Investing in rare and fine wine can be a great way to enjoy wine while realizing a potential return. Like all investing, however, it doesn’t come without its risks. In a recent article for the New York Post, Larry Getlen, writes about two of the biggest crimes committed against the fine and rare wine industry, both of which are detailed in a new book by Frances Dinkelspiel.
Outlined in Dinkelspiel’s new book, “Tangled Vines” and in the New York Post article, are the stories of Mark Anderson and Rudy Kurniawan, each of whom severely hurt the fine and rare wine industry in their own ways.
In 2005 Anderson, who had been illegally selling his clients’ rare wines for years, set fire inside of the massive Wines Central warehouse in California, where he rented a 2,500-square-foot bin to store his clients’ wine collections. The warehouse held over 4.5 million bottles of fine and rare wines which were stacked on pallets, stretching some forty feet high and the length of two football fields.
Over a quarter of a billion dollars worth of wine was destroyed in the fire and it took firefighters up to 8 hours to get the fire under control. Anderson was ultimately sentenced to 27 years in prison and ordered to pay $70.3 million in restitution, but even these harsh punishments wouldn’t help some of the small wineries who had most or their entire inventories stored at the warehouse. Many of them discovered that their insurance would not cover the damages because wine in a warehouse was considered “in transit.”
In addition to Anderson’s arson charges, a man named Rudy Kurniawan affected the fine wine industry, but in a different way – fraud. Kurniawan, who quickly became the wunderkind of the wine world, was at one point spending up to one million dollars a month to collect coveted wines and was said to have the greatest cellar in America.
Kurniawan began setting records at fine wine auctions, bringing in millions of dollars at each one. The problem was that many of these bottles were fraudulent and his operation was later discovered.
Even though Kurniawan’s fraud was eventually found out, it still inflicted real damage to collectors and the industry as a whole as collectors became more and more suspicious of the authenticity of many of the wines up for auction. Global auction sales of rare and fine wine dropped 19% in 2012 and another 13% in 2013. Some believed this was a direct result of the fraud committed by Kurniawan.
These two stories are the very extreme of what could happen to wine collectors and their collections, but they still offer sound lessons. Many collectors store their wine in off site storage facilities like Wines Central. And while wine storage facilities typically have systems in place to protect the collections they store, such as sprinklers, back-up generators and even humidity controls, it’s impossible to plan for events like arson or fraud.
While there is certainly some level of protection on these wine collections, most don’t realize the significant gaps in their insurance coverage. Having a comprehensive wine collection insurance policy can give peace of mind to wine collector or wineries.
A policy from Insure Your Wine will provide protection from drain or sewer back-up, while wine is in transit, from hurricanes or floods and much more. Learn more about our wine insurance services at http://insureyourwine.com/wine-insurance-policy-coverage-highlights/.
Read the entire New York Post article at http://nypost.com/2015/11/01/grapes-of-wrath-when-250-million-in-rare-wine-was-set-on-fire/