Fraud is rampant in the international wine industry, which has turned to tech such as mass spectrometry and blockchain platforms to ensure authenticity.
By Russ Banham and Luc Alper-Leroux
For as long as there has been wine, there has been wine fraud. More than two thousand years ago, the great Roman philosopher Pliny the Elder regularly complained about the authenticity of the high-priced Falernian wine poured at his table, since the lower classes seemed to have an unlimited supply at bargain basement prices.
Some things never change. Fraud is rampant in the international wine industry, with as much as a fifth of wine sold worldwide considered counterfeit, according to Wine Spectator magazine editor Robert Parker. His conclusion was based primarily on anecdotal evidence, since such few cases of fraud ever go to court. Other wine and fraud experts nonetheless continue to affirm the one-fifth bogus percentage.
There are two types of fraud involving wine: collector fraud, designed to entrap wealthy wine collectors into buying counterfeit vintages, and consumption fraud, which ensnares more ordinary oenophiles and occasional sippers.
To bring these deceptions to light, the wine and spirits industry has pinned its hopes on the fields of chemistry and technology. Mass spectrometry and liquid chromatography, blockchain platforms, and wireless near-field communication (NFC) data exchange links are combining to do what Pliny the Elder could not—ensure the wine he drank was authentic.
Grapes of Wrath
The price of a bottle of wine is dependent on many factors, but chief among them is “provenance”—where the grapes came from. The unique soil composition, sunshine, and rainfall levels in different wine-producing regions coalesce to give wine its unique “terroir”—characteristics like sweetness, acidity, tannins, and flavor.
While a trained sommelier can discern subtleties of different red, white, and rosé wines indicative of provenance, the average consumer may not have such skills. We trust that the $35 we just forked over for a Pinot Noir from Burgundy, France, is what we see on the label. If the estimations of wine fraud are correct, there’s a one-in-five chance it’s Pinot Noir in name only.
Unfortunately, proving consumption fraud is difficult, as it would require every bottle of wine to be opened and tasted by a sommelier. It’s also an easy crime to perpetrate: Fraudsters generally purchase a shipment of cheap wine, remove the bottle labels, and replace them with expensive labels from empty, high-priced bottles. The shipment is then sold to an unsuspecting distributor, which prices the wine for retail stores. Unsuspecting consumers buy the wine, leaving many none the wiser.
The Magic Cellar
While collector fraud is also difficult to prove, the financial stakes are much higher. One of the most spectacular scams came to light in 2012, when well-known, rare wine connoisseur and dealer Rudy Kurniawan was arrested and later convicted of relabeling inexpensive, older Burgundy wines as prestigious Bordeaux and other vintages, conning his victims out of a reported $30 million.
For years, Kurniawan told private buyers, like billionaire financier Bill Koch, that he’d come upon a stockpile of extremely rare and valuable old wines at what he called a “magic cellar.” The real magic was performed at the scammer’s Los Angeles home, where he put new wine in old bottles. The FBI described the house as a counterfeiting “factory.” Dozens of empty bottles, bags of corks, sealing wax, stamps of famous vintages, and a digital printer used to fabricate fake labels were eventually introduced as evidence in court.
To convict Kurniawan, Assistant U.S. Attorney Jason Hernandez relied upon Title 18 US code 1341. “We prosecuted the case under mail fraud statutes, which are very broad,” Hernandez said in an interview. “Every state has its own version, which criminalizes false representations and omissions.”
Although the prosecution had no smoking gun as conclusive evidence, they did have “several pieces of evidence that collectively painted a picture,” he said, referring to Kurniawan’s home winemaking factory. Since Kurniawan used the counterfeit wines as collateral to secure a $3 million loan, he also was charged and convicted of wire fraud.
Koch, who sued Kurniawan for selling him fake bottles at auction, settled out of court in 2014 for $3 million in damages. Kurniawan, whose authentic wines were sold for $1.5 million, remains in jail today.
The days of such easy money schemes may soon draw to a close. “Due to the high price of many wines, there’s a lot of money to be made by faking the contents of a bottle, but we’re getting closer and closer to providing a scientific way to validate wine provenance,” says Eric Wilkes, Group Manager at the Australian Wine Research Institute (AWRI), a research organization representing the country’s grape and wine industry.
A PhD chemist, Wilkes has long been at the forefront of using high performance liquid chromatography, inductively coupled plasma mass spectrometry, and infrared spectroscopy to analyze the organic acids and trace elements in wine to prove with sufficient certainty where the wine came from—or didn’t.
In combination, the three analytical tools peer deeply into wine at the molecular level, analyzing the chemical properties of different compounds, producing what Wilkes calls a “fingerprint.” He and other chemists in AWRI’s laboratory have discovered more than 40 trace metals like zinc and chromium and up to 15 common organic acids like L-Ascorbic acid in unique proportions in different wines. This information can be compared to soil composition data to reveal a wine’s origins.
“By looking at the underlying geology of a region or a country, we can say with a high degree of confidence that this particular wine came from that particular region,” Wilkes says. “Using isotopic ratios, which is similar to carbon dating, we can also identify the approximate age of wine, although not down to the actual year of a vintage.”
Although these methods do not provide 100 percent accuracy, Wilkes said they’re quite reliable. “Most scientific studies seek at least 95 percent accuracy to be considered worthwhile findings,” he explains. “We like to think we’re a bit better.”
AWRI has not provided its research for wide-scale publication and dissemination, selling the findings as certified analyses to wine producers. “We’re still deciding what our next steps will be, but there is little doubt in my mind that we have amassed a range of target compounds in specific amounts that would indicate either the provenance stated on the label or strongly suggest it is otherwise,” Wilkes says.
Blocking and Tackling
Blockchain technology is also being leveraged to combat fraudsters. In recent years, several blockchain platforms like Everledger, TATTOO Wine, and Chai Vault (which is still in development) have been built to track and certify wine from provenance and production through the supply chain and up to the point of sale.
By capturing a series of certified records documenting the step-by-step processes involved in making wine—planting, harvesting, crushing, fermentation, clarification, aging, and bottling—a verifiable “chain of custody” demonstrating the unique digital identity of a bottle of wine is achievable, says Eric Robertson, who heads up the wine and spirits blockchain platform at Everledger.
“In each step of the process, we rely on an accreditation agency that has a record on file that we can introduce into the blockchain, such as who grew the grapes, who produced the wine, and who bottled it for distribution,” he continues. “If a wine producer claims it only uses grapes grown without pesticides and hormones, we reach out to an accrediting agency with that certified record on file to make it another block of immutable data in the chain.”
As more records are added to the blockchain, a narrative of a particular bottle of wine emerges, telling its story from the day the grapes vines were planted through the dates of their harvesting, crushing, fermentation, bottling, and so on. AWRI’s data, in fact, would be an invaluable addition. “Any laboratory that certifies the chemical composition of wine would become another immutable block of information,” Roberston says.
The last technology bringing fraudsters to heel is the integration of NFC chips into bottles to inform consumers of authentic wine provenance and other statements of quality. An NFC chip is a part of a wireless link to another chip, such as one inside a smartphone. Consumers simply activate the NFC chip on a bottle of wine with their phones and receive basic information. Everledger has just begun to enable a link between a smartphone, NFC chips, and the data that resides inside its blockchain platform, offering a more comprehensive narrative.
Perhaps within the next five years, a consumer will heartily drink from a $35 bottle of Pinot Noir, knowing—with absolute certainty—that it was grown in soil kissed by a monk, exactly as it promised.
Russ Banham is a Pulitzer-nominated financial journalist and best-selling author.
Luc Alper-Leroux is a New York-based culture writer and journalist.