Rudy kurniawan & global wine auction fraud thread (merged)

WINE TALK
5361

[rofl.gif]

5362

Now that is funny.

5363

Adrian my position is that several producers would not be able to sell out each vintage at the present time without a healthy secondary market. Maybe that does not apply to Aubert de Villain and/or many burgs, but it certainly applies to many.

5364

UPDATE ON THE KURNIAWAN CASE --According to my friend Peter Hellman from the Wine Spectator, the Judge held a brief Status Conference today in response to the government’s request. The Status Conference lasted less than 10 minutes. Mr. Kurniawan’s attorneys provided no additional details as to the reasons for the request that the psychiatrist and psychologist be permitted to conduct an examination of Rudy at the Metropolitan Detention Center. The government, for it’s part, merely indicated that they were reserving their rights to conduct an independent examination by a psychiatrist and/or psychologist of their own choosing. Peter said that it seemed clear that there had been considerable discussion about the issue between the lawyers outside of the courtroom, but there was no bench or chambers conference with the Judge. Judge Berman granted the defense motion to allow the examination.

Judge Berman also made clear that he expects the trial to start as scheduled on December 9. Judge Berman stated that he thought the trial ought to be completed in just over a week. Mr. Mooney explained that they had considerable evidence and that he expected that the trial would last well into the second week.

The parties’ respective oppostions to the Motions in Limine (motions to exclude certain evidence at trial) were originally due tomorrow. The Judge extended the deadline for the filing of the parties’ opposition briefs to Thursday, November 14 at 4 p.m. NY Time. The hearing on the Motions in Limine and related pre-trial motions will be held next week.

On behalf of all us, my sinceere thanks to Peter Hellman and the Wine Spectator for keeping everyone informed.

5365

Very funny, still I can’t believe he wrote this:


Genuine greatness is most often achieved in youth — think Mozart or Michael Jackson. Or Roman Polanski. The 2013 Bordeaux vintage is much like vintage Michael Jackson — not only great, but pleasingly less dark than the original.

5366

Does this mean that the government will also have to conduct examinations with its own doctors, so that they can refute any bogus claims from the defense?

5367

Lew:

That was my take on the matter. Jason Hernandez, the Assistant US Attoney in charge of the case, clearly indicated that the government reserved the right to do that. I don’t know whether or when the defense is obligated to turn over any reports the psychiatrist/psychologist may come up with. However the defense is required by Rule 12.2 of the Federal Rules of Criminal Procedure to provide notice to the government when any defense of insanity or defense based on mental illness will be presented. I’m not sure how long before the trial that notice must be given and I was rather surprised to hear that the government wasn’t being resistive yesterday in light of Jason Hernandez’s prior correspondence to the Judge.

5368

Hmm. Funny? Really? I guess I’m in the minority, but I thought this was more stupid and annoying than funny. Sort of the way a kid who is strung out on sugar barks out a poddy word to get your attention. To each his own, I suppose.

5369

Don, you’ve become quite a celebrity: Someone saw your name on some of the shipping boxes you recycled here and was all “Is that THE Don Cornwell? Wow! I wish I’d been here…I’d have gotten his autograph!”

Keep up the good work…

5370

Ugh, couldn’t sell through, or couldn’t sell through at ridiculously inflated prices? Any wine that is vigorously sought and traded on the auction market* could surely sell through without that market, albeit at a price that reflected something closer to true drinking (and trophy) value without a built-in prospective auction resale value. What first growths, grand crus, and the like wouldn’t sell? Are you expecting a ripple effect that might make lesser wines’ sales drop? I just don’t see how the auction market is necessary to sell any wine. They are very necessary to sell those wines at exorbitant prices though, absolutely essential.

*I say “auction market” rather than secondary market, because resale after retail is always going to exist, its the ramped up atmosphere of the auction market that is really at stake here.

5371

Some updates on the Kurniawan trial —

The Government’s Forensic Psychologist

On November 13, the government filed its application to have Dr. Cheryl Paradis conduct a psychiatric examination of Rudy Kurniawan. The application was unopposed and the court granted the government’s application the same day.

Dr. Paradis is a forensic psychologist. She is an associate professor of psychology at Marymount Manhattan College and a clinical associate professor at the State University of New York Downstate Medical Center. She is also the author of a 2010 book entitled “The Measure of Madness: Inside the Disturbed and Disturbing Criminal Mind.” According to her website, she has testified frequently as an expert in psychological and neuropsychological testing in both the New York State and federal court systems.

The Parties’ Motions in Limine

The Pretrial Conference is scheduled to be held tomorrow. As noted earlier, both sides have filed various Motions in Limine (motions to exclude certain evidence at trial.) Mr. Kurniawan’s motions are primarily directed at excluding evidence of events occurring before March of 2007, which is the earliest date within the five year mail fraud/wire fraud statute of limitations. The government’s response points out (properly I think) that the government can introduce evidence of earlier events that are directly related to the charged crimes or which provide evidence of a pattern of related conduct.

The government filed three motions in limine which I think have a far greater chance of being granted. While I suspect all three of the government motions ultimately will be granted based on the briefing, the third motion is the most interesting one.

The government is moving to exclude the testimony of Rudy’s proposed expert on wine – C. Robert Collins, also known to many of us as “Bob Collins,” who most recently ran Old Vine Imports, a now defunct wine importing business based in the San Francisco Bay area. Alternatively, the government is requesting that the court conduct a Daubert examination to determine whether there is any substantial basis for Mr. Collins’ purported expert testimony before allowing the jury to hear such testimony. (Daubert is the nane of a United States Supreme Court case which authorized such preliminary examinations where there is a question as to whether or not the expert is qualified to opine as intended and/or whether or not the opinion is based on a proper scientific or evidentiary basis.)

Mr. Collins worked for many years in the retail wine business, primarily for Draper & Esquin and later went into the wine importing business. The government moved to preclude him from offering purported expert testimony on the grounds that there is nothing in the materials submitted to the government which would establish that Mr. Collins has any expertise in wine authentication and that the nature of his proposed testimony was wholly unspecified.

Shortly after the government’s motion was filed, the defense provided supplemental information to the government indicating that Mr. Collins engaged in wine authentication as part of his work with Draper & Esquin in the 70s and 80s, including work on authenticating the Dr. Lucia collection that was offered for sale by Draper & Esquin in 1985. Although he claims to be currently engaged in wine authentication for private clients in Russia and Asia, Mr. Collins has apparently never prepared a single report on wine authentication for a client.
As for what Mr. Collins would purportedly testify to, Rudy’s lawyers described that in their supplemental filing as follows:

  • “To the extent that Mr. Egan, or some other government witness, testifies at trial that specific bottles alleged to have been sold, or placed for sale, by Mr. Kurniawan were counterfeit, Mr. Collins may testify that some, if not all, of such bottles are completely consistent with prior counterfeits of those same wines that he has seen prior to Mr. Kurniawan’s appearance on the scene, and may thus be from sources other than Mr. Kurniawan. Accordingly, Mr. Collins has not formed any opinion as to whether Mr. Kurniawan did, in fact, counterfeit any wine, but rather, that based upon general availability of counterfeit bottles of the same wine Mr. Kurniawan may not have been the counterfeiter.”

However, at the same time, Mr. Kurniawan’s lawyers admit that Mr. Collins has not examined any of the allegedly counterfeit bottles that Rudy sold.

Obviously, absent a detailed side-by-side comparison of the bottles, labels and capsules, it would be completely impossible to say one counterfeit is identical to another. I also can’t imagine Mr. Collins testifying that he’s previously seen 1929 domaine-bottled Ponsot Clos de la Roche, 1945 to 1971 Ponsot Clos St. Denis, 1923 Roumier Bonnes Mares with Domaine Ancien Belorgey labeling, none of which were ever bottled by the respective domaines, or the various DRC fakes with the mistaken accent marks and other defects that are a unique Rudy signature/fingerprint. While the court may not outright exclude Mr. Collins’ testimony tomorrow, I expect that the court will agree to conduct a Daubert examination at some point during the trial before allowing Mr. Collins to testify. It is difficult to imagine that the court will ultimately allow the jury to hear such testimony from a purported “expert” witness.

5372

Some other dude did it. A novel defense.

5373

thanks for the continued updates Don, this is a really interesting case to follow and I know of nowhere else to get such detailed accounts.

5374

+1000

5375

Can’t wait to read the book on the whole thing when it comes out…

5376

The whole book is pretty much in this thread, thus far!

[berserker.gif]

5377

"Mr. Collins engaged in wine authentication as part of his work with Draper & Esquin in the 70s and 80s, including work on authenticating the Dr. Lucia collection that was offered for sale by Draper & Esquin in 1985. "

I know Bob personally. I worked for and with him in the early part of the '00s. I bought wine from him. I don’t recall him doing any authentication back then, but I wasn’t with him on a day-to-day basis.

As far as the Lucia collection is concerned. I was an employee of Draper & Esquin when that cellar was purchased. It was all Steve Gilbertson’s work on that. Bob had nothing to do with that collection. Steve drove out to the west side of SF, saw the cellar, and that was that. In fact, there wasn’t any authentication of bottles back then. Counterfeiting was unknown. I helped catalog the cellar. I was also the lone guy who drove the whole thing to 2 collectors in Rancho Santa Fe, near San Diego. I drove non-stop for 10 hours in a plain white Econoline van with a short pit stop for filling the gas tank.

5378

Who’s going to play him in the movie? Philip Seymor Hoffman?

5379

One of the documents that was attached as an Exhibit to Rudy’s Opposition to the Government’s Motion in Limine provided some very interesting information. The document was an “executive summary” by Fine Art Capital, the subsidiary of Emigrant Bank which made a $3 million loan to Rudy in 2007 which was secured by the art Rudy had purchased. This is the loan which is the subject of the second count for wire fraud in the superseding indictment. The document provides additional information about Rudy’s family members, his assets and liabilities, and provides evidence of apparent repeated tax evasion.

The executive summary prepared for Fine Art Capital describes Rudy’s family and the family businesses as follows (with some spelling and word order corrections as noted):

  • "Kurniawan is an Indonesian citizen. His family has private businesses in real estate, communications and petroleum. In 2001, his father, Makmur Widjojo, died. Kurniawan is the youngest of four brothers: Tan Teddy Susilo [sic: Teddy Susilo Tan]; Darmun Saputra [sic: Darmawan Saputra] (who runs business interests in Indonesia) and Andy Suryanto (deceased). Kurniawan’s mother, Tan Lenywati [sic: Lenywati Tan] resides in Indonesia. Kurniawan’s wealth is inherited from his father’s estate and from his family’s businesses. His brother and mother are listed as being resident with him at 9638 E Naomi Street, Los Angeles. FAC has made inquiries with several professional investigative services providers including the Bank’s security services to verify the source of the family’s wealth and their reputation.

None of the sources consulted could verify or deny these facts partly because of the inadequate recordkeeping in Indonesia."

With regard to Rudy’s assets and liablities, the memorandum listed them as follows:

In the Superseding Indictment, Mr. Kurniawan is accused of failing to disclose that he had an additional $11.5 million in debts (mostly to Acker) not listed in the financial information he provided the bank, falsely stating that his annual personal expenditures were $150,000 as opposed to millions every year, and falsely stating that he was applying for a green card when in fact he was under a 2003 deportation order.

Of particular interest to me were the comments in the memorandum about Rudy’s declared income on his tax returns:

  • “His current debt to net worth ratio of 23% will increase to 35% with FAC’s Line of Credit. Kurniawan’s 2005 tax returns list adjusted gross income of $10,737 and his 2004 tax returns list adjusted gross income of $1,055. He has yet to file his 2006 returns because they must reflect his wine sales of over $30 million. Tax treatment of these sales has delayed his filing and he is, working on this issue with his lawyers and newly appointed accountant. Loan documents require him to file and settle all income tax liabilities no later than March 31,2008 or the loan will be in default.”

The claim that Rudy’s adjusted gross income was only $10,737 in 2005 in just incredible. To put this in context, in Koch v. Acker, Merrall & Condit, Bill Koch filed a proposed First Amended Complaint listing 211 countefeit wines that Koch purchased from Acker Merrall in 2005 and 2006, virtually all of which he alleges were supplied by Rudy Kurniawan. Koch itemizes $305,000 of counterfeit auction purchases (before premium) from wines sold by Rudy Kurniawan at Acker’s April 2005 auction – and this is just the known counterfeits. Koch also lists “private sales” arranged through Acker which took place in May, June, July and September of 2005, bringing Koch’s 2005 total purchases of counterfeit bottles, before premium, to $757,500. And this is just the known counterfeits purchased by one person in 2005. Having $36 million in documented sales through Acker in 2006, (with presumably $30 million of that going to Kurniawan after the buyer’s premium) the “estimated tax liablity” of $1.5 million and the failure to have filed a tax return for the year 2006 as of November of 2007 speaks volumes. In light of this, it sure makes you wonder why the government didn’t follow through with its stated intent to add a tax evasion count.

A number of the assets listed by Fine Art Capital in the memorandum don’t appear to correspond with the numbers listed by the government in the Superseding Indictment.

For example, Fine Art Capital lists “investment in restaurants” of $450,000, but the superseding indictment refers only to a $100,000 investment in Mozza LLC restaurant group.

Fine Art Capital listed $6.5 million for “Diamonds, watches, cars.” But the superseding indictment lists only three cars: (1) One 2008 Black Lamborghini; (2) One 2011 Black Mercedez Benz; and (3) One 2008 Land Rover and $743,797.86 in watches, women’s jewelry and collectibles. There are no loose diamonds listed, but there is one pair of 18K diamond earings purchased for $4,800 which is one of two items of women’s jewelry (subtotal $38,400). Aside from a Mont Blanc pen ($17,945), the remaining $680,000+ in listed value are all watches, including many from Philippe Patek. All of these items are listed as having been purchased from two sources in 2006 and 2007. The total value of the cars, watches, jewelry and Mont Blanc pen doesn’t appear remotely close to the $6.5 million claimed. Did millions in diamonds and cars disappear or get sold between November 2007 and March 2012? Or are there millions in other assets the government hasn’t located? Or did Rudy somehow get away with grossly exagerating the value of his “diamonds, watches and cars” to Fine Art Capital?

Finally, the $15 million value listed for Rudy’s wine collection seems surprisingly small vs. the $36 million in known sales at the Cellar I and Cellar II sales in 2006 and more than $10 million in known private sales by Rudy in 2006 and 2007. Perhaps Rudy was referring only to the value of authentic wine that he owned? [wink.gif]

5380

FWIW, I was informed that there are a lot of fake 2009 DRC RCs circulating from the DRC counterfeit syndicate that got busted recently. The original intent was to sell to eastern European market but those got resold to France and Italy.