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August 10, 2014

Can wine fraudster reasonably whine that his sentence was not reduced given wealth of victims?

FakewineThe question in the title of this post is prompted by this intriguing AP sentencing story about a guy who tried to get rich by selling very expensive (and sometimes fake) wine before its time to some very rich folks:

A collector was sentenced to 10 years in prison in New York Thursday for making bogus vintage wine in his California kitchen, and selling it for millions of dollars. In sentencing Rudy Kurniawan, 37, Manhattan U.S. District Judge Richard M. Berman said he wanted to send a message to others who might tamper with what people eat and drink. “The public at large needs to know our food and drinks are safe — and not some potentially unsafe homemade witch’s brew,” Berman said as he announced the prison term for Kurniawan. He also ordered him to forfeit $20 million and pay $28.4 million in restitution.

Kurniawan, an Indonesian citizen of Chinese descent, lowered his head as the judge explained the sentence and described Kurniawan’s quest as a “bold, grandiose, unscrupulous but destined-to-fail con.” Assistant U.S. Attorney Stanley Okula described Kurniawan as the “kingpin of counterfeiters,” a man who turned his Arcadia home into a laboratory where he poured wine into what appeared to be vintage bottles before attaching elegant fake labels and selling them for tens of millions of dollars.

“He did it to line his own pockets,” Okula told Berman, who concluded that Kurniawan had caused losses close to $30 million, primarily to seven victims. One of them was William Koch, a billionaire yachtsman, entrepreneur and wine investor. Koch testified at Kurniawan’s December trial, when Kurniawan was convicted of mail and wire fraud.

Before he was sentenced, Kurniawan twice apologized, saying “I’m really sorry” and expressing a desire to take care of his mother, who lives in California after receiving asylum....

His lawyer, Jerome H. Mooney, asked for leniency, saying his client got swept up in the thrill of mixing with California’s wealthiest people. “He was insecure, very insecure,” Mooney said. “He wanted to be them. He wanted to be part of it.”

Mooney said Kurniawan used some of his family’s fortune to buy $40 million of wine, eventually selling $36 million of it before he realized he could develop a business in which he created mixtures that tasted like the world’s greatest wines. He said Kurniawan’s victims were wealthy and aware that counterfeit wines were a frequent occurrence in the marketplace. “Nobody died. Nobody lost their savings. Nobody lost their job,” he said. The lawyer said the 2 1/2 years Kurniawan has served in prison was enough penalty, since he had lost everything and been branded a cheat.

Okula called the defense lawyer’s comments “quite shocking,” especially when he suggested that Kurniawan should get lenient treatment because he ripped off rich people rather than the poor. “Fraud is fraud,” he said.

Kurniawan was a connoisseur of counterfeiting who mastered label making, cork stamping, bottle waxing and recorking to create fake bottles of wine. Federal prosecutors said Kurniawan turned his California home into a wine factory. Restaurants sent him empty wine bottles, then he mixed together cheap wine and rebottled it as vintage wine. He also borrowed money against his collection of fake wines and owes a New York bank several million dollars....

For example, Kurniawan phonied up two bottles of 1934 Romanee-Conti and sold them for $24,000. A fake double-magnum of 1947 Chateau Petrus was auctioned for $30,000. “He made blends,” Downey said. “He was like a mad scientist.” But he made mistakes that raised eyebrows in the world of fine wine. Kurniawan put up for auction bottles of Clos Saint-Denis from the 1940s and 1950s even though the winery didn’t start producing that appellation until the 1980s.

August 10, 2014 at 01:49 PM | Permalink

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I would have used a slightly different argument, than this status argument.

I would have used a benefit argument.

You are so rich you have no idea what to do with your money. At a spirited auction, you buy a real bottle of red wine made in the day of Napoleon for $1 million. You had the physical features of the outside of the bottle analyzed scientifically, each is from 200 years ago.

To impress your future business friends, you tell them, come to my party we will share this bottle, in honor of our new deal.

Scenario 1: Open a real bottle, nauseating sulfurous gases from the bowels and rear end of Hell emerge and fill the room, guests begin to excuse themselves, head for the doors. You taste it. Disgusting beyond vinegar, and who knows what you have just swallowed, what lead filled, bacteria grown toxins you have imbibed. You spit out the rest, but the wife says, lets go to the ER just in case, I will bring the bottle with me in case Poison Control wants it.

Scenario 2: A fraudulent version is stunning and the "best wine I have ever tasted." "Worth every penny, thank you for the memorable tasting experience." "Looking forward to our deal." "Please invite me to your next party, you sure know how to do it." In other words, benefit in future good will and impression on rich guests worth far more than the fraudulent $1 million cost.

My point is that the value of a benefit of a tort or crime should be discounted from the damages and sentencing. I play an illegally downloaded song to my friends They love it and each of my 10 friends than buys it on I-Tunes. The victim has made $10 after losing $1 to my illegal download.

A shy, lonely, outcast 14 year old in foster care, without parents because both are in jail for hopeless drug addiction and dealing, both being physically abusive and violent, has sex with a gentle, kind, young, attractive teacher. He is on Cloud Nine for weeks. He becomes outgoing, happy kid. He then gets the courage to ask a girl his age on a date. He gives her porn standard sex that she finds memorable. He learned his skills from the older teacher. Not traumatized, but out of his shell in an upbeat mood, he now has hope, after a horrifying childhood. His grades improve. Only the dumbass lawyer would want to destroy that teacher with long prison sentence rather than a warning or summary offense. The dumbass lawyer would do so with a hidden agenda of the vile feminist, "We are pious, fair and consistent. We prosecute female teachers as well as male ones. Do not attack our idiotic decisions, and our stupidity."

Posted by: Supremacy Claus | Aug 10, 2014 6:33:59 PM

"Fraud is fraud"

That's not what we hear when the rich person is the crook. We hear about all the good deeds he's done and how his service to the community out weighs the harms. Seems to me that the guy's real problem here is that he didn't give any money to the judge's favorite charities. If he had done that, then there would have been lots of leniency.

Posted by: Daniel | Aug 10, 2014 10:47:13 PM

Daniel: What if the fraud is more beneficial to the victims than the genuine article?

Posted by: Supremacy Claus | Aug 10, 2014 11:01:52 PM

@SC

The underlying issue with fraud is defining "harm". Is harm to be simply defined in economic terms? Or is there an inherent moral harm that stems from deceit that injures the victims and the larger society? And if one thinks the latter how are extant of those harms to be defined? There are people who would argue that the inherent moral harm of deceit by definition outweighs any pecuniary benefit a fraud might have to its victims.

Harms and benefits are not terms with universal definitions, let alone getting into the nuance of weighing harms vs benefits in specific cases.

Posted by: Daniel | Aug 10, 2014 11:12:15 PM

"There are people who would argue that the inherent moral harm of deceit by definition outweighs any pecuniary benefit a fraud might have to its victims." That includes prosecutors, and plaintiff attorneys, I presume. Harms and benefits should be determined by the average people in the jury.

I am arguing they are wrong, and unfair. If a benefit is conferred, it has to be calculated and subtracted from the sentencing or tort damages. With 100% certainty, and charisma, I persuade a dying cancer patient my expensive treatment is 100% effective if he places himself in my hands. It is total fraud. However, the patient has changed from a hopeless bed ridden person who has given up after the hopeless doom described by his legitimate doctor to an active happy person who makes a tour of family members, and tourist sites he always wanted to see. Now, the fraudulent doctor should be prosecuted, but a discount in sentencing should be conferred for the positive change he brought to the patient.

Posted by: Supremacy Claus | Aug 10, 2014 11:24:05 PM

From Gulliver's Travels:

"They [the Lilliputians] look upon fraud as a greater crime than theft, and therefore seldom fail to punish it with death; for they allege, that care and vigilance, with a very common understanding, may preserve a man's goods from thieves, but honesty has no defense against superior cunning; and, since it is necessary that there should be a perpetual intercourse of buying and selling, and dealing upon credit, where fraud is permitted and connived at, or has no law to punish it, the honest dealer is always undone, and the knave gets the advantage."

Posted by: Fred | Aug 10, 2014 11:46:38 PM

@Fred. Interesting decision to bring Swift into the discussion. Swift was no friend to democracy and he wrote that parable to mock its pretensions. Indeed, Gulliver's Travel itself is a bitter diatribe against all things we moderns hold dear. We love democracy, Swift hated it. We love science and technology, Swift detested it. We are optimists about human nature--Swift was a pessimist. Swift own view on this particular debate was--typical for him--to be upset with both sides. He had no love for knaves because they corrupted the truth of the Christian revelation. Yet he had no love for the gullible either because he felt they wallowed in their foolishness. The subtle trap in the passage you quoted is the phrase "honest dealer". Swift didn't think such people existed, which is what the final chapter of the book is all about.

@SC. Taken in its most ethereal sense it's difficult to dispute what you say. The better question is whether weighing the costs and benefits in the way you desire is within the ken of humans. You know when a Jew dies they say "Blessed is the true judge." I don't think it is the province of the civil law to ultimately weigh the balance sheet of a man's soul. The only recourse the civil law has is the quantification of vague moral intuitions and that leaves me decidedly unconformable--I'm wary of the self-dealing that is so tempting in such projects. Let the happiness the fraudster doctor brings to the deceived patient be weighed in the ledger of the true judge and not the human one. God is dead and I prefer he not be resurrected in a black robe.

Posted by: Daniel | Aug 11, 2014 2:25:36 AM

Hes just a modern day Robin Hood. Stealing from the rich and giving to humself and others indirectly thru purchases.

He only ripped off wine snobs, who were tossing there money away anyway.
Or is it better to let the government steal it thru taxes. But then its legal right.

I have a stronger sense of whats right and not legal when it comes to the feds.

They can stuff it.

Posted by: Midwest Guy | Aug 11, 2014 8:16:11 AM

Daniel:

My reason for my use of the quote from Gulliver's Travels up-thread was that it is a succinct explanation of the difference between theft and fraud. Nothing more. For the reasons set forth in that quote, I believe fraud to be far more blameworthy than theft and far more deserving of a harsh punishment.

This distinction is somehow forgotten when what sort of sentence should be imposed for an upmarket/elite fraud is discussed or argued, as an upmarket/elite fraud will ripple through the specific market the fraudster was operating within and sometimes even ripple through the larger economy. The most current example of this is mortgage securitization fraud, which some commentators believe caused the Great Recession.

As to your opinions about Swift, I think it is worthwhile to consider why an author/poet puts certain words in his characters/narrators' mouths. But regardless of Swift's intentions, the quote clearly and succinctly sets forth a sentencing factor that can and should be addressed by both sides in a fraud sentencing hearing, which is why I interjected it into this thread.

Posted by: Fred | Aug 11, 2014 6:21:47 PM

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