WARNING – ZACHY’S WINE AUCTIONS IS NOW OFFERING WINES FROM ERIC GREENBERG – WHO WAS PREVIOUSLY FOUND LIABLE FOR FRAUD FOR SELLING WINES WHICH HE KNEW OR BELIEVED TO BE COUNTERFEIT
Yesterday Zachy’s Wine Auctions released the catalog for its November 17-18 wine auction to be held in Hong Kong. http://auction.zachys.com/auctions/Default.aspx?AuctionId=273 This wine auction, titled as “Golden Gate Collection” is a two-day single cellar sale consisting of 7,263 bottles (in 1,115 lots) owned by Eric Greenberg, who resides in Marin County California, just north of San Francisco. The catalog estimates for this sale range from $6 million to $9 million (US), or $47 million to $70 million in Hong Kong dollars.
But what is buried in the fine print in the introduction to the catalog and in the conditions of sale is the information that the seller, Eric Greenberg, is a known fraudster and a known intentional seller of counterfeit wines. In the penultimate paragraph of the Introduction to the November 17-18 sale catalog Zachy’s makes the following disclosure:
- A note on Eric Greenberg, the consignor of this collection: Eric Greenberg’s collection at one point numbered over 60,000 bottles, and he has bought wines of questionable authenticity over the years. After an auction of approximately 17,000 bottles from his cellar in 2005, Eric was found civilly liable for fraud when 24 of the bottles were determined to be inauthentic. Zachys has inspected the Greenberg collection and selected the bottles for this auction, and Michael Egan, an independent expert, has also inspected and approved every bottle in this auction. Additional important information regarding this matter can be found in the Conditions of Sale. (Emphasis added).
On page 178 of the catalog, in the Conditions of Sale, is the following language in fine print:
- IMPORTANT DISCLOSURE: Zachys and Consignor hereby disclose, and Buyer acknowledges and understands, that: the Consignor is Eric Greenberg, who has previously auctioned wine in Hong Kong and New York since about 2001; the Consignor has previously purchased bottles of wine that were subsequently found to be inauthentic or unmerchantable; the Consignor was held liable (including for fraud) for selling at a 2005 auction certain bottles of wine determined to be inauthentic or unmerchantable; and Zachys has inspected the Consignor’s collection and selected the bottles for this auction, and Michael Egan, an independent expert, has also inspected and approved every bottle in this auction. (Emphasis added)
Except for the statement that Mr. Greenberg was found civilly liable for fraud, the rest of the “disclosure” by Zachy’s is materially inaccurate and it falsely attempts to minimize the significance of Greenberg’s intentionally fraudulent conduct. Eric Greenberg was not found liable for fraud because “24 of the [17,000] bottles” were “subsequently found to be inauthentic or unmerchantable.” Indeed, the words “inauthentic” and “unmerchantable” don’t appear anywhere in the jury’s written findings.
On April 11, 2013, an 8 member Federal jury in the case of William Koch v. Eric Greenberg in the Southern District of New York unanimously found that Eric Greenberg committed willful and intentional fraud by knowingly selling 24 bottles (21 magnums and 3 750 ml bottles) of counterfeit old and rare wines to Florida billionaire Bill Koch through a wine auction held at Zachy’s in New York in October of 2005. The counterfeit wines sold to Koch included 1864 Château Latour, magnums of 1921, 1928 and 1950 Chateau Petrus and magnums of 1921, 1945, 1949 and 1950 Chateau Lafleur. The jury unanimously found fraud by intentional misrepresentation by Eric Greenberg, “by clear and convincing evidence.” Specifically, the jury found in writing “(l) that Mr. Greenberg made a representation of fact; (2) that the representation was false and material; (3) that Mr. Greenberg knew the representation was false or made it with reckless disregard for its truth or falsity; (4) that Mr. Greenberg made the representation to induce Mr. Koch to rely upon it; and (5) that Mr. Koch did justifiably rely upon it, and sustained damages.” The jury made such findings with respect to each of the 24 counterfeit bottles in question.
The jury also unanimously found, again by clear and convincing evidence, that Mr. Greenberg had fraudulently concealed evidence known to him that the 24 bottles in question were counterfeit when Greenberg sold the wines through Zachy’s in 2005. While only 24 bottles of wine were presented to the jury in connection with the trial, this was due to the fact that the judge limited the time available to the parties for trial. Thus, shortly before trial Mr. Koch’s counsel reduced the number of counterfeit bottles to be presented to the jury from the 36 bottles listed in Koch’s Amended Complaint, consisting of 31 bottles of counterfeit wines in the Zachy’s October 2005 auction and 5 five magnums of counterfeit wines from the December 2004 Zachy’s auction, to 24 bottles. Mr. Greenberg’s expert in the Koch v. Greenberg action, Gil Lempert-Schwarz, conceded that none of the 36 bottles at issue in the litigation were authentic. [Lempert-Schwarz Deposition at page 213, lines 11-13].
The jury in Koch v. Greenberg awarded Koch $355,811 (the purchase price for the 24 bottles in 2005) plus $24,000 in statutory damages on one of Mr. Koch’s claims under the New York General Business Law (at the statutory maximum of $1000 per bottle). Based upon Greenberg’s intentional fraud and knowing sale of counterfeit wines, the jury also awarded $12 million in punitive damages against Greenberg. The punitive damages were later reduced by the trial judge to $711,000, bringing Koch’s net damages down to $1.15 million. Eric Greenberg appealed the judgment of fraud and fraudulent concealment, but the jury’s findings were unanimously affirmed by Federal Court of Appeals for the Second Circuit in September of 2015. Zachy’s, which was also named as a defendant in the same Koch v. Greenberg lawsuit, had settled with Koch before the trial for an undisclosed amount and written promise to eliminate the “as is” language from their Conditions of Sale.
While Zachy’s claims that Michael Egan, who was Bill Koch’s expert in the Koch v. Greenberg trial and who testified that all 24 of the bottles in question were counterfeit, “inspected and approved every bottle in this auction” that claim appears to be either greatly embellished, or an outright misstatement.
According to my colleague Maureen Downey, for an expert to properly inspect and authenticate wines, including assessment of the labels (including paper, ink and printing), capsules, cork and glass requires approximately 30 minutes per bottle. There are a total 7,263 bottles in this auction. If Mr. Egan truly inspected and authenticated each and every bottle in this auction, as claimed, that would require 3,631 hours of time – or 363 days working 10 hours a day, seven days a week. That absolutely did not happen here. Even if Mr. Egan could somehow properly authenticate each bottle in half the time Maureen says is required, i.e. with only 15 minutes of time devoted per bottle, that still would have required 1816 hours of time, or 182 days of work at 10 hours per day. That didn’t happen either.
To reduce it to the absurd, suppose Mr. Egan was the equivalent of superman and he could authenticate one bottle every minute, or 60 bottles an hour. The task would still have taken him 121.6 hours, or 12 consecutive days of reviewing the wines for 10 hours a day. Again, I don’t believe that happened.
The latest consignment of wines by Eric Greenberg, who is being forced to liquidate his property in connection with a divorce, was previously offered to and rejected by Christie’s and, it is believed, another well-known auction house. The most mystifying questions at this point are:
- (1) Why is Zachy’s doing business with a man that intentionally defrauded Zachy’s and the public by offering to and through Zachy’s wines that Greenberg knew or believed to be counterfeit?
(2) Why is Michael Egan, who previously testified against Eric Greenberg and stated that each of the wines in question were counterfeit, now working on Greenberg’s behalf and purporting to vouch for the authenticity of Greenberg’s wines? This follows consulting work for accused seller of counterfeit wines Antique Wine Company (now out of business) and work for the accused sellers of counterfeit wines in the pending Soutirage litigation.
Zachy’s, whose reputation as an auction seller was adversely affected by being sued by Bill Koch for having sold the counterfeit wines on behalf of Eric Greenberg, and also by Zachy’s sale of millions of dollars’ worth of wines originating from Rudy Kurniawan (via Kurniawan’s distributor Antonio Castanos) in Zachy’s auctions held in New York, Las Vegas and Hong Kong from 2008 through 2010, appeared to have made significant progress in recent years in repairing its reputation and restoring the faith of wine collectors. That makes the current offer of wines for Eric Greenberg totally inexplicable – aside from naked greed. To me, Zachy’s deliberate choice to offer the wines of a man who intentionally defrauded Zachy’s, Bill Koch and the wine-buying public by knowingly offering and selling counterfeit wines through Zachy’s crosses moral and ethical boundaries that should never be crossed by people in the wine auction industry. Potential buyers would be well-advised to steer clear of this auction and, from my vantage point, to steer clear of Zachy’s altogether, which is consciously choosing to do business with the fraudsters and sellers of counterfeits and appears to have joined the “the dark side.”
What’s next from Zachy’s – maybe “THE Cellar III”? Or how about the “John Adams bottles” from Hardy Rodenstock and Royal Wine Merchants?