Canada’s Wine Racket: Cellared in (not) Canada

The arrest of Rudy Kurniawan rocked the (wine) world two years ago; I wrote a cover story for Vue on the arrest as well as on the larger issue of counterfeit wine. The trial just concluded at the beginning of August so I wrote a follow-up piece for Vue, but sadly that never made it online. So, I’m posting it here for your enjoyment and edification – this is much more than just a recap of the Kurniawan trial; it’s about Canada’s own brand of counterfeit wine that is sadly, shamefully legal: Cellared in Canada bottles.

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Kurniawan may be guilty, but in Canada wine fraud is routine.

It was one the world’s most extensive wine fraud investigations and it ended with a resoundingly guilty verdict for Rudy Kurniawan, who was sentenced to 10 years in prison on August 7, 2014. Kurniawan perpetrated a “grand con” in which he cheated wine collectors out of millions of dollars by selling counterfeit bottles of some of the world’s rarest and most expensive wines. It’s a landmark case, both for the sheer extent of Kurniawan’s operation (hundreds of fake bottles, corks, stamps and labels were found in his home) as well as for the severity of his punishment. In addition to 10 years in jail, Kurniawan was also ordered to pay $28.4 million to victims of his scam, on top of the $20 million he must forfeit to the court.

Is 10 years too steep? Members of the prosecution say no, given the extent of damages involved: one collector reportedly dropped $231,000 on a single fake bottle. Undoubtedly the heavy sentence is also due to the people involved: Kurniawan cheated some very high rollers, most prominently billionaire William Koch. Koch began his crusade by filing suit against Kurniawan in September 2009; Kurniawan was later arrested in March 2012 after an extensive FBI investigation. People who can afford to drop hundreds of thousands on a single bottle of wine can afford to drop a lot more on a trial that was deeply embarrassing to their reputations.

I’m not defending Kurniawan in any way; he’s getting what he deserves. But while this trial, which is the first time the U.S. prosecuted anyone for wine fraud, has received immense publicity, Canada is quietly – and legally – perpetuating one of the biggest wine rackets out there.

If it says this on the label, it's really not Canadian wine.
If it says this on the label, it’s really not Canadian wine.

The term “Cellared in Canada” appears on thousands of wine labels across the country and the bottles are sold in the Canadian section of liquor stores. This is a loophole designation that companies slap on wine made from imported juice that was bottled here. In Ontario, up to 75% can be foreign; in British Columbia, the entire bottle can be made from non-Canadian grapes.

The biggest Canadian wine producers do this: the bottom tier of Jackson-Triggs, Mission Hill and Peller Estates is not actually Canadian wine. The practice began in the late 1980s during a vine-pull scheme in which Canadian wineries replanted vineyards with higher-quality varieties. Canadian wines were pretty terrible back then and didn’t stand a chance against Californian wines on the newly-open market after the 1989 Free Trade Agreement. Grapevines take a few years before producing fruit, so the government created the Cellared in Canada designation as a means for wineries to earn profits in these low-production years.

Cellared in Canada has since become obsolete: it served its purpose and is no longer needed by Canada’s burgeoning wine industry. As for why these wines remain so prevalent, it’s the same reason Kurniawan’s sentence wasn’t light: it concerns a small group of extremely wealthy individuals.

The Canadian wine industry is stunting its reputation by continuing to participate in such an egregious breach of ethics. It might not seem the same as a swindler who blended wine in his kitchen sink and passed it off as 30-year-old Burgundy, but it’s not really that far off.

If the juice doesn’t match what’s on the label, it shouldn’t be sold as such. That’s the logic that sunk Kurniawan – so why is Canada exempt from it?

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