A federal jury in New York has ordered Eric Greenberg, a high-tech entrepreneur with a home in Ross, to pay $12 million in mostly punitive damages to billionaire William Koch for knowingly selling him counterfeit bottles of wine.
In 2000, Fortune magazine listed Greenberg as No. 28 on its list of the 40 richest self-made Americans under 40, having amassed a fortune of $603 million. The story noted that Greenberg's 11,000-bottle wine collection included a cognac once owned by Napoleon. By the next year after the dot-com bust, however, the magazine said Greenberg's fortune had shrunk to $187.3 million, reducing him to No. 31 on the list.
Greenberg is CEO of Innovation Investments, an investment company focused on venture capital, private equity and a holding company for his family assets. He is also CEO of Beautifull!, a San Francisco restaurant.
Koch is the brother of David Koch, well-known for his financial support of conservative political causes. William Koch has pursued litigation against several auction houses and wine sellers since discovering that four bottles of his French wine that were supposed to have been owned by former U.S. president Thomas Jefferson turned out to be bogus.
The verdict, issued Thursday in U.S. District Court in Manhattan, is the result of a complaint that Koch filed against Greenberg in 2007 after he discovered many counterfeit bottles among a group he bought at auction in 2005 for $3.7 million. Koch said some 24 of the counterfeits had been consigned to the auction house Zachys Wine Auctions by Greenberg.
Greenberg declined to comment for this story, but in a written statement he said, "Clearly, the verdict is a disappointment because I believed all the consigned wine to be authentic. I believed that I had done the right thing by having one of the top, accredited auction houses, Zachy's, have their experts inspect and verify the bottles to be auctioned."
Greenberg added, "We will appeal this case, as we believe that we acted honorably and tried to do the right thing for all concerned."
In his complaint, however, Koch said Greenberg learned "in or around 2002" that his wine collection was infected with counterfeits when Serena Sutcliffe, the head of Sotheby's international wine department, inspected it prior to another proposed auction.
"Upon examination of the Greenberg cellar, Sutcliffe told Greenberg that a significant number of the bottles in his cellar were counterfeit and that Southeby's was not interested in auctioning counterfeit or questionable wine," the complaint states. Koch said that Sutcliffe's conclusion was later corroborated by another wine expert, William Edgerton. Edgerton placed a numbered sticker on each bottle that he inspected and recorded on a spreadsheet whether the wine was genuine, counterfeit or questionable.
Koch said that despite knowing that he owned counterfeit wine, Greenberg auctioned part of his collection through Zachys.
In his statement, Greenberg wrote, "I had disclosed to the auction house that there were inauthentic bottles in my cellar and did not conceal problematic wines."
According to Koch's complaint, "Zachys denies this." Zachys, which was initially named in the complaint together with Greenberg, admitted some liability and settled out of court.
Greenberg wrote,, "I tried to isolate and segregate any problematic bottles in my possession, and returned suspect wines that I had bought when possible."
But Koch said he first became aware of the counterfeit wine he had purchased from Greenberg in 2007 after he hired Edgerton to inspect his wine cellar. According to the complaint, during that inquiry Edgerton was "stunned" to find in Koch's cellar at least two of the bottles that Edgerton had inspected in Greenberg's cellar in 2002. One of the two bottles, both of which were Chateau Latour 1928, was genuine, the other counterfeit.
Koch's complaint contains other tantalizing details. For instance, Koch stated that when he asked Greenberg about the possible origin of one counterfeit bottle he purchased from Greenberg, Greenberg told him that he hadn't pursued a lawsuit against the supplier because his investigator, a former CIA agent, had told him the supplier had connections to Russian organized crime. The complaint noted that Koch had no way of knowing what portions, if any, of Greenberg's story were true.
Both parties agree that the bottle of Chateau Latour 1928 that Edgerton discovered in Koch's collection is counterfeit. But Bill Cunningham, a spokesman for Greenberg, said it is uncertain whether the other 23 bottles are counterfeit, because they've never been opened.
John Huston, an attorney representing Koch, disagreed.
"No, it was clear from the jury's verdict that they found all of them were counterfeit or fake," Huston said.