Gallo suppliers made millions in Pinot Noir scam

FRENCH wine-makers and dealers were convicted this week of selling millions of bottles of fake Pinot Noir to the US firm E&J Gallo in one of the biggest scams ever to rattle the wine world.

A court handed out suspended jail terms and hefty fines to 12 people for selling 18 million bottles of wine they said was Pinot Noir but which was in fact made from far cheaper grape varieties.

The convicted people included executives from wine estates, cooperatives, a broker, wine merchant Ducasse and the conglomerate Sieur d’Arques.

“The scale of the fraud caused severe damage for the wines of the Languedoc for which the United States is an important outlet,” the judge told a packed courtroom in Carcassonne in France.

He said the accused made €7 million in profits from the scam, with Ducasse raking in €3.7m and Sieur d’Arques pulling in €1.3m.

But the fines he imposed ranged from just €1,500 to €180,000, while the suspended jail sentences went from one to six months.

The wine was sold in the US under Gallo’s popular “Red Bicyclette” Pinot Noir label.

It is not yet clear whether Gallo purchased the wine at a lower price than the market rate for Pinot Noir.

If so, they would have substantially increased their margins on a wine that sells for $11.99 (€8.84) a bottle. Gallo was neither a defendant nor a plaintiff in the case in Carcassonne.

Meanwhile, US authorities are investigating potential infractions.

The Alcohol, Tobacco, Tax and Trade Bureau has been in discussions with the French authorities about the scam over the past year, a spokesman said, and will now review court documents to decide whether to take action.

The scandal broke in March 2008 when France’s fraud squad, the DGCCRF, became suspicious during an audit at the wine merchant Ducasse.

Ducasse had been buying Pinot Noir at €58 per hectolitre (100 litres) when the official market price was €97.

The volume of wine from the renowned Pinot Noir grape being sold to Gallo far exceeded the possible supply from the region.

After a year-long judicial investigation, the defendants were accused of substituting wine made from less expensive local grape varieties for the Pinot Noir, which is hugely popular on the American market.

US consumers, believing they were tasting the red grape feted with such style in the Oscar-winning 2004 wine comedy Sideways, were none the wiser.