He also described tasting to test as “hogwash”, as everyone has a different palate. (He’s absolutely right.)
Koch confirmed that it mattered to him that, for collecting wine, the wine inside it, as well as the physical parts such as the bottle, the label, and the cork are all authentic. He confirmed that it mattered to him if the liquid inside his drinking wines is authentic, and it matters if the label and the cork are authentic , because that’s what tells you the liquid is original. Therefore, the classification (collecting or drinking) of his wine makes no difference to the importance of its authenticity.
Hernandez returned to the question of Bill Koch’s home decoration, and asked how large a room they were speaking about with respect to the wine-related items. Koch replied that it was roughly the size of the witness box he was in. He confirmed that he gets the labels by soaking them off the bottles, not by printing them onto his computer. He has never used wax to decorate his walls, nor an ink pad instead of paint from the hardware store, nor serial number stamps. (Given that Koch had not been present when Jerome Mooney suggested to SA Wynne that these were the real purpose of the items in Rudy’s home, I can only imagine his confusion at being asked these questions!)
Jason Hernandez then also asked who the expert was who takes about 20 minutes to determine if a bottle is real, and Bill Koch named Michael Egan. He confirmed that he himself is not a wine professional.
Finally, Koch confirmed that I he were having a bottle of, as Mooney suggested, ’62 Romanée-Conti reconditioned, he would want it reconditioned only with the same wine, and only by the domaine. If he discovered another collector had done it, he would not buy it because they could have put anything into it.