Tycoons William Koch and Eric Greenberg fight battle over fake wine

Collector William Koch turns his battle with Eric Greenberg into a US federal case - one that has cost both sides a total of US$14 million

PUBLISHED : Thursday, 28 March, 2013, 12:00am
UPDATED : Thursday, 28 March, 2013, 3:29am

When most people get a bad bottle of wine, they send it back.

When billionaire US collector William Koch concluded the vintage wines he bought at auction were counterfeit, he made a federal court case out of it, that has so far cost both sides a total of US$14 million.

A court battle this week between Koch and Eric Greenberg, the fellow billionaire who sold him the wine, is again shining a light on the world of top-end wine sales.

It follows allegations of fake wine that cast a shadow over a HK$48 million sale by former Hong Kong financial secretary Henry Tang Ying-yen this month.

Koch purchased what he thought were French wines from the Bordeaux and Burgundy regions, some dating to Napoleonic times, he alleged in a 2007 complaint filed in federal court in New York. He claimed that Greenberg, who had consigned the wines, defrauded him.

Koch initially said 36 bottles that he bought at New York-based Zachys Wine & Liquor in 2004 and 2005 for about US$500,000 were counterfeit. Last week, he pared back his claims to 24 bottles for which he spent about US$350,000.

While Koch, the founder of Oxbow Carbon & Minerals, has filed other lawsuits over alleged counterfeit wine sales, the case against Greenberg, founder and chairman emeritus of internet firm Scient, is the first to go to trial, with opening arguments scheduled yesterday.

US District Judge Paul Oetken said on Tuesday he would allow Greenberg to present evidence that he offered to reimburse Koch for the full cost of the suspect bottles. Koch's lawyer, John Hueston, then proposed that evidence about the refund be presented during a second phase of the trial when the jury would decide whether to impose punitive damages. Hueston told Oetken that if the judge rejected the idea, his client was also willing to drop the punitive damages claim.

The judge then asked: "Are you saying Mr Koch is simply seeking an apology?"

Hueston said his client was seeking to protect the integrity of the fine-wine market. Hueston alleged that Greenberg wanted the suspect bottles to be returned to him in order to put them back on the market and to "send the bottles back to the next victim".

Arthur Shartsis, a lawyer for Greenberg, told the judge that when his client first learned that Koch suspected the wines he purchased were fakes, he repeatedly offered to reimburse the collector for what he called the "very, very low six figures".

Shartsis said Koch had rejected Greenberg's offer to have a public tasting of the fake wines to raise money for charity. "This case is an embarrassment to all of us," Shartsis said, adding that the lawsuit had dragged on for more than five years.

"We've spent cumulatively about US$14 million on a claim that is probably between US$100,000 to US$200,000," Shartsis said. "The legal system shouldn't be doing this - at all. Particularly when one of the parties years ago could've avoided the costs for both by accepting a full tender."

Koch alleged that Greenberg consigned the counterfeit wine during two auctions held by Zachys Wine Auctions in December 2004 and October 2005.

Included among the wines Koch alleged were counterfeit were two bottles of Chateau Lafite Rothschild - one from 1805 costing US$22,500 and one from 1811 bought for US$29,170. Koch said he also bought three magnums of Chateau Lafleur, vintage 1945, for US$57,000 that he contends were fakes. Shartsis said outside court that Koch has dropped claims that the 19th century wines were counterfeit.