Over the past three years, I have been involved (I must stress in an advisory capacity) in a huge wine fraud, with estimated losses sitting around twenty million pounds. I sat on the Liquidation Committee and was there to advise both the investors and joint liquidators. This case was consuming and something I found, at times, incredibly draining as it was impossible to disconnect from the emotion, immense frustration and the enormity of individual losses.

The company in question was ruthless, their tactics crude but clearly successful as countless victims handed over substantial sums on a regular basis. The value of individual portfolios varied from small, £5,000 to £10,000 to the largest of £1 million. The age, mental health and vulnerability of some of the investors played into the fraudster hands as many of the more defenceless victims invested the majority of their net worth.

Conversely, I was joined by four investors who sat with me on the Liquidation Committee. Their backgrounds varied considerably however, they were all bright, articulate and incredibly intelligent. One a forensic accountant, another the chairman of a very large construction company and the remaining two were both highly-skilled academics / professionals.

Of course, this raises the question of how can these bright individuals be so easily lead?

Mark, a retired murder detective was lucky to some degree as he moved his wines before the liquidation commenced however, not only was Mark deceived by the first company, but was also swindled again as many of the original employees re-morphed under a new company name and contacted each and every investor throughout the course of the liquidation. We, the Committee appealed, were vehement that this company should be stopped immediately however, and I am sad to say, neither the Courts nor the Joint Liquidators cared much. They are very much active today however, they are firmly under the microscope of the wine press. Mark has kindly offered to provide a record of his experiences however, we have redacted the company names and names of their employees. All content is provided in Mark’s own words.

“I first became aware of Wine Company X in March 2007. They cold called me and sent a brochure outlining how some wines were gaining cult status and were a good alternative investment opportunity.

 In the early days the value of the wine did appear to increase. They said that the best disposal methods were to private individuals or clubs – wine connoisseurs, who would pay more money for vertical vintages of particular wines. This I believe now was simply a sales pitch to get you to buy more. The purchase included 5 years brokerage and storage. I concluded that I should therefore keep my wines for at least 5 years to optimise the growth.

 My main concern with Company X was that they sold you a collection of wines, which included a significant quantity of cheaper wines. As I became aware of the cost of the storage, I realised that it was not good to retain the cheaper wines.

I became concerned during the autumn of 2014 that all was not well at Company X. On 1st November 2014 I was sent a Storage and Management Invoice. This was for the cost of storage and management fees (the management fees being something new).

I phoned up two of my contacts (A and B), who both agreed that I should open an account in my own name at LCB. Contact A stated that this would be the safest option for me. Contact B pointed out that they would be less obligated to sell any wines on my behalf. Contact A sent me all the forms and my wines were transferred to my own account before the end of November 2014.  He also informed me that he was moving on from Company X. My wines were transferred into my own account at London City Bond (LCB). I subsequently learned that a few days later, Company X went into liquidation.

Contact A made contact with me in January 2015 and made me aware that he had moved to a new company, Company Y. He was very critical of Company X and pointed out that many clients, who had retained their stock in Company X’s name would now have to deal with the liquidator. I felt obliged to him and thought that I could trust him. He explained to me that Company Y was a completely separate company and that they would offer for sale wines with better investment potential. He explained that they would be chosen for their potential growth and would not be offered as collections with cheaper wines as per Company X’s methods.

Contact A also pointed out that I was in a strong position to sell off my wines before the market became flooded with the liquidation stock. He said that if I came on board with Company Y, he would sell off my wines for me. He also explained that there would be no fee for selling these wines where I was making a loss. It all seemed pretty positive to me. I realised that I would make some losses, but expected to see growth with the new wine purchased through Company Y, particularly in view of what Contact A told me.

In addition to the wine purchased from Company X, I was sold a further £48,672.13 of wine from Company Y between January 2015 and February 2017.  I assumed that the wines that they were offering me were at a fair market price. If I had realised that they were not at a fair market price, I would not have purchased them.

Initially it was Contact A who called me to sell wines. He always pointed out the high potential for these wines to make me a profit and that they would be good for my portfolio. Contact C then took over calling me and applied pressure for me to always to agree to purchase wines. He always assumed that you had funds to make investments whenever they called.  I started to point out that they had not sold any of my wines purchased from Company X and there were always excuses why they had not done so and promises made that they would do so particularly if I purchased more wine.

They did sell 180 bottles of wine in November 2015. They also sold 126 bottles of another in various sized bottles in January 2017. The £1,445 that I received went as part payment for the purchase of 6 bottles of 2009 Chateau Haut Brion Graves Bordeaux in January 2017. Some of the wine that they offered me for sale I had not heard of and I questioned Contact C about it. I recall a conversation about the Oregon collection. He told me that they had some new computer software which helped them to analyse wines for potential high growth and that it had picked out this wine. He assured me that it would do well in my portfolio.

When he called me about the Chateau d’Yquem, he told me that it had been scored highly by Robert Parker and that Robert Parker was involved in a Michelin chain of restaurants and would be promoting the sale of this desert wine, which would push the price up. I cannot remember exactly what he said about this, but that is my recollection.

I did not always purchase wine when they called, I had to stand my ground firmly because Contact C would not accept me declining lightly. In spring 2017 my circumstances changed when I decided to retire completely.

I did not have spare funds and when I pointed this out to him, I realised that he was not interested. In fact he sent me two invoices when I had firmly refused to purchase the wine He later told me that he had cancelled them.

Contact C had made several promises to sell my wines purchased from Company X, but little came of it apart from excuses. In the summer of 2017, he did sell 12 bottles for £624, but they added a Sell-Through Fee of £31.20 (5%). LCB also charged me £48 carriage costs. I contacted him about this carriage cost and he told me that there was a maximum charge, which meant that it was better to sell the wines in one go. He subsequently sent me some guide prices for the residue of my Company X stock. He also stated that it would be sold quicker if I transferred it all to Company Y. That way they would have to pay the storage fees even if it was not sold before the end of December.

 Towards the end of September 2017, he called me to offer for sale 6 bottles of 2006 Torbreck the Laird Shiraz at a sale price of £3,238.36.  I told him that I did not have the funds. He was insistent and would not accept my refusal. He also told me that I had previously purchased 6 wines of the same vintage and stated that nobody buys 6 wines and that I would not be able to sell them if I did not purchase the additional 6. He also stated that he would enquire if he could get a wooden case to put the 12 in. He promised to ring me to let me know if this was possible, but did not.  He said that if I worked with him on this then he would promise to sell some of my wines before Christmas.

 The invoice was dated 27/9/17 and indicated that it was to be paid for on 10/10/17. I did not pay it and Contact C phoned me to ask why I had not paid it. I told him that I did not have the funds and pointed out I had said that when he first called me. He said that his Director would not be happy with him because he had marked it up on the board as a sale. He said that I needed to work my magic and call him back the next day. I did call him back the next day and told him that I did not have the funds. He was clearly not happy and has called me several times since, but I have not picked up the phone”. 

I received Mark’s initial communication during October 2017 – I believe Mark was directed to me by LCB. Of course, I was happy to represent Mark and set to the task of getting his monies back. Initially, there was protracted communication between Mark and ‘Contact A’ (I advised Mark how best to approach the company as I had an intimate knowledge of their fraudulent dealings). The following prices highlight the gross overpayment:   

The end result being that we helped Mark gain the return of £57,945.29 which we did without a charge save a gentlemen’s agreement for a decent pint of ale!  Interestingly, a payment plan had to be put in place as they were unable to produce the funds in one transfer. This month saw the last tranche reach Mark’s bank account safely however, this company asserts they have sold over 4,000+ cases. Surely, a company of this success would have some money in the bank account? Their current company accounts are overdue by nearly two months and their previous accounts showed zero stock and less than £5,000 in the bank. Of course, the time between their last filing and the current (overdue) one may prove interesting reading. We shall see.

Clearly, and in Mark’s case, it is easy to be seduced by fraudsters. Moreover, and in the case of this company, many of its professional partners have turned a blind eye to the original and sizeable fraud and continue to work with them today. Commercially, I acknowledge the ‘if we don’t – someone else will’ type argument however, their moral compasses are off course in my opinion. These companies hide behind their professional partners, their alleged contributions to charity / society however, and at the heart of their operation simply lies an enormous web of deception.

The company in questions currently provides sponsorship to a league one professional football club. Please do not, in anyway, confuse this fraudulent outfit with the excellent services of Farr Vintners whose highly respected chairman is one of the owners of Crystal Palace Football Club.

Whilst sitting on the Liquidation Committee, I contacted the league one club and presented overwhelming evidence of fraud. In short, they would be receiving monies directly off the back of fraudulent activities, which is clearly highlighted in Mark’s statement. Granted, this was not available at the time however, the sizeable amount of disclosure was compelling. Today, this family run football club ignored my warnings and continues to accept funds derived by fraudulent means, which I believe is a disgrace.

There are many, respectable wine companies that offer excellent wine investment advice. I have been working in this area for close to twenty years however, and given the high-volume of wine fraud, I took the decision not to advertise our services for close to a decade as I simply do not want to be entwined in this awful mess. My list of Dos & Don’ts is vast however, I would certainly put the following at the top of my list; 

The extent of a large-scale wine fraud in the Côtes du Rhône has been unveiled, amounting to 66.5 million bottles of counterfeit wine.

The scam is being described as a “a massive misuse of the Côtes du Rhône label” by French authorities, after Guillaume Ryckwaert, CEO of France’s largest bulk wine negociant Raphaël Michel was arrested last year on suspicion of passing off cheap wine from outside the Rhône as Côtes du Rhône AOC as well as wine from the Châteauneuf-du-Pape AOP.

The scam shook both the French and UK trades when it was first uncovered in mid 2017. As one of its main customers, British consumers are likely to have been some of the primary victims of the fraud which is becoming an increasingly major problem for producers across the North and Southern Rhône.

French authorities estimate 15% of the annual output of the Côtes du Rhône appellation between 2013 and 2016 was counterfeit.

Last week, France’s consumer fraud body, the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCDRF) reported that around 50 million hectolitres of wine from Piolenc negociant Raphaël Michel was fraudulently sold under the Côtes du Rhône AOC, while 10,000 litres was sold falsely under the renowned Châteauneuf-du-Pape AOP label.

Wines from the Châteauneuf-du-Pape AOP typically sell for anywhere between £15 and £50 in the UK, compared to the estimated value of the actual wine which would put it in the sub £5 category.

The commercial value of the fake Châteauneuf-du-Pape AOP is believed to have earned €7,000,000 for the company.

In what is shaping up to be one of France’s biggest wine frauds, the deception is all the more poignant as it comes from one of France’s most successful and longest running negociants, founded in 1899.

Under Ryckwaert’s leadership, the company grew its annual turnover from €7 million to €80 million between 2002 and 2017, with Ryckwaert credited with modernising the company and taking it in a new direction.

Producer associations from Côtes du Rhône and Châteauneuf-du-Pape have now joined the civil case against Ryckwaert, claiming that the alleged fraud has damaged the image of the region.

None of the vast network of growers used by Raphaël Michel or its managers have been indicted, while Ryckwaert faces charges of deception and fraud.

We’ll keep you posted!