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A vintage scam

The fine wine drain

It seemed like a great investment, but Dan Rosenheck’s passion for Château Lafite Rothschild lost him a pot of money

It seemed like a great investment, but Dan Rosenheck’s passion for Château Lafite Rothschild lost him a pot of money

Dan Rosenheck | April/May 2016

If it sounds too good to be true, it probably is. So say those who have never had a whiff of 1998 Château Lafite Rothschild. In late 2011 I had been an aspiring wine connoisseur for about a year, long enough to have learned the names of the world’s most exalted beverages, but not to have tried more than a handful. Like many novices, I started out on Bordeaux, memorising the 1855 classification of the region’s reds into price tiers – called crus, or “growths” – and developing a childlike reverence for the premiers crus (“first growths”) at the top. Although there were no sub-rankings within each class, Lafite was listed first because it was the most expensive tipple in the France of Napoleon III, and my drinking buddies told me it was still considered the premier premier cru today. Chinese drinkers certainly thought so: they had bid it up at auctions to stratospheric heights after deciding, for still-obscure reasons, that Lafite and only Lafite made for an impressive gift – perhaps because its name was easy to pronounce in Mandarin, or because the estate had stuck the character for the lucky number eight on the label of its 2008 vintage.

So when a friend in the wine trade snuck me into Wine Spectator magazine’s “Grand Tasting” in New York that November, I made a beeline for the Lafite table. They were pouring the 1998: a middling harvest overall for Cabernet Sauvignon, which Messieurs Primi Inter Pares had nonetheless turned into a masterpiece. As a Frenchwoman doing her best to smile sprinkled her elixir among the parched mob, I made off with a couple of thimblefuls, and scurried to the corner of the room to stand watch over my booty.

The perfume wafted into my nostrils before I had time to lift my glass. “zomfg,” began my tasting note. (The “o”, “m” and “g” stand for “oh my God”, you can guess what the “f” is, and the “z” comes out when exuberance makes you miss the shift key.) The scents were so intense, so focused, so easy to distinguish: ripe blackcurrants quivering on the branch; cedar that conjured up a Lebanese hillside; tobacco or thyme leaves floating on the wind. How could a wine be this powerful and yet this elegant? At the tender age of 13, the 1998 Lafite did not yet offer much complexity, and its firm, astringent tannins left me puckering after every sip – the punishment a fine young Bordeaux inflicts on impatient drinkers who disturb its slumber prematurely. But oh...that smell. “I smelled this across the room,” I wrote. “I smelled this at the bar afterwards. I smelled this even when I was shoving pizza down my throat at 3am. And then I smelled it in my dream.”

After scoring this sip of paradise, I was a man on a mission. I couldn’t imagine what this stubborn youth would blossom into at maturity, and there was only one way to find out. Unfortunately, 2011 marked the peak of the Asian Lafite frenzy, with a half- decent vintage commanding $1,000 a bottle. There was no way a twenty-something journalist could justify dropping a G on grape juice, or really even half that much. But if I could somehow find a bottle below $500...

I waited three lovelorn years for my Lafite. I set up a web alert to advise me if a bottle ever popped up in my price range. It didn’t. I flirted with other first growths: Margaux, Haut-Brion, Mouton Rothschild. But you never forget your first time. I would carry the torch for Lady Lafite as long as necessary.

Finally, in February 2015, she arrived – in an email from a Cali­fornian vendor called, fittingly, Premier Cru (PC). There she was, buried deep in a list of wines on sale, for a mere $475 – just below the entirely arbitrary $500 cut-off I had set the day we met. The only catch was one technical term, buried in the fine print: “prearrival”.

On the surface, prearrivals – sales in which a store collects payment before securing physical possession of the bottles – are unobjectionable. Claret aficionados have bought Bordeaux en primeur (while the wine is still maturing in oak barrels) for centuries. Prearrivals are particularly common in America, where merchants have to wait for large European shipments to mosey across the Atlantic.

But no one did prearrivals quite like PC. Their website frequently featured coveted wines at anywhere from 10-40% below the lowest competing price. Such bargains were invariably offered on prearrival. And PC made no pretence of listing a realistic delivery date. Instead, the firm would send customers their wine at its leisure, after delays that were known to exceed a decade. Although the company’s website claimed that it had already purchased all the wines it offered on prearrival, knowledgeable buyers presumed that PC was simply taking its sweet time to acquire on favourable terms the wines it had already promised to customers.

To the uninitiated, this system might sound suspiciously like a Ponzi scheme. But if PC really was selling goods it didn’t have, and raising the money to buy them later by selling more goods it didn’t have, the pyramid had taken a long time to collapse. The company was founded in 1980, and had a strong record of either making good on its promises or offering full cash refunds, albeit often after seemingly interminable delays and without paying interest.

On internet discussion boards such as Wine Berserkers, debates over PC’s business model were just as popular as those about the latest Burgundy vintage. The firm’s vocal defenders proclaimed that their orders had always been fulfilled in the end, and that the waits were a feature rather than a bug, since PC was effectively offering “free storage” on immature wines. The naysayers replied that PC’s bargains on ultra-rare wines were unfathomably generous; that it took 30 years for Bernie Madoff’s swindle to be exposed; and that Carolina Wine Company, a retailer with a similar reliance on prearrivals, had gone bankrupt in 2009. The supporters retorted that because PC was a big direct importer, it negotiated better deals than its competitors, and that it could sustain itself like an insurance company by investing the interest-free loans it received from wine buyers. And the doubters accused their adversaries of spreading propaganda in favour of PC in order to keep the pyramid scheme running long enough for them to get out.

In the autumn, after a dozen jilted buyers had filed lawsuits, Mr Fox sneered that “these are from people, mostly Asians, who are...feeling insecure because they are not from the area”

Last June PC’s order backlog grew so long that the New York Times called to inquire. John Fox, the company’s owner, essentially blamed his clientele. “A few of our old-time customers are used to waiting,” he said. “They know they’ll get their wine. But customers that have come around in the last six to seven years, because we have good wines at the right price, they are not used to waiting extended periods.” By the autumn, a dozen jilted buyers had filed lawsuits. Speaking to Berkeleyside, a news website, Mr Fox sneered that “these are from people, mostly Asians, who are...feeling insecure because they are not from the area.”

By the time the fateful email reached my inbox, I was well aware that buying from PC required a leap of faith. In fact, despite receiving many tantalising offers over the years, I had always resisted PC’s siren song. But this time was different. This was 1998 Lafite. My Bordeaux epiphany. First among equals. Sure, it might take a decade, I thought, but who wants to drink that wine before its 25th birthday anyway? It’s just a question of when it arrives, not if. I took a deep breath and pulled out my credit card.

Everyone is entitled to a lone mistake. But somehow the sense-memory of Lady Lafite had relieved me of my senses. Rather than vowing not to throw good money after bad, I felt like a poker player (another of my vices) who has bet so much on a hand that he is mathematically “committed” to the pot, and must pay whatever it takes to see it to the end. Next up was the 2010 release of Cerbaiona, one of my favourite Brunellos. Since I was already expecting the Lafite, I could tack those onto the same delivery and get them shipped for free. Wouldn’t it be interesting to try the wine when it was, say, ten years old, and then again at 20? How about two bottles?

And then PC’s offers started getting juicier and juicier. Before long, my “calculated risk” became desperate rationalisation. With these discounts, I can always find friends to split the bottles with me...right? Or resell them for a gain. As for why a business would offer me wines I could immediately flip at a higher price, well…they must have their reasons. 1995 Cos d’Estournel for $100? What a steal! 1998 Cheval Blanc for $400? One of the greatest wines of my life. 1989 Haut-Brion for $800? Guess I’m blowing through that $500 limit.

At least I wasn’t alone. Most instances of vinous skullduggery involve forgers selling fake trophy wine to super-rich collectors. PC’s clientele certainly included high rollers: Arthur Patterson, a venture capitalist, was on the hook for $836,500, and Adebayo Ogunlesi, a Goldman Sachs board member, was out $479,000. But the store catered more to upper-middle-class professionals than to the private-jet set. Around 9,000 people are currently awaiting prearrival deliveries from PC. Some are owed as little as $8; some were in over their heads: Ron Talocka of Florida took out a second mortgage on his home in order to pour $50,000 into PC’s coffers.

For three decades, PC had rewarded the faithful for their devotion. But on December 10th last year, following a series of weak Bordeaux vintages that dried up the en primeur market, the firm closed its posh storefront in Berkeley. Phone calls were routed to a voice-mail message announcing that PC was “transitioning to online-only sales”, and the reassuring statement that “the term ‘pre-arrival’ is applied to wines we have purchased (typically abroad) that have not arrived yet” vanished from its website. As word spread, customers began demanding refunds from their credit-card issuers. Some of the first rats off the ship secured them. But later that month Universal Card, PC’s credit-card processor, sued the company for $228,500 in reversed charges – a case that may cause the likes of Visa and Amex to reconsider their generosity.

Finally, on January 8th, PC filed for bankruptcy. It turns out that the company had even less liquid available for liquidation than the sceptics had warned: it declared $7m of assets against $70m of liabilities. A few weeks later I asked PC’s lawyer whether the firm ever did place orders for all the wine it had promised to customers. He said he had no idea, and that the owners would not comment.

Surprisingly, the Chapter 7 paperwork – which helpfully listed my full name and address for all the world to see – revealed that I was actually a slightly larger-than-average unsecured creditor. My $2,116.95 of outstanding orders ranked 3,280th: perhaps the only list on which I will ever outrank the billionaire William Koch, who is owed just $71. Although I have disputed the credit-card charges and have been invited to register my claim with the bankruptcy court, I suspect that the only money I will recoup from the investment will be my fee for writing this article.

You’d think this foolhardy tale would yield some painful lessons. Of course PC’s prices were too good to be true. And of course sending thousands of dollars to a company of dubious repute, in the hope that one day it might fulfil your order, is asking for trouble. But I knew all of that before I took the plunge, and little good it did me. My chances of finding out what a 1998 Lafite tastes like once its tannin recedes and its aromas develop have evaporated.

Anyone got a bottle to sell me?

2 Readers' comments

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Aurangzeb - September 8th 2016

How kind of Barrie (comment, March 25th). Dan, fill us in - did the bottle ever arrive?!

Barrie Lepley - March 25th 2016

To Dan Rosenheck: Your story is indeed a very sad one. To cheer you up, I am happy to send you a bottle of 1998 Ch Lafite. I will send it by DHL to the London office of The Economist to your attention in early May. It is too warm in Perth (where I and the wine live) to send it now. No it's not too good to be true! I suggest you let it rest after receiving it for a few months to allow the wine to recover from the voyage. I am a long term subscriber to The Economist which is the most interesting and important thing I read. I am using this blog because I was unable to find another source of an email address for you other than social media which I avoid. Happy drinking! Barrie Lepley