Wipe Away the Confusion in Wine

Posted on July 23rd, 2012 by K2 New York Office

The value of old wine has risen dramatically in recent years, New York reports, and the compelling success at auction of Rudy Kurniawan, a well-known wine expert charged with five counts of fraud in May 2012, has been partially credited for its boost.

In 2002, a 1945 DRC Romanee-Conti sold for $2,600; by 2011, the price tag had risen to $124,000. Collectors, however, have historically approached such high-end investments in wine differently from those in more “traditional” financial assets.  Part of that difference, it seems, is because the measure of wine’s value is relatively unquantifiable. As such, it has not been treated with the same due diligence associated with other transactions.

Such inattention is steeped in cultural habits within wine circles that have little desire to question a “phenomenal” talent whose rallying personality raises the interest and, in this case, the value of an industry. As New York reported, “Among the privileged set [sic] Kurniawan’s quirks and resume gaps were of much less interest than his generosity.”

It is nonetheless important to note that “gatekeepers” exist, no matter what the asset class, and it is necessary to evaluate their character and capabilities to protect any potential investment.

1. The first stage in vetting Kurniawan’s background would have included discreet interviews and a public records review – Kurniawan claimed to associates that his parents operated a major Guinness distributor in Indonesia, but provided few other details. Kurniawan also leveraged this nearly unknown background to “explain” what seemed to be a limitless resource of funds and initial seed money.
2. A second focus of investigation, therefore, would be to determine Kurniawan’s true financial status. As is apparent now, several records indicating economic instability filed within the last decade would have raised suspicions about Kurniawan, especially considering his outwardly lavish lifestyle. It would also have signified a reason for Kurniawan to take risks for monetary gain.

One such disclosure would have been a $1 million lien “quietly” filed by Acker in 2007 on all of Kurniawan’s wine. According to the recent federal complaint, Kurniawan attempted to auction these wine holdings without Acker’s consent through Christie’s auction house on two occasions (most recently in November 2011). He had also arranged to repay $2.3 million in loans from a California collector through these unauthorized sales.

 Chateau Sucker (New York Magazine)