Grape-Switching Scandal Rocks State Wine Industry

The California wine industry’s worst scandal in two decades has come to light in recent weeks as state authorities have accused a number of grape harvesters of selling inexpensive varieties as premium wine grapes.

The latest round of suits was filed Thursday by the state Department of Food and Agriculture, the result of a wide-ranging investigation during the 1988 grape harvest. Shortages of premium wine grapes drove prices up for some varieties last year, but prices of non-premium grapes remained moderate.

In several of the suits, the growers or harvesters are accused of passing off cheaper French colombard grapes as Chardonnays, which sell for more than eight times as much. In others, inexpensive red grapes were allegedly sold as zinfandels. Both Chardonnay and a blush wine made from zinfandels have become highly popular moderately priced wines in recent years.

“There have been suspicions for some time that there were irregularities (with grapes) from some growers,” said Frank Indelicato, co-owner of Delicato Vineyards in Manteca. “But it’s gotten real bad in the last two years. Some people are trying to take advantage of the high prices for grapes.”

The extent of the problem is not yet known, but both federal and state authorities are continuing their investigations. It also is not entirely clear why some wineries apparently failed to detect the switch, or how much mislabeled wine--if any--made it to the marketplace. Industry sources say wine made from the grapes under suspicion was not of the expensive type, but rather fell among those that typically sell for $5 or less per bottle.

Winery officials are clearly embarrassed by the situation, and some express concern about the effect the scandal could have on the industry’s image.

“There are 6,000 honest, hard-working grape growers in California and a couple of cases like this make all of us look bad, and that is causing a lot of bitterness in the grape-growing community,” said Jim Ledbetter, owner of Vino Farms and president of the Sonoma County Grape Growers Assn.

Six civil cases have been filed so far by state agriculture officials, all in the San Joaquin Valley where virtually all of the state’s cheaper wine grapes are grown. However, some of the allegedly inferior grapes or wine are believed to have wound up at wineries in Napa and Sonoma counties--the state’s most prestigious wine-producing areas, and federal investigators are known to be looking into some suspicious cases at a number of premium wineries.

Wineries Victimized

The wineries themselves so far are not under investigation for switching grapes, and are considered to have been the victims. However, sources said the federal Bureau of Alcohol, Tobacco and Firearms, a division of the Treasury Department that regulates the wine industry, is checking to see whether some wineries have mislabeled wine made from the suspect grapes.

It was also learned that federal regulators have demanded that a number of California wineries show exactly what they did with any suspected misidentified grapes or the juice produced from them. Winery officials said they are cooperating.

Authorities want to determine whether wineries that bought misidentified grapes or wine violated the federal “minimum varietal content” regulation. Federal rules require that wine bottled with a varietal designation (Chardonnay, for example, or white zinfandel) be made from at least 75% of that grape variety.

The Bureau of Alcohol, Tobacco and Firearms has the authority to suspend the license of any winery that knowingly bottles wine with a varietal designation made from less than 75% of the named variety.

Private Suits Filed

At least three private lawsuits also have been filed. In one, brewing giant Anheuser-Busch recently won an out-of-court settlement in Northern California after it claimed that an Escalon, Calif., grape harvester had sold it lesser-quality grapes labeled as premium zinfandels. The defendant agreed to pay nearly $1.1 million to settle the case after a government inspection determined that less than 23% of the grapes delivered to Anheuser-Busch were actually zinfandels.

Industry officials insist that the situation occurred in only a few instances in the San Joaquin Valley and could not happen in the premium wine areas (Napa, Sonoma, Mendocino and Lake counties, for example) where wineries and growers are closely linked by long-term contracts. “These are smaller communities where the growers know the wineries, people know each other, they eat together, they’re friends,” a spokesman for the Sonoma County Wineries Assn. said.

By contrast, the San Joaquin wineries are typically much larger and process huge amounts of grapes from many different growers.

Ev Delfino, assistant director of inspection services for the state agriculture department, said evidence accumulated so far indicates that the problem was localized in the San Joaquin Valley. “The great majority of growers, 99 and nine-tenths of them, are clean. There is no large-scale misidentification of wine grapes.”

Warning Issued

Since about 1987, when the state’s supply of Chardonnay and zinfandel began to dry up (in part because of a small harvest) and prices rose dramatically, the state has suspected that some grape growers and brokers might take advantage by selling cheaper grapes and passing them off as more costly varieties. In fact, the state Department of Food and Agriculture issued a public warning to growers and wineries early last year.

State Assistant Atty. Gen. Mark Urban, a prosecutor in the six cases filed so far by the agriculture department, said the state is seeking a total of more than $1.2 million in damages, including penalties.

Another six suspicious instances have been referred to the attorney general’s office for possible prosecution, according to sources familiar with the investigation. (There is a one-year statute of limitations on grape-switching; all the cases filed so far refer to actions that allegedly occurred last summer.)

In four of the six cases already filed, Bavaro Brothers, an Escalon-based grape harvester, and its owners, Nick J. Bavaro and Francisco Bavaro, among others, were named as defendants. A secretary said that on the advice of its lawyers the company would not comment on the cases.

Zinfandel Producer

Buyer of the grapes in three of the Bavaro cases was Delicato Vineyards, believed to be the state’s largest white zinfandel producer and purchaser of 80,000 tons of California wine grapes last year. Delicato sells much of its production--4.2 million gallons last year--in bulk to other wineries, including Sutter Home, the state’s largest marketer of white zinfandel under its own label.

In one case, the Bavaro firm is alleged to have sold French colombard grapes, which sold at a statewide average price of $138.79 per ton in 1988, as Chardonnays, for which the statewide average was $1,122.36 per ton.

In other cases, the state alleges that lower-priced carignan, valdepenas and grenache grapes were sold in different transactions and passed off as zinfandels. There was a difference of about $600 per ton in the price paid for those types of grapes last year.

Winery owner Indelicato said vintners cannot always tell the type of grapes they are receiving, and therefore must rely on the representations of their suppliers.

“Even when we have suspicions, and we call the county (agricultural) commissioner over, some of the grapes are sent to (the viticulture laboratory at UC) Davis, and sometimes even professionals can’t tell for sure. Just looking at the grapes, it’s hard to tell. You have to analyze the seeds.”

Bob Steinhauer, viticulturist for Beringer Vineyards in the Napa Valley, agreed. “The three of us who buy grapes for Beringer inspect the vineyards to make certain that it’s what the grower says it is. And we have a map on file of every vineyard we buy from, showing the varieties,” Steinhauer said. “When the grapes are on the vine, it’s fairly easy to tell what’s zinfandel and what’s not. But it’s harder to tell when the grapes are in the gondola.”

Sebastiani Vineyards in Sonoma and Charles Krug in the Napa Valley, both premium wineries that bought grapes from the Bavaro firm, have filed lawsuits against it claiming that the grapes were misrepresented; each suit seeks $1 million in damages. Both wineries said discussions are under way to settle those cases.

‘A Small Minority’

“This does not represent the entire wine industry,” said Robert Hartzell, president of the California Assn. of Winegrape Growers. “It’s a small minority of growers.

“This is an extremely unusual situation. . . . In the 12 years I’ve been president of (the grape growers), I’ve almost never seen the state need to step in.”

Hartzell said some growers do not believe that the state is being tough enough on the wrongdoers. “They think the perpetrators’ hands aren’t being slapped hard enough, that the penalties should be more severe. Both growers and vintners are deeply concerned that a few greedy people have misrepresented the varieties.”

The last time a scandal of this type hit the California wine industry was nearly 20 years ago when Almaden Vineyards, then located in San Jose, allegedly mislabeled wine that it sold to airlines. That case was settled out of court.

Some wineries are upset that the authorities were slow to warn them that a significant amount of misidentification was occurring. In some cases, the warnings came after the wine was already blended with other wine. That means large quantities of wine could be suspect if it were labeled as varietal.

A spokesman for Lost Hills Winery in Acampo said the Bureau of Alcohol, Tobacco and Firearms was slow in telling wineries of its concerns, “and we never knew until we had blended our tanks. . . . They should have told us. We could have held onto that wine until the percentages were certified. Now it’s too late.”