Beware the fine wine fraudsters having another vintage year

The current boom in wine investment is giving scammers the chance to con investors out of thousands of pounds.

Fine wine investment fraud is the latest in a long list of scams and frauds costing UK consumers over £38bn a year, according to the National Fraud Authority.

Returns on fine wines, such as Château Lafite, Château Mouton Rothschild and Château Margaux, have far exceeded those achieved on the stock markets over the last decade, thanks to the rising demand from increasingly affluent emerging economies such as China.

According to the Wilson Drinks Report the Liv-ex Fine Wine index has risen 225 per cent since July 2001, compared to just 5 per cent for the FTSE 100. Even between 2005 and 2010 the wine index rose 188 per cent, compared with 1 per cent for the FTSE. And where there are high investment returns, there are fraudsters.

Gavin Partington, communications director for the Wine and Spirits Trade Association (WSTA), says: "Wine investment fraud has been on the increase recently because the market for fine wines has been so staggeringly successful compared to returns on the stock market. We have come across several cases of fraudsters who have set themselves up as legitimate wine investment companies. I can't talk about individual cases, but I can say losses from this type of fraud run into the millions of pounds."

Buying fine wine while it's still in the barrel – "en primeur" – means that investors can purchase the product far more cheaply compared with when it will have been bottled two or three years later. (Well-known brands from Bordeaux and Burgundy can increase their value several-fold once the vintage has been bottled and released to the general public.) Legitimate wine merchants will then keep the bottled wine secure in temperature-controlled "bonded warehouses" – so you may not even see your investment for many years.

This is a perfect scenario for fraudsters because they can charge money up front; the investor doesn't expect physical delivery of any product; and it will be years before the fraud is discovered.

"The delay between order and delivery does make life very difficult for many consumers wanting to invest in wine," says Partington. "They have to put a lot of trust in businesses, which is why we lay down strict guidelines for our members and try to educate consumers on the questions they should ask before investing. It's about due diligence."

Alun Griffiths, buying director for wine merchant Berry Bros. & Rudd, warns: "Anyone can set themselves up as a wine expert and adviser on wine investment. It's not regulated by the Financial Services Authority. Fraudsters obtain shareholder lists then simply cold call people, emphasising the tax benefits, for example. They'll sound very plausible, but you should never deal with cold callers. There's absolutely no protection for investors, I'm afraid."

Griffiths advises would-be investors to check out the credentials of any wine investment company and be wary if it is a recent start-up. They should also check the prices quoted against published information on specialist websites such as WineSearcher.com and the Liv-Ex Fine Wine 100 Index ( live-ex.com).

The high prices – a bottle of 1986 Château Lafite-Rothschild Pauillac costs around £750 – attract counterfeiters, too, faking labels and passing off plonk as fine wines at auction. For example, the owners of the French Domaine Ponsot label discovered some of its own Clos Saint Denis burgundy at auction claiming to be pre-1982 vintage – impossible since that was the first year they had produced it.

At the other end of the price scale Barking & Dagenham council trading standards officers this month seized 220 bottles of fake Jacob's Creek, a brand owned by drinks giant Pernod Ricard, which were being sold in off-licences and shops throughout Essex.

Corporate ID theft – fraudsters passing themselves off as legitimate companies – is also a problem. In April fraudsters faked a wine merchant's website and email address, placed orders with one of its French suppliers, and made off with £10,000 worth of wine before the fraud was detected.

"There's plenty of anecdotal evidence to suggest corporate ID theft is on the rise," warns Partington.

And this month two men admitted conspiracy to defraud after running a Leeds-based wine scam – SurplusWines.co.uk – purporting to sell cheap wine from restaurants that had gone bust in the recession. In just five days a Belgian fraudster, Denis Lefrancq, took in £380,000 for wine that was never delivered. He then shut down the operation and fled to Prague where he was arrested. His partner, Jeremy Gillis, helped set up the business and even put adverts in newspapers.

The rise in wine fraud has prompted the WSTA, which represents 340 members in the drinks industry, to launch its own fraud prevention unit working with police and customs to combat identity theft, counterfeiting and wine investment fraud. WSTA members will share information about actual or suspected fraudulent activity within the trade and work closely with Operation Sterling, the Metropolitan Police's economic prevention and disruption unit.

But it isn't just the fine wine industry that fraudsters are targeting. The latest fraud alert from the National Fraud Intelligence Bureau (NFIB) concerns websites selling fake designer perfumes that never get delivered or are counterfeit. The Action Fraud helpline has received 28 such reports this year.

It seems that unwary shoppers can still be lured into giving away their debit and credit card details to fraudsters hiding behind legitimate looking, well designed websites, often masquerading as well-known brands. A "co.uk" web address is no guarantee that the company is based in the UK, so foreign–based fraudsters can often get away scot free.

Detective Superintendent Tony Crampton, director of the NFIB, says: "Customers should check the http address has 's' at the end or that there is a small padlock in the browser window indicating it's secure. Most fraudulent sites will not show either."

Ticketing fraud is also high on the police's agenda following Take That's current "Progress" tour. Desperate fans who spent money on unofficial ticket-selling sites have lost hundreds of pounds when tickets never materialised. The Action Fraud helpline was bombarded with complaints, which the NFIB analysed, and City of London Police arrested a 41-year-old man earlier this month. Losses from online ticketing fraud are now thought to be nearly £170m.

The problem with ticketing websites is that even if tickets are bought months in advance, they are often not delivered until two weeks before an event, giving fraudsters months to carry on the fraud before it is discovered.

Harry Watkinson, a spokesman for the City of London Police, says: "We've also seen a significant increase in the amount of land banking fraud recently."

This is where property investment companies persuade investors to buy small plots of land in the hope that planning permission will be granted by the local authority, thereby increasing the land's value. Often the land being sold could never be developed because it is an area of special scientific interest, inaccessible, or simply non-existent. Last year the Financial Services Authority closed down five land banking firms who had lost investors £42m. The FSA is also investigating a further 20 firms and estimates that total losses through land banking fraud top £200m.

The National Fraud Authority says that private sector fraud losses top £12bn, with the financial services sector losing £3.6bn through insurance, mortgage, credit card and online banking fraud. Consumers alone are stung for around £4bn through mass-marketing frauds such as lottery, ticketing and advanced fee frauds.

How to protect yourself against fraud

* Always be wary of cold callers, however plausible they sound.

* Do background checks on any company that approaches you with an investment opportunity. Use the Companies House website and establish that any quoted address and phone number is genuine. Be suspicious if you can’t establish a “real world” presence in the UK and don’t rush into any decision.

* Only use websites that you can trust. Before giving your credit or debit card details to a website make sure it’s genuine. The latest versions of web browsers include safe shopping security features. Buy antivirus and firewall software and ensure it is always updated with the latest signature files.

* Never access a site from a link from within an unsolicited email. Chances are it will take you to a fraudulent “phishing” website aimed at stealing your security details.

* Buy goods online using a credit card. If the goods cost over £100 you should be protected by the Consumer Credit Act.

* When buying online ensure that the web address starts https:// before entering any personal information. Check that a small padlock appears in the browser window indicating the site is secure.

* And most importantly of all, always bear in mind that if something looks too good to be true, it probably is.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Arts and Entertainment
Jamie T plays live in 2007 before going on hiatus from 2010
arts + entsSinger-songwriter will perform on the Festival Republic Stage
Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    C#.NET Server Side Developer (C#, XML, WCF, Unit Testing,SQL)

    £30000 - £40000 per annum + benefits+bonus+package: Harrington Starr: C#.NET ...

    Junior Database developer (SQL, T-SQL, Excel, SSRS)

    £20000 - £30000 per annum + benefits+bonus+package: Harrington Starr: Junior D...

    Business Analyst - Banking - London - £550 - £650

    £550 - £650 per day: Orgtel: Business Analyst - Traded Credit Risk - Investmen...

    Data Centre Engineer - Linux, Redhat, Solaris, SAN, Puppet

    £55000 per annum: Harrington Starr: A financial software vendor at the forefro...

    Day In a Page

    All this talk of an ‘apocalyptic’ threat is simply childish

    Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

    Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
    Mafia Dons: is the Camorra in control of the Granite City?

    Mafia Dons: is the Camorra in control of the Granite City?

    So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Once the poor relation, the awards show now has the top stars and boasts the best drama
    What happens to African migrants once they land in Italy during the summer?

    What happens to migrants once they land in Italy?

    Memphis Barker follows their trail through southern Europe
    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
    Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

    Frank Mugisha: 'Coming out was a gradual process '

    Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
    Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

    Radio 1’s new top ten

    The ‘vloggers’ signed up to find twentysomething audience
    David Abraham: Big ideas for the small screen

    David Abraham: Big ideas for the small screen

    A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
    Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

    Florence Knight's perfect picnic

    Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
    Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

    Horst P Horst comes to the V&A

    The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
    Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

    Mark Hix's summery soups

    Soup isn’t just about comforting broths and steaming hot bowls...
    Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

    Tim Sherwood column

    I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
    Tim Howard: I’m an old dog. I don’t get too excited

    Tim Howard: I’m an old dog. I don’t get too excited

    The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
    Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

    Tom Peck on Match of the Day at 50

    The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition