Uncorking Wine Fraud: Maureen Downey on Counterfeits, Crime, and Blockchain Solutions

0:00 One of the things about wine fraud, if we're going to tackle this problem, what we need is oversight through the supply chain. Because the wine market is so opaque and there's so much gray market and black market, then that's how fraud gets in. Sit back and grab a glass. It's Wine Talks with Paul K. Hey, welcome to Wine Talks with Paul Kay. And we are in studio today, but to have a conversation with Maureen Downey up in the Los Altos Hills. From introductions in just a moment. Wine Talks, of course, available iHeartRadio, Pandora, et cetera, wherever you hang out for podcasting, they have a listen to a conversation I just had with John Wilkinson of Bin to Bottle.

0:42 If you've ever been interested in starting a brand, starting a winery. He's part incubator, part processor, for instance, the whole brand Prisoner started his facility. Great conversation about the industry and the entrepreneur side of the industry. Also some great, great conversations about Armenian wines that we recorded a few months ago out in Armenia. So have a listen to that. But now, while we're here today, we're here to have a conversation with Maureen Downey, the preeminent authority and consultant on fake wine. Yes, there is such a thing. Some people think I sold fake wine. I'm just joking. But. But welcome to the show.

1:23 Thank you very much. Thanks for having me. We had a little trouble connecting, but that's great. I'm glad you're here. Next time we're up in that area, we're going to stop by and say hi and taste some wine and continue this conversation. Because, like your friend, if we have a glass in hand, right, it is, you know, and I started this thing because I hate the swirling and sniffing shows. I think that propagates the aristocracy of wine. And that has nothing to do with it. You know, we enjoy doing it and pontificating, but most people don't understand what we're talking about. So I like to tell the stories. But these are, I think, what you've been doing. This is incredible stories. But before we get to that, I want to continue this conversation since listeners heard your. Your Master of Wine story.

2:08 I had applied on the airplane. I told Nova this. I was flying at home from New York, and I said, hey, do you want to be a Master of Wine? I'm like, yeah, sure, why not? I can do that. And, and I applied online and it, you know, and I did, actually, the, the essay was good. They liked my essay, but they hated my tasting notes. But there's a whole sort of understanding of what the Master of Wine wants from you, right? Absolutely. I mean, there's. It's not a free form. Do it your own way. And it's interesting, especially, I think, as an American. So I was in the program for many years. I did very well on the tasting. I never got that great on the essays, but I focused on the tasting. I wanted to pass that first. And I'm a very good natural taster. I actually took the advanced Master sommelier degree at 23, the advanced master solenier exam at 23, and Fred Dame said I was one of the best natural tasters he had ever seen. And he moved me to New York in 1996, and that's how this.

3:12 My whole journey started. So I'm a good natural taster. But, you know, tasting wine is a language, and it's just like learning any other language. Like, I can't go to Russia and talk about that blue car over there with a. With a flat tire because I don't speak Russian. I can see it. We can all see it. But if you can't, you're not using the same terminology and the same, you know, sentence format and all of that, then somebody isn't going to understand you. So I think, you know, following the WSET and then the MW or the Master Sommelier programs, they really kind of. They bring you along so that you're speaking the same language that other professionals speak. The interesting thought you made.

3:58 And it's not why we're here together, because I want to talk about fraud in the wine business, but it's an important concept for listeners to understand the difference between the Master Psalm and the Master of Wine and the diploma W set. But you said something before we started the show, and that was, there are a lot of Masters of wine that I'm not gonna say don't do anything, but they don't ever have a preeminence in the industry. And it's an incredibly difficult degree to get or certification. But. And that's why I wonder. And this is why my comment when I started this conversation was sort of like, depending why you're getting into it now, it's so arduous, you probably can't get into it without the complete passion and get through to it without the passion and the need to do it. But at the same time, when it's all said and done is what you do with it and the information you learn that matters.

4:53 Well, and for me, I think it's even a little bit. It's more than that. It's because there are. I'VE read some articles recently that, you know, oh, you can. You can get the knowledge someplace else. You don't have to take these courses. And I would strongly disagree with that, with that sentiment, because the. The value of going through these courses is not necessarily in. In the education that you get. It's in the connections that you get. It's in the people that you meet. It's in the relationships that you can establish. And, you know, for myself, for example, you know, with all this fraud stuff, people not known that I had been passionate about fraud and speaking out about it in 2004-2005-2006-2007, when Rudy did get arrested in 2012, people wouldn't have known.

5:47 Oh, my God, she was right. We need to talk to her. And I wouldn't know. All these big producers in Bordeaux and doors in Burgundy wouldn't open to me. So I think being in the program and making the connections. And as you were just recently in Northern California and you interviewed Nova Khadimotre, who's a master of wine, winemaker, consulting winemaker, and a dear friend of mine. I wouldn't have Nova as a great friend if it weren't for the MW program. So I'm very grateful that I did study that. Now, you know, I had an opportunity to continue on the MW program or deal with the fact that Rudy just got arrested. Rudy Cornell, on this counterfeiter, whom I had been saying for 10 years was counterfeiting. And I chose to build that instead of studying more. But, you know, I think for a lot of people, they think that somehow getting the MW means they're gonna. They're gonna suddenly just have be overwhelmed with offers and money and opportunities, and that's not necessarily the case. And today especially, there's this new class of people coming through who are coming from other professions.

7:03 They're attorneys. They're this. And they want a new career. Wine seems to be. We get. And not on the MW side, but we seem to kind of be the dumpster for all other industries. Like, people that either fail out of other industries or they get bored. They're like, oh, I want to do wine. Wine is fun. But it's actually a career, and it's actually work. You know, but there's this whole new. Right. Industry of people who. They have learned everything, but they don't have any background in line. So I think that's really weird. Like, you could pass the test with no experience. And that's. I think that's totally strange. But it's very strange. And I'M the opposite. Even though I, you know, study a lot and read a lot of old books and have some fabulous time now, right now reading a book on Gertrude Stein and Hemingway's experience in Paris. And it has a lot to do with wine as well. But, yeah, that's true. I mean, some of these conversations I have on these shows with people that are educated in the wine industry, but they can't hold a conversation about what the wine industry is because it's more than just the fermented grape juice in a bottle. And maybe that's, you know, in fact, my conversation with John Wilkinson had been the bottle was nothing's really changed for 12,000 years on what's in the bottle. You know, maybe some technologies, but it's still fermented grape juice. But the business of wine is completely different and difficult and managed to manage. The reason I sold my company was it got.

8:36 It just got too complicated for the size of my company to manage, to be able to produce a profit from it. Even though we were selling three to 400,000 bottles of wine. I sold 20 million bottles of wine in my career. I mean, yeah. And it just started to get too hard. One of the things that I find fascinating is that even the most successful winemakers are at their heart, farmers. That's what they are. Right. Because the wine is made in the vineyard. And so now I've got a blockchain technology that is anti fraud, inventory control, track and trace. Try explaining that it's. It's difficult. Well, let's talk about that, because I just, I had a podcast. I won't mention any names. I. It's an old friend of mine in the industry. You know, we started this industry in the 70s. And I reposted the podcast recently and I got an email from a gentleman, I think he's in la. He sells in rare wines for sellers, resells them for people that have them.

9:42 And he was offended. I reposted this podcast because he said this gentleman is known for his fraudulent wines, his counterfeit wines. I'm not, I don't want to mention any names, just. It's just a fascinating subject. And when I brought it up over the last two weeks that you're going to be on the show to people, they're like, what do you mean? I said, oh, there's serious stuff now, either you knew who Rudy was, and that's obviously the most obvious story, but it's been going on a lot longer than that. Oh, Pliny the Elder wrote about counterfeit wine in 70 A.D. oh, well, that was really. Yeah, yeah. His friends, he considered himself rather a connoisseur. And his friends were waxing and waning over a bottle of falernia, which was the most popular wine at the time. And he was writing what idiots they were, basically that they didn't know that what they were drinking wasn't real Falernia. Yeah. That's fascinating. 70 AD so this is, it's not a new problem. It's not going away. It's getting worse currently. So people are shocked at the size of the market. So when I talk about wine products, I don't just talk about counterfeits because you have to talk about fraud. So you have to talk about, you know, the sale of the resale of stolen wine, the resale of wine that has been through hurricanes and fires.

10:59 So resale of salvage bonds, you know, bootleg spirits. But to give you some perspective, the World Health organization states that 25% of all alcohol consumed in the world is illicit. 25%. That's the world Health Organization. So. Wow. Yeah. You're talking about dispirits, you know, fake, fake Pappy Van winkle, fake, whatever. 25%. That's phenomenal. It is phenomenal. And it's. But if you really, if you pay attention to the news, it's not because there are, there are news stories twice or three times a week in the wine trade. You know, 10,000 bottles seized here, you know, 50,000 bottles seized there. And it's, it's a combination of high end and lower end. You know, I would invite listeners to Google the Sassakaya frog and watch the carbonieri, you know, redo. So organized crime have gotten involved and they're doing this at a grand scale. Wow. And they get digital printers and they, they recreate all the anti fraud. They make the tissue paper, they make the wooden boxes, they make the, the bands that go around the wooden boxes. I mean, we got high end stuff. There was a, there's another one that's Bordeaux bottling line in China. And there's a Bordeaux bottling line of a, of a Bordeaux. You know, it's not a major, it's a pity crew. But you see this, and it's a Chinese bottling line of bottles are perfect. Wow. Because they have the bottles.

12:31 Bottle manufacturing or bottling of the juice. Yeah. We have no idea what's in it. Yeah. So before Rudy, whichever. For the listeners, the movie Sour Grapes and Rudy Kern, I always get his name on, but he's my neighbor. My neighbor. He's my neighbor here. He's we're in Arcadia. And I remember they weren't drinking with him. No, no. And I just. Fascinating story about. And I'm a huge fan of, for instance, the movie Catch Me if youf can and Frank Abbott story. And I love hearing his story because, I don't know, maybe I have this. This romantic view of being able to do it to the extent of just to fool somebody. Not just cheat anybody, but just be able to fool it and everybody. Not people don't know that Walt Disney's career started in doing that. He was a fraudulent war relics vendor. Really? Yeah. He would make distressed war helmets and sell them as real interesting. Okay, so before Rudy became a movie in the story, was it that. Were people aware of this and, you know, were auction houses you diligently seeking, you know, proper goods and not. Well, no. And. And many of them are still not so. Rudy learned from a man named Hardy Rodenstock.

13:49 So this is kind of fun. Hardy Rodenstock's real name was Meinhard Borka. He was a German music producer turned counterfeiter, wine extraordinaire. So he started making old and rare wine in the 80s and selling it. And the sad thing is that a lot of the benchmark tasting notes from maybe some of the biggest critics in the world wore bottles that were made by Hardy Romanstock. Really? And then Rudy Cornelan came along and he started making old and rare wine. The interesting thing is that Hardy was. Is somewhat narrow. Hardy made mostly Bordeaux, lots of Yuccan, like all these. The oldest bottle of Yukim in the world. I took a bottle of Yukim back to Yuccam and Pierre Lerton was like, yeah, so this bottle was made a year after Marie Antoinette lost her head in a year before my house was built, you know, and it's. It totally wasn't real. Yeah, right. But people paid hundreds of thousands of dollars for it.

14:51 So. So Harding rode the stock, I think, you know, kind of influenced Rudy. And then in the wake of the Rudy Cornell and he was arrested in 2012, he was able to make him sell wine for about 10 years because he was funded by Acromero Condit and John K. Farm. And these documents are available on wine fraud.com, our website. That's a resource for people where you can actually see people giving Rudy million dollar loans through the auction house to come up with these wines. Knowingly do that, or they thought Rudy was a rare and special guy who was able to source these things. Well, if that's the case, why wouldn't you Just buy a million dollars worth of wine for Rudy.

15:39 Why are you doing it through an auction house? Don't know. It's a good question. Right, Right, it is, because then you're going to go buy at auction and pay the 30% to the auction house. Why not just get a million dollars worth of wine from Rudy? So, not if it made sense, but. So anyway, in the wake of Rudy getting arrested in 2012, I started saying that Rudy was counterfeiting in 2002. I was the only woman in the industry. I started in auctions in 2000. They only became legal in New York in 1996. And Christie's and Sotheby's started in 1998. And Morell and company might have started in 98 as well, auctioning wine. It only became legal in 1996. The first auctions in New York were in 98. What about Michael Broadbent? And, you know, that's London. Hugh Blind and so that's London.

16:32 Cuba Line was in Boston, but in New York, they weren't. They were not legal. I didn't know that. Yeah. So I started in 2000. So I was kind of at the very beginning of the industry, and. And I started to find, you know, when you line bottles up and one of them looks different, I have a little bit of OCD and a bit of a photographic memory. So when things are slightly different, they stand out to me. I do wooden puzzles as a hobby. Right. So I'm a puzzle person. I try to find patterns and things. So these things started to stick out. There was really nobody to teach me about it. So I had to go and learn about glass from glass experts and paper from paper experts and started to put all this stuff together kind of forensically and learned about Hardy Rodenstock. And so I started to say that Rudy was counterfeiting in 2002. He wasn't arrested until 2012. And that was a very lonely 10 years.

17:35 And I'm not getting upset. Sorry. It sounded like I got shoved out there. I didn't. And there are a lot of guys that really don't like me because it's big money. So, you know, I stuck to my guns and I, I. Because I knew it was right. You know, it's that little, you know, Sister Catherine on this shoulder and Sister Angela on this shoulder saying, do what's great. So, you know, that's interesting. Stop there for a second. Because in Frances Deaconspiel's book about. About fraud and deceit and murder and all that in the wine business. Yeah. You know she talks about that there wasn't really an awareness.

18:16 Well, there's an awareness, but there was no interest in prosecution back in those days for alcohol at the federal level. There's still not. It was the Koch brothers that sort of pressed the issue with Rudy and whatever else they did to bring it to the forefront. And she also mentions that, you know, the prosecutor, you know, isn't happy with himself when they prosecuted Joe Franzia for faking, you know, white zinfandel. And you're saying today that's still the case, that the feds don't have a keen interest in pursuing this because they're pursuing other stupid things, but whatever. In the state of California. Well, they're pursuing. Yeah, exactly. They're going after bullshit and letting looters out.

19:00 In the state of California, wine is important enough to our GDP that we have an FBI agent. So I've been working with the FBI agent. She's. We have a new one recently out of the San Francisco office, works in Santa Rosa, and we have a home in Sonoma. So I do a lot of training and stuff up there. We've worked on a lot of cases. John Fox put a couple of. John, Josh, Carmen, all. We put a bunch of people in jail. But one of the really frustrating things for us is that there is a pedophile who owns. Well, he does shell companies, but who owns one of the biggest storage and transport companies in the United States of wine. Not allowed to be in the wine industry as a convicted pedophile. And he was operating without a license in California, in St. Louis, and maybe in Chicago, New Jersey.

19:56 In the state of California, selling wine without a license is a misdemeanor. The FBI could not get the California ADC to go after this guy for illegally selling wine because it's a misdemeanor. They don't care why. They care. But illegally selling wine without licenses, because there's lots of those guys around here. Yeah, yeah. Which means, you know, the next time that you're. That you're pissed off that you hit a pothole, thank a counterfeiter because he's not paying the taxes that are due. You know, this guy actually got arrested in St. Louis. They raided his office in St. Louis, arrested him, arrested his wife and arrested his CFO, and he owed millions in back taxes to St.

20:42 Louis. So that's selling. He was selling one, you said transporting one, and he sells one and he imports one, and he was doing all the unlicensed. So it's. What amazes me is that the only thing that the government goes after. And I actually spoke at the national conference of State Liquor Authorities a few years ago. The only thing they care about is shipping regulations because the money is behind all of the money, is the lobbying money. So they don't actually care about the law. It's just the distributors who care about keeping that distribution dollars. It's the WSWA doing that. Yeah. It's so frustrating to me that I. And so what I said to these guys is, look, you know, California, you're. I know you're out there, you know, go after all of these people who are illegally selling wine because they're shipping it. I mean, if you. If you care so much about shipping to miners, go after the people who are totally breaking the law, not the winery that just wants to get wine to their client and state xyz. So, yeah, it's frustrating to me. It's a. It's a. Well, we've been dealing with this forever. My wrapping this company up here. My wife had to shut down 32 different tax returns to different states. And as you already know, some states charge the tax by the gallon, some by the leaders, some by the sip bottle. And it's just ridiculous to try and calculate. And just the effort to say, hey, we're not doing it anymore, has become a nightmare for her to

22:12 figure out. But she's a licensed cpa, and she wants to do it. Right. It's funny you say that, because I have in my. I said I studied for 35 years every Tuesday tasting wine, and I had every conceivable type of vendor in the store, Right? Yeah. Winery reps. I had supplier reps. I had Southern in here. And of course, all the big guys and all the bottom fishers. And. And. And, you know, now that you bring it up, I know of a couple bottom fishers that were not licensed to sell me wine. And one of them actually went off and got a. A tasting room so that he would be licensed. I thought that was rather noble of him to actually, you know, prepare to pay the taxes. Yeah, yeah. But then I. When I. This building I'm in right now is licensed as an O2, as a 9, as a 12, a 17, 18, a 20. And I'm trying to market the building with these licenses, and one guy came to me, goes, hey, I may have a guy. He's been selling Bordeaux for years, you know, black market.

23:11 I'm like, what are you talking about? He goes, yeah, he's got a list of clients he's selling all the classified gross and the Grand Cru Burgundies. And maybe he wants a license. And I'm thinking myself, how annoying. Right, Right. And here's your wife doing 32 tax returns. Right, exactly. So that's what, so that is one of the things that I've figured out about fraud. One of the things about wine fraud, if we're going to tackle this problem, what we need is oversight through the supply chain. Because the wine market is so opaque and there's so much gray market and black market, then that's how fraud gets in. So, you know, over the last 20 years, everybody that's had an idea about, you know, their anti fraud solution has sent it to me.

24:03 So I've gotten to do a lot of good market research and poked holes in it. And I finally figured out that, you know, you can't just put a sticker on a bottle and think that you're safe. What you have to do, the producer has to be able to watch that bottle as it moves through the supply chain, as does the distributor, so that we can eliminate some of this gray market, you know, activity. And I know that I'm, you know, I'm not going to be popular with the gray market and I'm totally fine with that because if I can provide transparency to the producer and to the consumer, those are the two parties that I care about. You know, all the guys making so much money in the middle because they worked as a sommelier for two years and happen to know a couple rich guys who are selling their wine like they shouldn't be making all the money. You know, the producers should be, should be able to be making the money. The licensed wholesalers and distributors. And then the consumer should know what they're getting. I mean, one of the problems with, with the John Fox problem at Premier Crew, that's one of the cases that I worked on with the FBI. John Fox, even back when I was at Maryland Company in 2000, John Fox would put bids in at the auction and he would send out emails as though he already had those bottles in hand.

25:25 The auction hadn't even happened yet. Wow. So I knew that guy was dirty. And then he sent in line when I was at Zacky's and half of it was counterfeit. So I knew that guy was dirty. And then by the time I moved back to California in 2004 and was a part of a group called the Bordeaux Wine Enthusiasts and we get together and have dinners. And so I got to know the people in this group in person really well and a bunch of them had wine they're like, yeah, you know, I've got lots. You know, I bought futures five years ago, and they're not here yet. And I'm like, yeah, you're not getting futures. I mean, the reason that you give somebody money for futures is so that you have assured provenance. Right? Well, John Fox is out there on the secondary market, bottom of the line.

26:08 That's not what you paid for. So if we can provide oversight through the supply chain so that the guy who buys futures actually gets, you know, wine of good provenance, then we've solved part of the problem. I think it's interesting because I look, I sold wine that was ten to twenty dollars. My great collection of Grand Cru Burgundies and classified growths here. But I had clients over the years who asked for those wines and. And I would get them prices and they would go, I can get it cheaper. And I kept telling them, like, but you don't understand. This is from the sort of. Like, for instance, if somebody wanted Lafitte, it would come from the family, that direct connection with. With the organization, with the. I forgot the name of the family now, but.

26:56 Or there's a vendor here who all his wines in cellar are from. Directly from the winery, Right? Yeah, you can go find the stuff cheaper. But, man, you now that. You now that it's. You're exposing how. How prevalent it is. I didn't realize it was as big as it is. So I think about 5. 5. My number is 5. Michael Egan number is 10% of fine wine is counterfeit. A lot of it happens at the lower end. So here is the. Shaveault is the name of my solution. Shea Consulting is the name of my company. Shea Scratch for seller. So the Shay Vault is a Web3 solution that we can implement either at the producer or in the secondary market with one of our authenticators, who we now have all over the world. And what it does is we put the information in a blockchain ledger is created. So now you go online searcher, and you see that there are 10 bottles of this 82 Lafitte listed. Well, the vendors who have shavel bottles, unless they're vendors on my blacklist and they're not allowed to use my system like Acker, there'll be a little URL and a potential buyer can go on and they can click on that URL, they can see the blockchain secured ledger of not only authenticity, but provenance, because it'll show you. If you go on shaveault.com, you can see one of These ledgers, it'll show you that the vault was purchased from

28:30 Chateaune Estates by Fred Dame or by name Confidential. On this date. It was sold at Zacky's auction on this date, this lot purchased by Maureen Downey. Now, Maureen Downey is selling it through K and L, you know, on this date. And then if the person buys the bottle, that the ledger gets transferred to them so that we have this, this ledger. Now on Wine Searcher, if you have 10 bottles and four of them are in the shave alt and six of them are not, the four that are vaulted are going to be worth more because, you know, the authenticity and problems. So at that point, hey, if you want to gamble and you want to bottom fish, go for it. But what I always say is that if you're spending, you know, $3,000 on a $5,000 bottle, you have not saved $2,000. You have probably wasted through.

29:22 Because if you're getting a screaming deal, it's salvage, you know, it's listed. Yeah. So pay for. Pay for profit. And there will be a stratification in the market. The people that want to pay my clients pay for provenance. I tell them because I, I do, I, I manage collections. I, I find offers and I tell them, if you want the cheapest wine, I'm not your girl. Right. Because I'm not going to go for the cheapest. I'm going to go for. For top provenance. So let's, let's talk about. I want to get into the, the blockchain stuff in a second here, but I wanted to. I want to peel back some of the things I saw come across my desk over the years that you can probably poke holes in. For instance, these 3D stickers, what do they call them for holograms, that they were putting on wines.

30:10 I was just trying to figure out. I had. I had one of my vendors actually, who was selling Chilean wines here, was like, oh, I became the rep for this, this thing, and here's the brochure. And I'm like, I still don't get it. That seems just as. As fakeable. Well, number one, it substantiates a counterfeit refill, because you could easily empty that bottle and refill it and that with a needle. So if you've got a right, you know, you've got. Everybody uses Corbin now. Yeah. And there was a situation in Europe where there was this huge international ring of hospitality workers who were putting their coravan and empty fine wine bottles in with the laundry and then taking the laundry out, and somebody would Come around and collect the bottles. And they refilled. They sold thousands of bottles on online auctions of refilled, you know, wine. So I consider that a cosmetic solution. That's also something. And I've spoken with some producers who use it. You know, somebody could recreate that bottle tag.

31:18 And by the way, 5% of those tags get scanned. 5, 5, 5%. And if you are close enough to go like this, it's too late. You already own that bottle. You already own the bottle. Right. So now that's a problem, not an investment. So anything where you have to be in proximity to the bottle in my world is not a solution. Anything that is cosmetic is not a solution. Somebody in China, if they can recreate an entire bottle, they can 3D print those bubble tags and make a million Lafont montraches. And okay, 5% of people will ever scan those things. Maybe they'll get caught, but they won't get caught until they sell a couple thousand bottles. Right.

32:05 So I don't find that to be a robust solution. It does not address the supply chain, it doesn't give the buyer any protection prior to purchase, and it doesn't help the producer know who's drinking their wine. No. I couldn't understand it because I said, I don't know, this seems easily thing, but I love this. I did not love it, probably should hate it, but the idea that you could corvette a thing, pour it out and refill it with whatever. And I went to a tasting that, a very high end tasting. It was all grunge, it was vertical. You know, we were supposed to guess what it was and where it was and all those things. And it was clear to me. This is interesting. So I want to ask you this question. This was, I think the earliest vintage was like in 89 or 87 and up to like 2015 and some random vintages in between seven different wines. The question amongst this group of aficionados who had these incredible sellers was, is this a vertical? And then what do you think it is? And my experience taught me this was clearly a vertical. And this is kind of interesting because if any of these wines were faked, there would have been some kind of anomaly in the sequence of wines. And it was clear to me when I was tasting them that these were the same winemaker from the same plots of land in the same general vicinity, and that these, the, the terroir differences were the only thing I was sensing. Yeah. So the winemaking

33:35 expertise was obvious. But I'm wondering if somebody buys a fake Lafitte have you ever heard of somebody saying, man, I opened this wine, it just didn't taste right? Of course. So there, there's. Go back and read John Capon's horrific tasting notes. I mean, those are littered with counterfeit wines. And if there's one of two things that happen, one of three things that happen. Number one, the counterfeiter intentionally puts tainted wagon. So cork one. Oh, use a little bit of cork and then. Oh, bummer. It's corked, right? Bad won't bottle. Yeah, bummer. A lot of times people chalk it up to a bad bottle. So that's why when I started in auctions, this really kind of, it was exposed, because before auctions were big in New York, people would have a case of Petrus and they'd go down and they'd have a bottle and they would be like, oh, my God, that's, you know, that's amazing. The angels are singing. And then six months later, they'd have another one and they'd be like, God, that's just not so good. Must be a bad bottle, right?

34:41 And then they'd open another one, and it would be great. Well, what we noticed, especially bottles coming from Royal Wine Company was if you took 12 out, four of them were counterset, but nobody, collectors weren't taking them out and inspecting them. And, you know, maybe they'd take them out and rack them, but a lot of people just left them in the case. So what, what raw line merchants would do and what other people did. And there's a, there's a particular guy in LA that did quite a lot of this back in the day, I think. I, I Anyway, you know, they would take a full case, they would take, you know, four cases and turn it into six cases or eight cases. Well, the margins suck in wine generally. So, hey, this is a great way to pad your margins.

35:27 Right, Right. So it wasn't until we started putting these bottles up next to each other, it would be like, okay, these three or these four don't fit. Now, when it comes to the taste with the old and rare wine, you know, I mean, one of the ridiculous things about the John Capon tasting notes was that he'd be like, yeah, you know, we tasted another mag of 1950 lafleur from Big Boys Cellar. Tasted fourth time this month, consecutive notes. They didn't make that many mags. And by the way, I'm selling a bunch in my auction next week, so it'll be great. You know, it was totally a pitch to sell these counterfeit wines, but a Lot of times the wines would be off. Now, what we did the other night, I have. There's a counterfeiter from Russia named Alexander Ayugov, or he called himself Alex Anakin. And he got caught and he was counterfeiting Ramany Conti. And the packaging is brilliant. I mean, it is so good, really. But he was caught. I have a bunch of his counterfeit bottles. And I've hired Ronan Saber, who's a master sommelier. He's the CEO of the European Corps Master Sommeliers as the CEO for Shea Vault. And he. And we were up in Napa and he was like, come on, let's open this, let's open this. And I had some winery friends and winemakers over and I was like, all right, fine.

36:48 I'm like, you guys, you can open it, but it sucks. And so we opened up an 04 Roman a Conti. And everybody was like, this is disgusting. So this guy was making them organized crime, making them in Russia, selling them in Switzerland, you know, as four or six at a time out of. Out of his car, or, you know, selling them to different people who would sell them to different people. But they're so expensive. You don't need to have a strong supply chain. You know, you can. Yeah. And still make tons of money. So I think one of the things that Rudy did which made him different was that he actually tried to make decent blends. Yeah. But at the same time, you know, let's go back to the. To the John Kate Monticey notes, you know, 1950 lafleur out of mag, you know, tasted consecutively four times. They made six mags the entire year. And he drank more than those. And he wrote tasting nuts on more than those, I believe. And. Or he definitely sold more than those.

37:46 But how many people have really had that wine enough times to say, oh, yeah, that's correct. And you don't open mags very often. So that could seller Forever a 1945 Mouton that has lived this life. You take a bunch of 1945 Mouton that have actually lived in the Same box since 1947 when they were put in a box. They're all going to be so different. They're like people now that they're 60 years old. You know, 60 year old triplets are not as similar as 60 year old as. As. You know, those triplets are when they're four days old, of course. Right, right. That's interesting. I don't think anybody has the palette. I really, truly don't think anybody has the palate to truly be able to taste some of these old and rare wines. Outside of a family who produced them, you know, who has grown up. You know, I think that Aubert Oflain and you know those people at Romanee Conti who've been around that wine for so long, they would know what a very old Romanee Conti tasted like. But most other people don't have that experience.

38:54 So that opens up a door for counters. And that is why most counterfeiters today are not making olden rail wine. Because they don't want to have to get period glass. They don't want to have to get. I mean the forensic stuff that we look at is what is the chemical composition of the paper? What is the chemical composition of the glue? How was the ink applied? You know, is the ink the correct chemical composition for age? What is the capsule? Has the capsule and the bottle or. Excuse me, have the capsule and the label or the labels aged together? Right. Because a lot of times they'll age the labels and then put them on well, they'll be disparate between the pieces. So it's like, well it's like seeing a 65 year old woman, a 25 year old face, you know that there's been some work done. Right.

39:44 There's a few of those around. Yeah, that's fascinating because you know, lead capsules from the day certainly cork was better, better off years and years ago than it is today. Well, and you got to get the right glass so it's easier to mass produce these, the newer bottles. So what kind of things would I prisoner? I mean, that kind of thing. Well, so a lot of the big counterfeits like in Asia are very, they're entry level. But a woman was just arrested in the UK for selling counterfeit yellowtail. The UK is a wash and counterfeit yellowtail? Yeah. Why it's 349 or some. Either you make a whole bunch of $1 bills or you make a couple hundred dollar bills, I suppose.

40:32 But look, you and I know that a glass these days is $16 a case just for the glass, the carton. Then you gotta fake the labels and all that's, you know, you could. And the juice has got to be. It's gotta be something at 50 cents a liter or something. You gotta put something. Yeah, but I mean the people who are drinking this are drinking it at pubs and they, they aren't really paying attention. Although I think it is amazing. I think in some cases those are. If you are a regular consumer of an entry level Wine. I think that you would probably be able to notice the difference more than somebody drinking a 1945 Mouton for the first time, because you have a sense of. I would agree with that. I would agree with that. But if you're. If you're. Let's just take Yellowtail for a second. Even Prisoner, which, you know, I have a hard time drinking it.

41:20 You know, if you throw a bunch of stuff in a bottle, most people aren't going to know. They just say, hey, I'm drinking Prisoner. This is great. But let's just take Yellowtail. I mean, you know, the Wink wines and the Naked. Naked wines are 60 cents a liter. That's, you know, $3.60 or $4.50 a case. You're not going to buy much cheaper than that to get it into the bottle to fake Yellowtail. And I think most people are not going to do Yellowtail Chardonnay and something from the middle of Spain. I don't. I don't 100%. But these people aren't focused on what they're drinking. They're. They're focused on being at a pub, you know, or. Or whatever it is that they're doing. So I think at the end, I think that the people who did this, it was a combination of organized crime from China and Eastern Europe, and they made the bottles and brought them to the UK and just sold the crap out of them.

42:12 You know, I was in London, I judge at the International Wine Challenge, and I went into one of those little mini. You know, there are a couple of large grocery chains, and I went into one of their little stores by a tube stop, and I bought a bottle of Hendrix and I took it back and I put it in the freezer and it froze. What? Yeah. Bottle of Hendrix in the uk. Well, it's Scottish, but. Wow. Yeah, it's really crazy. I know. A fake bottle of Hendrix. Yeah, that's why I drink Gordon's. So my dad. So, I mean, it happens and it's, you know, and I think that, you know, you'd get. So this woman apparently was buying. You know, somebody showed up with a. A van full of Yellowtail and said, hey, I've got this extra. Do you want to buy it? You know, super price for you.

43:05 And she bought it. But these people are, you know, they go around to these little stores and they say, oh, so and so store committed to 50 cases and they only bought 20. I've got 30 extra cases. Do you want them? A good story? Yeah, that's a great story. Yeah. Heard it all the time. So how does it. Well, we're going to talk about this. This is fascinating stuff. But, you know, you get the three tier system America. Right. You have to go from the supplier, whether it's the importer or the winery, to if you use a distributor like Youngs OR R&DC or Southern or the big guys are. They are, is there fraud? Not from them, but because they're. I mean, even 7 has like an internal ABC rep who's there all the time.

43:50 But is there fraud to them? A hundred percent. Wow. So I've gotten bottles of, for example, Vogueway that allegedly came directly from Drake Sashby to a reputable vendor and, and then to my client. And so what happens? Because wine has gotten so expensive, things happen in transport. There is a very, very fine Bordeaux wine and they realized that somebody on their own bottling line was swapping out authentic bottles for counterfeits and putting counterfeits in the OWCs. Wow. So, yeah. So people across the value chain realize this, you know, and so here's. I think this is fascinating. So there was a ship carrying Domain de la Rome Conti and it stopped in Honfleur in France. And this wine was stolen from the port.

44:58 The police got it back. It went to Canada. The importer in Canada immediately turned around and sold his allocation to brokers in New York City who sold the wine to an executive at Goldman Sachs who put it in his house at the Hamptons. And then that guy's cellar manager, when he was away, stole the wine. And that cellar manager ended up jumping off the Essex House the day that he was supposed to get arraigned or sentenced. Oh, wait, yeah, that was, it was in the news. But so that line got stolen and transport. And then it went to a sole importer in Canada who turned around and gray marketed it to the United States. So that's supposed to be a good supply chain. But DRC can't control the bottles once they leave. Once they leave drc. This is why we have to control the supply chain to control fraud. Because a lot of times what happens is the, you know, truck drivers are beginning to pay attention to how much the ones are worth. You know, you just take a couple cases off the top of a.

46:02 Take a couple cases off the top of the pallet and you've got a down payment for a house. Sure. You know that whole truck of papi that was stolen how many years ago? Right. There's that big. So it does. It does. And, and, and I'll tell you with this shavel Solution. I have talked to some of these big wholesalers and distributors and they're very interested in it because they want that oversight, because they want to. You know, the interesting thing about this is that at the bottle level you can't swap it out. So one of the other things that happens a lot is people put their wine in storage, right? And you've got a bottle of 82 Petrus in storage. Guy who owns the storage facility needs some money, he goes and sells your 82 Petrus.

46:46 And when somebody else comes in with an 82 Petrus, he puts your, he replaces your bottle. And sometimes like in Francis Dinkel spells book, you know, the Ponzi scheme ends up running out. Yeah, right. But this solution protects the individual bottle because you can't swap my bottle. That's my bottle of Lafitte. It's not a bottle of Lafitte anymore, it's my bottle. And, and the producer can, can see where it is. You know, in the end, consumer can see where it's been and that the wholesaler can track where it goes. And you know, there's going to be some issues, there's going to be some gray market, but the gray market is really where a lot of that fraud gets into the three tier system. That was the other thing I told the National Conference of State Liquor Authorities. This three tier system, in my opinion, is a joke.

47:39 It is a joke. It's a total joke. And it doesn't work because in the state of California you can be an importer and a vendor. So there you go. Three tier system broken, right? So. Well, as I talk about, Prohibition was never repealed. It was just broken up into 50 pieces and everybody could control and it's a pain in the ass. I will say something interesting. We're going to be on an hour really soon here and this is going to have to be a two parter. But I was just awarded and it hasn't hit the press yet because it hasn't started yet, but it's contracted. The only direct to consumer vendor allowed to ship into Utah, they put out an rfp. A few, Long story short, they put on RFP in January and. But I had been talking to him for years and they've now authorized it and now we're working on the process. And it's incredible opportunity. I think it's incredible opportunity for, for. So I broke my, my teeth in Utah. I half grew up in Park City. We had a home in Deer Valley from the time that it opened. Well, this is. So my dad bought my parents Bought in Deer Valley in 1983. Deer Valley opened in 1982. So I spent a lot of my youth there. When I graduated from college, I was living in Deer Valley. I was working at, I worked at the Stein Erickson Lodge. It was my first job out of college. Wow. And then I wrote wine lists in Park City for a friend who had a couple different restaurants. And so I know Utah very

49:11 well. Yeah. Yeah. Incredible facility. I toured their 100,000 square foot, completely robotic distribution center, which is like amazing. Yeah. And watch, you know, Barton's Vodka go by me as well as Opus go by me. Yeah. That's not really the reason. Congratulations there. Yeah, it's going to be, it's going to be a fun thing. The reason is there is no three tier. There is no nothing. You don't have to register the brands, you don't have to go through. You don't have to worry about Federal Express returning the package. You don't have to worry about signatures required. None of that occurs in, in Utah because it goes to the store and the consumer picks it up and they can't return it. There's no alcohol return. So that's an amazing thing. Even though they do take 88%. And I can privately go over the numbers with you, but yeah, they, they get 80% of what they do. You know, when they do their, when they do their. They get their papi allocation like I used to get mine.

50:02 And. But you can, because it's only 88%. If you win the lottery and you win the right to buy Pappy, it's like, you know, like a hundred bucks. Not even a hundred dollars. It's 88% on $69. And my, my boyfriend and I, we've been together for over 10 years, but he, I, I met, I, I was dating him actually in 96 when I moved to New York. He was a bartender in park city for, for 20 plus years. And one of the, we were telling a friend the other day, we were telling Ronan because we were at Napa together, that one of the great things about Utah is that at the end of the, when it, when a new vintage comes in, they don't mark things up. No. So if you happen to be in the right place at the right time, you get screaming deals on first growths and burgundies that people don't know about.

50:50 So it can be kind of a trick. Maybe we shouldn't be telling people that. So very interesting. But I want to ask you a question about a recent theft. Then we'll have to wrap it up, and then we're going to come back, we're going to get heavy into the blockchain concept when we do this again. And we can do it next week or the week after, whenever you want. Perfect. There was a huge theft. In fact, I was in Hermosa beach, where I hang out all the time. I was talking to the liquor store owner there, and she's got an interesting collection of wines. And she said, did you hear about the theft in Venice? And it was just written up again, I guess. This morning, my daughter sent me an article. There's a video of the guy looking in the camera. So I think the wholesale value of the retail value was 100 grand or $200,000. 700,000. Okay. So let's say so for one, that person doesn't know what he's stolen because it could be fraudulent. So let me tell you about it. Go ahead. So. Because the next morning, I got a phone call from. These are the types of cases that I help. That I help law enforcement with. And there's also a private investigator working on this. So I know a little bit about this case.

51:52 So do you remember the French Laundry case? Yes. That was one of 13 thefts in the Bay Area. So there is a ring of people who are doing this, and they did not get caught. These guys went through the ceiling and they dropped down. And they have them on camera for three hours FaceTiming with somebody showing them all the bottles. Come on. Nope. Wow. So three hours they were in there, and somebody was directing them bottle by bottle, what to steal. Now, you know, again, they said, you know, I said, first thing the guys got, you know, get serial numbers, get in. Because a lot of it was burgundy. I'm like, okay, well, Wilson Daniels will know what serial numbers you have. So get that information. They're like, we're going to send a list to the auction houses. And I'm like, nope, the wine's already been sold. The wine was sold probably before the theft occurred.

52:49 And it's through these brokers who have their rich clients, and they send a list and they say, hey, this is what we've got. And then, you know, the wine gets sold. It never gets. It's never online. No. Of course, it's never publicized. And this, again, my blockchain solution will stop that. It won't stop at all, but it will be able to recover those bottles. So it's interesting that. But let's just say that there's. These guys are stealing because the three tier system's Broken. And I've had many, many people over the years bring me things that I unfortunately couldn't use at the time that I would love to know what the provenance was.

53:29 Right. You know, these guys could have stolen some fake DRC as it was as well though. Right? Sure. But the guy, this was a wine shop. Only a wine shop. Yeah. Distilled spirits. I don't know if he sold spirits, but, but I know that he did have a lot of direct allocations. I mean he had the store for like 20 years. So if he had counterfeits that he then he bought them on the gray market and, and he was duped. But this is exactly how the three tier system is broken because those guys can so easily flip those ones. There is no control. It's absolutely ridiculous. And in this country, all the money goes to the lobbyists who care about not shipping to different states. They don't care about the actual crime. And they need to open up their eyes because they're losing massive amounts of money. The governments are losing huge amounts of money in unpaid taxes. Like we both live in California.

54:31 Stop raising my taxes. Go after the crooks. Right. You know, but yeah, theft. That pipe is amazing. I mean they burrowed through the ceiling. You know, I don't understand it because my father, before he was in the wine business in the 70s, he had a chain of pharmacies and that was the first thing you protected because they were stealing narcotics all the time. And he learned early on in 1959 or something that you got to protect the ceiling because that happened all the time. Yeah, well, that amazing. And that's, that's how they went into a lot of the restaurants in the, in the, you know, break ins that went here too. The other thing that they had in common, all of these break ins happen on the night before a holiday closure. So that there is going to be 24 hours before somebody's in the, in the space. Oh, that's interesting thought because.

55:18 Yeah, the only successful theft in Vegas, which was many years ago was planned the day after the super bowl because of all the money that would have been in the vault at the sports, the sports, sports book. But I had a conversation with an executive of R&DC and it fascinates me to have these conversations because when you're talking about breaking down prohibition and you know, we in the industry, you know, that's at odds with the commerce clause and we've been trying to get the Supreme Court to look at and they won't and yeah, you're. It's mainly because the wswa, the Wholesalers Spirits association of America, is very powerful like the NRA is, and they're not going to let you break down.

56:08 And let's face it, you know, the mob was in wine and liquor for forever. I mean, maybe they still are in some cases, but, you know, for the most part, it's just leftover mob mob mentality that keeps us at bay this way just because it's alcohol. But it was a very interesting. It's in the interesting thing to me, when I had this conversation, I wanted to have the listeners of the show hear from somebody inside, one of the people. It's a completely different outlook on what goes on in the marketplace. It is strictly driven by how much can I sell and when can I sell it. There's no romance of the industry.

56:48 There's no romance of the alcohol. There's no romance of wine. There's none of that exists. It's out of the background. The question is, how much shelf space can I get and what can I sell it for and what are they drinking? I could care less if they're drinking White Claw, which is canned crap that the millennials think is great, and not worry about the fine wine division because you know what? People are buying it right now. So it's not that important. It's a fascinating part of that industry that is. Yeah. So that's a commodity. Yeah. And that's unfortunate. And that's what breaks my heart. And that's why I go back to the producer and I want to find the solution that enables the producer to protect their brand, protect their legacy, protect the product, give them oversight, protect the end user and connect the end user and the producer directly.

57:41 So I'm excited to tell you about that because it's really. When we do part two, and I'll make sure I stay focused on that, we can do it as soon as you'd like. It goes. I mean, it's hard because it's such a fun topic. We're just going to get into that because I want to hear about it because I've always wondered about blockchain technology when it came to wine, you know, where it has its. Where it fits. And it sounds like you've got a keen understanding of how that's going to help the consumer. And. And the people that listen to the show are. Are wine consumers. And there's. I get trade people on the show that will listen to it and I have consumers listen to it. And I think this is a fascinating subject. It's Been such a pleasure to meet you. Thank you. You, too. Los Altos, which is sort of the southern part of the peninsula, right? Yeah. I'm in Los Altos Hills. So.

58:28 I mean, one of the things that's interesting is that my father. This is the original Silicon Valley. This is the original Silicon Valley. My father's one of the original designers of the integrated circuit. Wow. So it's kind of fun that, you know that he was an inventor of an entrepreneur, and I'm kind of. And I'm sitting in his office right now, so. Where'd you fly into San Jose to get there? Well, I live in Sausalito. Oh, you do? Okay. And. And we have a home in Sonoma, so. But my mom still lives here, so I kind of fly. You know, I drive back and forth. Well, I'll keep you posted the next time we're coming up. We usually fly to Oakland, but I'd be willing to fly into wherever to. To sit with you live with the microphones. I have a little portable studio I bring along. Yeah. No, is the most fun. We'll do it up there. Okay. I'll open up something yummy and real.

59:16 And now you got my interest in these. Like, one of these. Well, I've probably tasted many fake wine, not knowing that they were bottled improperly. But I tried it. I tried to do business with, you know, reputable. Like we were in French Lonnie once for dinner, and I had a customer looking specifically for Burgundy for a seller, and kind of wonder how many fake ones are his seller? Because he. He was one of those guys looking for a deal somewhere. Oh, yeah. And. And they brought. I told. I told the guy my budget. I told him I wanted a Grand Cru or Premier Crew if I could do it. And I want to cote the nui. And he. He brought this wine, and I rolled it over, and it was an importer in San Francisco. And I've trusted them ever since. They've. They've. You know, here's the difference. I'll just wrap it up with this. I did a real estate transaction here, and it culminated and started. It started and culminated on a glass of Grand Cru Burgundy.

1:00:13 I forgot the region. And it told me when that happened that how important a good glass of wine is. How good? Honest. And I think it's a great term now, I've been using a lot. Honest glass of wine means two things now. Right. It not only means that the winemaker was true to trying to put together the terroir of that wine based on what he or she was received, but now we're talking about your honesty, like. Yeah. Yeah. I mean, it's. It's. Yeah. It's a crazy world. Too complicated. Thanks again, Maureen, for the time. Thank you. And. And I look forward to part two. I'll. I'll bring some counterfeit bottles for you to look at. That'd be so fun. Yeah, good. We'll do it again. Cheers. Thanks.