Vault Insurance Search August 18, 2021 Don’t bid on that bottle without reading these six facts about wine and spirit fraud Stephen Bitterman SHARE THIS: http://Share%20on%20Twitter http://Share%20on%20Facebook http://Share%20on%20LinkedIn Steve Bitterman is Vault’s Chief Risk Services Officer. If you’ve been bitten by the wine bug, you may recognize the anticipation of being ushered into a protected cellar to examine a venerable burgundy from a legendary vintage. Or if your passion is spirits, you’ve likely tasted the thrill of bidding in an auction on one of the few remaining bottles of a hand-made bourbon. Well, I don’t want to spoil anyone’s cherished memories, but there’s a strong chance that roughly one in every four bottles you saw was a fake. Maureen Downey, a leading expert on wine authenticity, says that fully one-quarter of the fine wines sold—costing collectors $3 billion a year—are forgeries. A common scam is to pour cheap table wine into empty bottles pilfered by accomplices at high-end restaurants and hotels. More accomplished fraudsters may carefully mimic the appearance of world renowned vintages, filling them with a blend of just good enough wines. Disheartening, yes, but no reason an informed collector can’t sharpen their fraud detection skills. With that in mind, here are six facts every wine and spirits collectors should know: Most known wine forgeries are never disclosed. When Bill Koch, the Florida billionaire, discovered he’d been hoodwinked into paying $500,000 for four bottles of 1787 Lafite purported to be owned by Thomas Jefferson, he spent $35 million to track down the crooks and told the story on 60 Minutes. Most collectors, though, would rather drink a barrel of Two-Buck Chuck than admit to their friends they have been duped. Dealers and auction houses work hard to keep any word they might have sold fakes out of the public eye. And of course, many of the fakes are never discovered at all. After a decade selling an estimated $50 million in fake wine, Rudy Kurniawan was arrested, jailed, and deported to his native Indonesia, a fraud chronicled in the 2016 Netflix documentary “Sour Grapes.” As many as 10,000 of Kurniawan’s bogus bottles are still in circulation. There are fakes in every price range Forgers have been working diligently to meet the surging demand for top-end wines and spirits from investors worldwide, especially in Russia and China. By some estimates, there are more bottles of Romanée Conti 1945 and Château Lafite 1982 sitting in cellars in China than were ever produced. But fraud is equally rampant in mid- and low-price wines. For example, more than 25% of the wine made in Italy—the world’s largest producer—is mislabeled or outright fake, according to a 2021 study in the Italian Economic Journal. The malfeasance runs throughout the supply chain. Bottlers add flavorings, sugar alcohol and grapes not from the region promised on the label. Distributors and Retailers pass off fakes as the real thing. Fraud extends to whiskey, too Spirits now account for 20% of the sales at what used to be exclusively wine auctions, and crooks are following the collectors. A sting operation by Inside Edition paid nearly $1,000 for a bottle of Colonel E.H. Taylor – Four Grain, a limited-edition 100-proof bourbon at Acker, the country’s oldest wine shop. The distiller identified it as a fake. Even the Scotch in Scotland is suspect. A recent test by a Scottish University found 38% of the aged whisky for sale at auctions and high-end dealers was not as old as the labels claimed. You can spot some, but not all, fakes Don’t buy any bottle without giving it a careful look-over. You often can catch misspellings, labels that were printed on a computer, and other conspicuous indications of a forger who hasn’t mastered the craft. Experience and artful use of Google will help you identify bottles that differ in appearance or materials from others of the same vintage. If you’re concerned about a sophisticated forgery, you will likely need to hire a fake-wine expert, a growing specialty. They keep up on the fraudsters’ latest tricks and have high-tech ways to spot the new wine in old bottles. You often can’t taste the difference between a fake and the real thing Lettie Teague, wine columnist for The Wall Street Journal, convinced Bill Koch to hold a tasting that compared five bottles of fake wine he was duped into buying with legitimate bottles of the same vintages. In two cases, the frauds were easy to spot. But bogus bottles of 1978 DRC La Tâche and a 1950 Château Pétrus tasted at least as good as their real counterparts. One of the fake wines was adulterated by bits of cork. That proves nothing, as even the best wines can sometimes become corked. Your insurance won’t bail you out if you’ve been defrauded Whether it’s a homeowners or special collection policy, your insurance almost assuredly only covers the actual value of your property, not what you were fooled into paying for it. If an earthquake shatters your case of rare burgundy the day after you discover it was fake, your insurance company will send you a check to buy a new case from Gallo. But even if your policy doesn’t cover fraud, your insurance company can be a powerful ally as you build and safeguard a wine or spirits collection. At Vault Insurance, we have experts who have worked with the world’s most prominent collectors. And we can connect you with our network of trusted advisors who can help spot fakes before you buy them and keep your legitimate acquisitions safe. The next time you’re invited to a whisky or wine auction, we want you to experience excitement, not dread. 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