Bootlegging at distilleries will ‘always happen’

Following a spate of high-profile Bourbon heists in Kentucky, it’s clear that distillers continue to face a widespread, and under-examined, issue: security.

A number of Bourbon thefts in Kentucky have thrown up questions around distillery security

*This article was first published in the June 2015 issue of The Spirits Business magazine and events in the story outlined are likely to have progressed

Padlocked spirit safes have been an integral part of Scotch whisky distilleries since the early 1800s, preventing disobedient employees from siphoning off new make spirit before quantities had been officially recorded. Since the dawn of the commercial spirits industry, authorities have sought methods to protect precious tax revenues, as bootleggers simultaneously discover ways to outsmart the system.

While illicit alcohol production is still rife all over the world, theft and other crimes committed against legitimate distilleries in established markets are largely regarded as a problem confined to the spirits industry’s history books. Recent headline-grabbing events in Kentucky, however, suggest this is not necessarily the case.

A lengthy investigation by police culminated earlier this year when nine people were charged for allegedly forming a criminal syndicate to steal and sell barrels and bottles of Bourbon from the Buffalo Trace and Wild Turkey distilleries. The investigation first launched in 2013 when workers discovered 65 cases of highly coveted Pappy Van Winkle had been pilfered from Buffalo Trace – amounting to an estimated loss of US$26,000. Authorities quickly deduced that the crime had most likely been committed as part of an “inside job”. The plot thickened 18 months later when five casks of Wild Turkey were discovered in the backyard of Buffalo Trace employee Gilbert Curtsinger. The 45-year-old was subsequently identified by police as the “ringleader” of the group, which is thought to have stolen more than US$100,000 worth of Bourbon over seven years. Mark Searcy, who worked at the Wild Turkey Distillery, was also among the list of those charged.

Meanwhile, a veteran police officer resigned following the revelation he had exchanged telephone calls with Curtsinger, and a Buffalo Trace security guard admitted to receiving payment for “turning a blind eye” to the thefts. The case grabbed international headlines and prompted questions over the level of security of modern distilleries.

Both Buffalo Trace and Italian drinks group Gruppo Campari, owner of Wild Turkey, have been loath to discuss the case, which is still ongoing. However, Campari released a statement that read: “We have already conducted and continue to conduct an audit of all existing security measures. As a result of the audit, we have made adjustments and improvements to our security program that obviously we are not prepared to discuss in public.”

Most drinks groups approached by The Spirits Business declined to comment on the subject of distillery security – perhaps an appropriate indication of the topic’s current sensitivity. However, for Kevin Smith, vice president of Kentucky Beam Bourbon affairs at Beam Suntory, the issue has long been at the forefront of drinks groups’ agendas.

“Security has always been important and we have 24-hour guards and surveillance, but we always review our processes to make sure they are effective,” he claims. “I am not saying we are untouchable. Just because this happened at two particular distilleries, it doesn’t mean they weren’t diligent,” he said.

The Buffalo Trace Distillery, where US$26,000 worth of rare Pappy Van Winkle Bourbon was stolen in 2013

Sensitive issue

The reluctance of groups to discuss the matter of security makes it difficult to assess whether it is a pressing concern throughout the broader spirits industry, particularly as the value of aged Bourbon, Scotch, rum and Cognac continues to skyrocket on the secondhand market.

Rosemary Gallagher, spokesperson for the Scotch Whisky Association (SWA), reinforces the view that security remains a “top priority” for the Scotch industry. “Scotch Whisky is a high-value product,” she comments. “The industry takes security very seriously and invests in the appropriate measures to avoid theft and any other breaches of security.”

Despite reassurances from industry members, Donald Snyder, founder of distillery-focused consultancy group Whiskey Resources, argues that theft is a regular, if underreported, occurrence at large US distilleries, the security measures at which have become more lenient with the growth of tourism.

“It’s a fact that bootlegging will happen at big distilleries,” he claims. “It has always happened and it will continue to happen. After Prohibition security at distilleries was like Fort Knox. It was exceptionally strong. Measures have become a lot more relaxed over the past three years or so, but I think that’s starting to change.”

‘Impossible’ to predict loss

While such claims have not been confirmed, Snyder believes that if small-scale distillery thefts are noticed they are often “written off” as loss, since it is a lengthy and arduous process to report larceny of bonded products. “Because of this it is impossible to predict how much money has been lost through theft,” he adds. “I would not say it’s a huge amount, but it does happen all across the country.”

As such, Snyder predicts that in line with the growth of craft distilleries, security requirements may be ramped up at a federal level since the Alcohol and Tobacco Tax and Trade Bureau (TTB) has a “vested interest” in protecting its tax revenues. However, he warns that producers must “strike the right balance” between making their distilleries both secure and friendly to a growing number of tourists.

The colossal potential income from tourism has not gone unnoticed by the whisky industry, which has invested heavily in opening state-of-the-art visitors’ centres over recent years. Indeed, the Kentucky Bourbon Trail witnessed a record-breaking 720,000 visitors last year – visitors whose experiences would perhaps be tainted by the sight of miles of barbed wire and armed guards.

Snyder adds that such measures could also impact the internal harmony of a distillery. “The more security that businesses implement, the more likely it is they can create a culture of distrust when there needs to be mutual trust and respect,” he says.

The spirits industry’s new dependency on tourism and widespread professionalism will almost certainly prevent a return to Fort Knox-style security. But, as Snyder concludes, the recent misfortune of Buffalo Trace and Wild Turkey may well act as a “call to action for other big distillers”.