Bloomberg News

Billionaire Koch Wins $12 Million Verdict in Wine Trial

April 13, 2013

Billionaire Koch Wins $12 Million Wine Trial Punitive Award

Billionaire William Koch, left, and his attorney John Hueston hold magnums of fake 1921 Chateau Petrus outside federal court after Koch was awarded $12 million in punitive damages, in New York on Friday, April 12, 2013. Photographer: Patricia Hurtado/Bloomberg

Billionaire collector William Koch, after waging a $17 million legal battle over 24 bottles of counterfeit Bordeaux, was awarded $12 million in punitive damages by jurors, some of whom shook his hand after court.

The federal jury in Manhattan found against the consignor, Eric Greenberg, concluding he made fraudulent representations about the authenticity and provenance of the wine, including claiming that many purported grand crus, with one dating back to 1864. On April 11, the panel found Greenberg fraudulently sold wines he knew were counterfeit and awarded Koch $379,000 in compensatory damages.

The jury, in its verdict yesterday, concluded Greenberg exhibited “criminal indifference” in the 2005 wine sale. U.S. District Judge J. Paul Oetken said during his instructions to the jury that the award was designed to “punish the defendant for wanton, malicious or reckless acts.”

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“I feel outta sight, over the moon,” Koch, accompanied by his lawyer John Hueston, said after court. “We weren’t expecting damages and we got $12 million, so it’s unbelievable.”

Koch testified at trial that the experience had caused him to stop collecting wines. Koch said April 11 that a counterfeiter could make a fake bottle of rare vintage wine for about $100 and sell it for $100,000.

‘Serious Consequences’

“There’s a huge code of silence in this industry,” Koch said after court. “The whole point of this was to shine a bright light on it. Perpetrators are now warned -- there are serious consequences.”

Greenberg said in a statement he would appeal the verdict, calling the jury’s decisions “a disappointment.” Greenberg told jurors yesterday when he took the stand again that he offered Koch a full refund after learning that Koch had concerns about the wine. His lawyers told the judge they would also be filing papers to reduce the jury’s damages award.

“I’m sorry that the wines I sold to Mr. Koch were counterfeit, but I thought they were real,” Greenberg told jurors.

Hueston asked Greenberg if his offer to reimburse Koch for the wines was an effort to keep the incident from becoming public.

‘A Waste’

“No, absolutely not,” Greenberg said. “Instead, we’re spending $17 million in litigation, millions of dollars in taxpayer resources, when federal furloughs are under way. This is an absolute waste of time, a waste of money, a waste of resources, and these people have used three weeks of their lives here,” he said, turning to jurors.

After the verdict, three jurors stepped up to Koch in the courtroom to shake his hand. Another juror, Mary Forbes, later approached Koch as he left the courthouse, shook his hand and said, “I’m glad it all worked out so well.”

Juror Wally Williams, 68, of Manhattan, who is a retired member of the British Army’s Royal Electrical and Mechanical Engineers, said he concluded that Greenberg had decided to sell off the fakes once he learned what he’d had.

“I think because somebody did it to him he decided to do it to somebody else,” Williams said, calling his verdict “a message.”

Williams said jurors had arrived upon the $12 million punitive damages figure by each submitting the damages they thought was warranted, added up the sums and divided by the eight members of the panel.

‘About Accountability’

“It’s a lesson,” Williams said. “Don’t do that to people. If you get hurt, you shouldn’t hurt anybody else.”

Jury foreman Darrell Paul, 41, of the Bronx, said the panel decided Greenberg had failed to inspect or segregate counterfeits from his wine cellar.

“It wasn’t about money, it was about accountability,” Paul said. “I personally felt there needed to be a message out there that it’s not really cool to do business that way.”

Asked what he would now do with the 24 bottles, Koch said he would use the money to create a website that would educate people about counterfeit wines and how to detect fakes and also include photos of the bottles. After leaving the courthouse, he clutched a magnum of 1921 Chateau Petrus, one of those bottles he purchased from Greenberg, which cost him $29,500.

Belle Epoque

Koch filed suit in 2007 alleging Greenberg, founder and chairman emeritus of Scient Corp., defrauded him when he falsely promoted his wine collection as “the Best of the Best,” claiming that some bottles dated back to the Belle Epoque, a era that preceded World War I.

The federal jury in Manhattan on April 11 awarded Koch $355,000 for the price he paid for the wines at auction and $24,000 in compensatory damages, representing $1,000 for each of the 24 bottles.

Koch, the brother of conservative Tea Party founders David Koch and Charles Koch, is the founder of West Palm Beach, Florida-based Oxbow Carbon & Minerals LLC.

The suit was one of several filed by Koch against wine consignors and auction houses that he says sold counterfeit wine. An earlier lawsuit against New York-based Zachys Wine & Liquor Inc., where he’d bought the wine, was settled for an unspecified amount.

The wines at issue included a purported 1864 Chateau Latour bottle, which Koch bought for $14,160, two 1950 Chateau Petrus magnums he bought for $20,060 each, and the 1921 Chateau Petrus magnum.

Wine Dealer

During the trial, Greenberg testified he had earned about $40 million from selling rare vintage wines. Rudy Kurniawan a rare wine dealer who sold bottles to Greenberg and Koch, has been indicted by Manhattan U.S. Attorney Preet Bharara for allegedly fabricating counterfeits. He is scheduled to go on trial in September.

Hueston, Koch’s lawyer, said yesterday after the verdict that their legal team continues to pursue lawsuits against Kurniawan and other auction houses for selling counterfeit wines.

An agent with the Federal Bureau of Investigation who is handling Kurniawan’s case and prosecutors handling it were monitoring Greenberg’s trial.

Hueston said after court that Koch’s legal team was “cooperating with the FBI.” Jim Margolin, a spokesman for the FBI’s New York office, declined to comment on the probe.

Thomas Jefferson

Koch also filed a lawsuit alleging he bought counterfeit wines that had purportedly belonged to Thomas Jefferson. He won a default judgment against German wine dealer Hardy Rodenstock, who had consigned the purported Jefferson bottles to Christie’s International Plc (CHRS) for sale. A lawsuit against Christie’s for that sale was later dismissed by a federal judge in New York.

Arthur Shartsis, a lawyer for Greenberg, told jurors during the trial that his client hadn’t misrepresented the wines and had instead relied upon wine experts at Zachys to inspect and authenticate his bottles for the sale. Shartsis said that the auction catalog also included a provision that the wines were sold “as-is” and said Koch hadn’t bothered to inspect the bottles before the sale or make any inquiries.

The case is Koch v. Greenberg, 07-cv-09600, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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