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2009 vintage uncorks fears of wine fraud

Created:

13 April 2010

Written by:

Ellen Kelleher

Experts are warning that the high quality of the 2009 Bordeaux vintage could lead to a rise in wine fraud. Simon Staples, sales director with Berry Brothers & Rudd, supplier to the royal family since the reign of George III, said: "The quality of 2009 wines is absolutely fantastic. But I’m concerned that hucksters and companies will rise from nowhere and promise they can deliver these wines."

The warning comes as police in London and Hertfordshire act against suspected wine fraud. Since last month, the Metropolitan Police Fraud Squad has arrested eight Britons in connection with an alleged £3m ($4.6m) wine investment fraud.

More than 50 victims were persuaded to invest sums of £25,000 to £100,000 to buy cases of Australian wines that did not exist, according to the police. They were told the scheme was a strong investment as Australian wines can increase in value with age.

Detective Chief Inspector Robin Cross, head of the Fraud Squad, said investors should be suspicious of salesmen’s advances.

"People of all economic backgrounds are being targeted and persuaded to invest in what appears to be a sound financial opportunity," he said. "We would advise those considering investing money, whether it be a small or large amount, to do their research and be sure that the companies or individuals they are dealing with are reputable and legitimate."

Fine wine can be a good investment. In the past five years, the Live-ex 100 fine wine index, the industry's benchmark, has almost tripled, against a 15.9 per cent return from the FTSE 100.

And in spite of recent claims of hoodwinking, wine funds and quality vintages are still seeing interest. Thousands of buyers travelled to Bordeaux this month for en primeur week to sample wine still maturing in barrels, which will be delivered in 18 to 24 months' time.

"This can be advantageous if the price of the wines rise dramatically from the initial release price,"said Jim Budd, author of investdrinks.org, a blog dedicated to wine investing. "It is also a way of getting hold of wines that are produced in very small quantities and are rarely seen after their en primeur release."

The investigation by the Fraud Squad coincides with a similar probe by the economic crime unit of Hertfordshire Police. Here, investors allegedly paid for en primeur wine that was never received, according to the county's force.

The trial of three directors from Bordeaux Wine Trading Company and one from International Wine Commodities Limited, who were arrested and charged with conspiracy in connection with the scheme, is due to take place in June at St Albans Crown Court. The defendants have pleaded not guilty.

Some wine merchants say they are taking additional measures to protect customers. John Roberts, a sales manager with the broker European Fine Wines Limited, says: "There's an awful lot of fear out there at the moment. These incidents bring a lot of worries about the market."

Nigel O'Mara, chairman of In Vino Veritas, a fine wine broker, adds: "Wine fraud has been around for a very, very long time, so people in the trade should be constantly on the look-out".

"It is possible to make money through investing in certain top wines, especially from Bordeaux,"writes Mr Budd. "However, it is certainly not as easy as it is often suggested."

Advisers warn that bonded warehouse storage charges (up to £12-£14 per case per year) and upfront brokerage fees (usually about 10 per cent) can erode the gains earned on fine wine laid down in the cellar.

This article orginally appeared in the Weekend FT. For more FT personal finance and investing articles, see www.ft.com/money.