Shadows in the Vineyard: The True Story of the Plot to Poison the World's Greatest Wine (24 page)

Toward the end of the promotional copy there was this phrase: “… jealously coveted by La Pompadour who failed to succeed in her intrigues.”

O
n September 1, 1988, the French minister of agriculture held a press conference at the ministry’s Hôtel de Villeroy headquarters in Paris to deal with a controversy suddenly swirling around the Domaine de la Romanée-Conti. Minister Henri Nallet felt he had no choice but to formally address the media that Thursday, as it had become clear to him, to nearly everyone involved, that it was necessary to set the record straight. Things had gotten out of hand. Over the previous few days the whole affair had become, as the
New York Times
would report it, a stumbling block for “Franco-Japanese relations.”

Quelle pagaille.

What a mess.

Standing before the not-so-small small group of journalists from around the world, Nallet said, “Romanée-Conti is like a cathedral. There is no question of letting a part of France’s cultural patrimony get away.” Nallet went on to say that Romanée-Conti should be regarded as a precious “work of art,” and the French government has the right to prevent it from falling into foreign hands.

The story the
Times
published on the matter at hand came
with the headline “Wine Plans of Japanese Upset French.” A spokesperson for a very frustrated Monsieur Aubert de Villaine was quoted as saying, “We have no intention of selling the vineyard.” There was a comment from an exasperated Norio Ushiyama, the president of Japan’s department store chain Takashimaya: “It appears that the French press has tried to undermine us by saying that we want to buy Romanée-Conti.”

Under the terms of the deal Monsieur Leroy had brokered in 1942 when he bought half of the Domaine, his company, Société Leroy, secured the right to be the exclusive distributor for DRC’s wines everywhere in the world except for the United States and Europe; those markets remained with the de Villaines. Since 1970, Takashimaya had worked with Société Leroy to market the Domaine wines, along with Société Leroy’s own wines, in Japan.

In August 1988, representatives of Takashimaya and Lalou Bize-Leroy, who was now at the helm of her family’s company, struck a deal in which Takashimaya would buy 33.6 percent of Société Leroy for $14.6 million. The way Ushiyama explained it in the media, Takashimaya’s investment in Leroy was a natural evolution of their long-standing partnership. “We want to help expand the sale of French wines in Japan,” he said, and Lalou wanted to focus more on the quality of the wines.

Japan, along with the rest of Asia, was emerging as one of the very best markets in the world for fine French wine, which the vignerons welcomed. On the other hand, the French weren’t so crazy about the fact that the Japanese were buying up France’s vineyards. Already Japanese investors had acquired interests in two Haut-Médoc wineries, Château Citran and Château Reysson, and the Château Lagrange, which had one of the largest holdings of vineyards in Bordeaux.

Theirs being a country of fierce nationalism, the French
didn’t take kindly to foreign influences. The presence of American ketchup on the tables of France’s restaurants was enough to draw their ire and call for laws outlawing the condiment. Bordeaux châteaux… bottled culinary accoutrements… and now the crown jewel of their French wine heritage was going to be compromised by outside influence?

Not quite.

Somebody somewhere in the French press, as Ushiyama had described, had caught wind of the deal between Takashimaya and Société Leroy; whoever it was who had heard “Japanese,” “buying,” “Romanée-Conti,” went apoplectic and rumors spread. As the Domaine’s spokesperson made clear, Takashimaya was not buying a piece of the DRC, rather a stake in Société Leroy, which merely distributed a portion of the DRC’s wines, though it was a sizable allotment of the Domaine’s wines. Around that time, Société Leroy was annually selling approximately $35 million worth of the Domaine’s wines.

That is why Minister Nallet took it upon himself to make clear that if Takashimaya was attempting to buy a piece of the distribution in order to give the Japanese leverage to buy the vineyard, the French government would not tolerate such an intrusion. Nallet noted that French law gives the ministry the power to block any deal in which a non–European Community company acquires more than 20 percent stake in a French corporation.

Reassuring, but as it related to a sale of the Domaine, at least, it was a moot point. The “cathedral” was never in play. Ultimately, the talk of a Domaine sale was a big misunderstanding that caused a few weeks of headaches all the way around, but was of no enduring consequence to the DRC. However, Société Leroy and Takashimaya were about to cause extraordinarily serious
problems for the Domaine, problems that would turn the entire Domaine against Lalou, even her only sister.

Jack Daniels and Win Wilson couldn’t believe what they were hearing. If it was true, it was a bona fide scandal, and one that might very well drive an irrevocable wedge between them and the Domaine, or Aubert and Lalou, or both.

Reports were coming into their office that hundreds of bottles of the DRC wines just released that year in 1991—authentic DRC wines—were flooding the American market at prices considerably less than Wilson Daniels could offer. Frankly, the prices the wines were selling for were less than the price Wilson Daniels had paid for their own bottles direct from the Domaine.

Because the Domaine cellars it wines for three years before offering them to the market, in 1991 the ’88 vintage was released. According to its contractually structured deal with the Domaine, Wilson Daniels paid the DRC up front for its exclusive allocation for the United States. Based on the prices Win and Jack and the Domaine had agreed to for the ’88s, Wilson Daniels needed to sell its wines in America for baseline minimums in order to earn its profit. The Wilson Daniels price, say, for an ’88 La Tâche was about $250. Now they were getting reports that bottles of the stuff were turning up all over the country for $125. So it went for the Domaine’s other
grands crus
.

Wilson Daniels’s typical clients, were choosing to buy the less expensive DRC wines, leaving old Win and Jack with a storeroom filled with Domaine wines they had, as it turns out, overpaid for and could not move, and therefore would not see the expected profit on their investment from. They were stuck with some three thousand cases, about half of their entire allocation,
for a total loss of $2.7 million. That kind of red on the balance sheet at that point in the history of Wilson Daniels put them on the brink.

Win and Jack didn’t need to be Sherlock and Watson to figure out what was happening. The Domaine wines that were out there were legit, and other than the Domaine and Wilson Daniels, there were only two other possible sources: Percy Fox, the exclusive distributor in the United Kingdom, and Société Leroy, with the distribution territory of everywhere else. To ensure adequate supply to service to its vast market, Société Leroy received by far the largest allocation, about 60 percent of the total release; Wilson Daniels got about 25 percent for the robust American sales; Percy Fox took the remaining 15 percent for the United Kingdom.

Each of the distributors negotiated their own market price with the Domaine based upon the unique circumstances and currency values of their territory. However, just as the world’s financial markets traditionally rely on the U.S. stock markets, the axiom priceline for the DRC was the United States. The three distributors understood they were to take every precaution to ensure their allocations remained only in their market in order to prevent exactly the sort of disruption in the international market algebra that occurred in the United States in 1991—which, Win and Jack discovered, had been orchestrated in bad faith at their considerable expense. It didn’t take long for Win and Jack to piece it together.

At that time, the Domaine sometimes sold DRC wines in mixed cases, which is to say, one bottle of Romanée-Conti, with the remaining eleven slots being some variety of the Domaine’s other
grands crus
. The exact case breakdown was determined by production, which of course was predicated on the harvest. The Domaine sold mixed cases primarily to Wilson Daniels, at Win and Jack’s request, as it made for a more practical buy for clients
like restaurants and hotels. Assorted cases were also a way that Wilson Daniels could ensure the stable sales and market value of the Domaine’s wines other than Romanée-Conti. In other words, if you want a bottle of the holy grail, you’ve got to buy the whole lot at the established prices.

In 1988, the assortment of each case was based on the following yields: The 4.46 acres of Romanée-Conti produced 6,438 bottles; the 12.4 acres of La Tâche delivered 20,137 bottles. Those are the two monopoles that the Domaine owns completely. The rest of the Domaine’s
grands crus
come from appellations in which they own or lease parcels. The Domaine’s nearly 13 acres of Romanée-St.-Vivant offered 19,346 bottles; the 8.6 acres of Richebourg produced 12,009 bottles; and the 8.6 acres Grands Échézeaux, 12,163 bottles. The Domaine’s 4.6 acres of Échézeaux yielded quite a bit, 20,745 bottles; and the Domaine’s sliver of Montrachet in the Côte de Beaune birthed 3,455 bottles of the Chardonnay.

Win and Jack discovered that Société Leroy that year also took receipt of mixed cases of the Domaine’s ’88s. Once those cases were prepared at the Domaine, Société Leroy sold a substantial number of them to an intermediary that paid roughly $1,800 per case, an exceptionally high price that covered just about half the total cost of each assortment. Win and Jack had dubbed the unofficial middlemen who sometimes appeared in unofficial distribution chains like this one “fax jockeys.” Fax jockeys never physically took receipt of the wine, but rather handled everything via fax machine communications.

This particular Monsieur Jockey, Win and Jack learned, had arranged for the cases to be shipped to Switzerland, where all of the bottles of Romanée-Conti were removed from the boxes and sold to the markets of Great Britain, the United States, and
Japan. Based upon the scarcity and high demand and the currency exchanges in those countries, Monsieur Jockey made fantastic profits on those bottles alone. In Japan, according to what Win and Jack discovered, Takashimaya purchased many, if not all, of the bottles of Romanée-Conti. The other DRC wines were scattered into the world market, including the United States, and sold at bargain rates as the bottles had not been subjected to the normal necessary markups of the official distribution system.

Once Win and Jack were certain they had cracked and documented this “gray market,” they called Aubert. They informed Aubert what they had learned and politely demanded he buy back the inventory of ’88s that Wilson Daniels was now unable to sell and could not afford to sit on. After all, it was his co-
gérant
at the Domaine who had broken their distributing agreement and undercut them. Naturally, too, they made clear the Société Leroy was a problem. It wasn’t just Wilson Daniels’s supply chain and sales in the U.S. market that Société Leroy had upended, Lalou’s company had caused damage to the long-term value and prestige of the Domaine’s wines, and along the way exalted the wines from her own Domaine Leroy.

Société Leroy itself represented one of the largest domaines in Burgundy. It began with Monsieur Leroy’s grandfather. François Leroy grew up a scrappy ward of the state and built a wine business. In 1868, he added to it with acquisitions he made from the Boillot family in Auxey-Duresses. François’s son, Joseph, continued to develop the business, and then, in 1919, Henri, Lalou’s father, took over. Under his direction, Société Leroy became an empire.

A key to Henri’s success was that he took advantage of a loophole
in trade laws between France and Germany. At the time, if French spirits exported to Germany contained an alcohol content above a certain percentage, they were subjected to steep taxes, a move intended to keep French spirits merchants at a competitive disadvantage in Germany. Leroy devised a supply chain in which he would make or buy fortified wines in France with alcohol content just below the taxable percentage, then ship it to Germany, where it was redistilled and sold with the higher alcohol content as brandy, which fetched higher prices and was free of the tariffs. The greater the volume, the larger the profit, and Monsieur Leroy’s business moved in volumes of railroad cars.