A refutation of a refutation: Running the Numbers on Maureen Downey’s Fake Wines
According to the Institute of Masters of Wine, Maureen Downey is “‘The Sherlock Holmes of Wines’ (and) is an independent expert on fine and rare wine and wine collection management, and is one of the foremost global authority (sic) on wine fraud, counterfeit wine and fine wine authentication.”
Miss Downey says that there is “$592,222,222 — $683,333,333” of Rudy Kurniawan’s fake wine in the market.
I refute it. I have demonstrated in a previous article that her figures cannot be accurate.
Unfortunately this always results in a spray of venom (as per the tweets below).
Let’s wipe that away and look, once again, at what the figures say.
I wrote, “The average price per lot at the now notorious “The Cellar” auction conducted by Acker Merrall & Condit in New York in October 2007 — at which many of Kurniawan’s fakes and forgeries were sold — was (including premium) over $10,500 per lot for a total of over $24m. The 2,271 lots offered in that two-day sale comprised 11,474 bottles, so $2,092.00 per bottle.
If there is $147.2m of Château Rudy still in the market, using the Acker bottle price of $2,092.00 it would equate to 70,363 counterfeit bottles made over a ten-year period, or 7036 bottles per annum, 135 bottles per week, or 19 bottles every single day.” It’s highly improbable.
The example of “rarest, most expensive wine” cited by Miss Downey as justification for her vaunted figures was 1978 Henri Jayer Richebourg, sold in 2002 for between $2–3,000 per bottle. In December 2016 it was claimed to be worth more than $10,000. So I used $10,000 per bottle to work out how much wine RK could have made over a 10-year period. I wrote, “Even if you put the average at an inflated $10,000 per bottle, it still requires Kurniawan to have been cranking out an implausible 55,000 bottles at 5500 bottles per year, 106 bottles per week, or 15 bottles per day.”
Miss Downey wrote, “Mr George is looking at Rudy as being only an auction seller, and judging the numbers based only by auction value. In fact, Rudy sold more privately that he did at auction, even if the auction houses did a good amount of that private selling.”
No, I’m not.
I wrote, “In this tale one must follow the money. The best place to do this is the legal documents that pertain to his arrest and conviction in 2012.
The legal documents detail his non-auction, private wine sales, though doubtless much of this information remains hidden even from government investigators who had access to Kurniawan’s emails and other documentation. Nobody can be sure of how much fraudulent wine he sold off the record.”
I referred to legal documents that contain details on RK’s private (non-auction) sales.
These figures clearly demonstrate that it is a long way to $550m from the available data.
The growth in value of RK’s fakes is correlated by Miss Downey with a magnum of Pétrus 1929 and with a bottle of Henri Jayer Richebourg 1978.
The “large format premium” of 2.25 is reasonable.
The Pétrus 1929 is said to be worth 5 x a single bottle, based on a single magnum sold at an auction in October 2005 and single bottle sold in December 2005 using data from Wine Market Journal. That’s where it was at that time, though it’s specious to base a large correlation on two bottles sold at two auctions in a two-month period 13 years ago.
The price of a 1929 magnum sold in October 2006 at 14% below the October 2005 price is not used. It’s worth whatever it last sold for, no? But only the highest recorded figure is used here. And no Pétrus ’29 — in bottle or magnum — has been auctioned since November 2013. Wines and other things have to be valued for insurance claims, lawsuits and the like–for which skill must come into play (but never humility or modesty, apparently) — but without recent market data the figures are nominal.
A single bottle of Henri Jayer Richebourg 1978 was sold at auction in May 2018. No bottles had been sold since May 2015 and only 45 bottles in total since September 2002, according to the figures taken from Wine Market Journal. That’s not a liquid market that can be used for correlation. One might as well benchmark the art market against Leonardo’s “Salvator Mundi”, which was auctioned on 15 November 2017 for $450.3 million — the most expensive painting ever sold. Ergo my late grandparents’ very bad copy of the “Mona Lisa” is worth £1 million.
Claiming that “many items he made have gained in value over time as much as 900%” is a fallacy. One item (Jayer Richebourg 1978) has gained 900%. Very few others, if any, have also done so.
Miss Downey wrote, “Mr George was, I believe, in the employ of Spectrum at the time of that sale and can perhaps shed light on this instance, though it is rumored to have been the action of Vanquish employee/manager.” (Miss Downey is referring to the notorious February 2012 sale–conducted by Spectrum Wine Auctions and Vanquish Wines — at which the counterfeit Romanée-Conti pictured above was offered for sale.)
I can shed light on how I had nothing whatsoever to do with this sale.
I worked on a consultancy basis for Spectrum from May 2010 to January 2011 as its “Head of European Consignments”. But the role was made untenable by Spectrum’s insistence on everything being shipped to California for inspection and photography, which necessitated slip-labelling for import into the USA. This was wholly unappealing to potential consignors so the only consignments that I oversaw were an ex-cellars offer from CVNE in Rioja, sold at Spectrum’s Hong Kong auction 12–13 March 2011 (by which time I had no dealings with Spectrum), and a single bottle of Graham’s 1948 Vintage Port from a private UK consignor, which was sold through an online auction, though I have no record of when this was.
I had no involvement at all with Spectrum’s auction held jointly with Vanquish Wines in London on 8th February 2012 — over a year after I last had any dealings with Spectrum, when it became widely known that many of the wines at this auction had been consigned (via a third-party) by Rudy Kurniawan.
Miss Downey lists 489 SKUs based on “the evidence we physically inspected (and that) Rudy made at least the following numbers of different wines (each representing what would be a unique SKU) from the following producers”.
If we divide $683,333,333 (“Value of Rudy K made wine (sic) that still exists in the market”) by 489, the per bottle price is a remarkable $1,397,409.68. No bottle of wine has ever sold for that much.
Apparently “we are missing 81.7% of the time/banking data to see what was paid in, and 53.2% of known auction consignments sales revenue, plus a myriad of other sales for which we have zero data despite knowing they occurred…”
So let’s increase the number of bottles by the 81.7% of “missing” time/banking data to 888.51. Now the average bottle price is $769,077.82 and still way beyond anything that has ever been sold.
Now let’s multiply the number of bottles by the 53.2% of missing “known auction consignments sales revenue” to 749.15. Now the average per bottle is $912,144.88. It’s still not viable.
Back to the beginning, with $150,000,000 (“The range in value — at time of sale — of the wine Rudy K sold”). Divided by 489, it’s $306,748.47 per bottle. Multiply the bottles by 81.7% and we get $168,821.96. Multiply by 53.2% and it’s $200,226.92. These figures are not credible.
“$130,000,000 — $150,000,000 The range in value — at time of sale — of the wine Rudy K sold.
$424,305,556 — $489,583,333 Value of Rudy K made wine (sic) that still exists in the market, using above sale value, and an average of a 326% gain in value to 2015.
$592,222,222 — $683,333,333 Value of Rudy K made wine (sic) that still exists in the market, using above sale value, and an average of a 456% gain in value through current market 2018.
By this calculation, which is based on evidence not pure conjecture (sic), $550million is a middle figure in these estimates. It represents an increase in value of 370% across all items over time in the middle of the range.
Considering that Rudy K was making the rarest, most sought-after wines in the world, and doing so in a prolific manner, and that many items he made have gained in value over time as much as 900%, I believe these to be reasonable numbers.”
Note “at time of sale”. The sales were conducted from 2002 (“Rudy was faking, and trying to get me to sell, 1947 Petrus and Lafleur as far back as spring of 2002”) to 2012, though it should be noted that the FBI began looking into RK in 2008, which made it very difficult for him to operate. He didn’t sell much from 2008 until the time of his arrest in 2012. There was too much heat on him.
Yet again, I must point out that the $150m figure is not a base figure from 2002. The figure is the claimed value of his counterfeit wines as of 2012 — the end of the “time of sale”. The $550m figure is the claimed value from December 2016 on. The wine — or certainly not all of it — was not in situ at the start of this lucrative period and therefore did not enjoy the enormous returns seen in the wine auction market in this period.
We can correlate the $150 million figure against these auction totals and the growth (or decline) of the market from 2012 to 2017. The fine wine auction market was worth $389 million in 2012. By 2017, it had declined 1.9 percent to the previously stated $381.7m. So the claimed $150m figure would now be worth $147.2m, not $550m, or “$592,222,222 — $683,333,333” as is now claimed.
“so many wines he made have sky rocked (sic) in price as have the wines of Henri Jayer and his #1 production Domaine de la Romanée Conti (sic) — it becomes clear that it is not unfathomable to assess a 370% increase on a $150million production figure.”
It’s not unfathomable — in the sense of being immeasurable — as my figures show. But it is unbelievable, and not in the sense used by sportspeople who have just won something.
Not all of Rudy’s bottles were fakes. Some of them — a lot of them — were genuine and therefore do not count in the “fake” totals being cited here.
Miss Downey says, “we do not have any information on the myriad of other sales that Rudy and his agents executed in the 10-year period in question” and “Because we are missing 81.7% of the time/banking data to see what was paid in, and 53.2% of known auction consignments sales revenue, plus a myriad of other sales for which we have zero data despite knowing they occurred…”
It is inappropriate to speculate on 81.7% or 53.2% of data for which there is no proof. If there’s zero data, any assumptions are purely speculative.
Even with the disingenuous figures and methodology displayed here, the claimed $550m figure, or “$592,222,222 — $683,333,333” as it is now, remains difficult to sustain.
That the fine wine market is riddled with counterfeits is not in dispute. But while collectors need to be wary and do their due diligence, the fine wine market isn’t quite as rotten as suggested.