An alleged massive wine fraud has shaken Burgundy, where investigators are focused on one of the region's largest dealers and the local wine board is suing a former ally.

"The Burgundy wine industry has decided to join proceedings as a civil party in order to be fully informed of the details of the case," said Cecile Mathiaud, spokeswoman for the Burgundy Wine Board (BIVB).

Allegations of a massive fraud erupted when it emerged that six managers of the respected Maison Laboure-Roi, including its two elderly owners Louis and Armand Cottin, had been taken into police custody for questioning last week.

"They were brought in for questioning and released, but no formal charges have been made at this time," said public prosecutor Eric Lallement.

According to Lallement, an 18-month investigation revealed an alleged fraud involving 1.5 million bottles of premium Burgundy wine, perpetrated between 2006 and 2008.

Around 500,000 bottles worth a total of 2.7 million euros ($3.4 million) were allegedly blended with wines from lesser appellations in the region, beyond the 15 percent allowed by law.

"To a lesser degree, table wine was also used," said Lallement.

Another 1.1 million bottles were labelled with false vintages.

"If they ran out of Meursault 2008, the Meursault 2010 was transformed into 2008 on the label," said Lallement. They also added "old vines" when it was not the case.

France's DGCCRF fraud prevention agency grew suspicious after a routine audit showed little difference in the volume of grape must entering the cellars and the volume of wine leaving. Normally, a certain amount of volume is lost in the course of winemaking.

Louis Cottin, 81, and his brother Armand, 82, as well as the company managers admitted the discrepancy during questioning, but blamed it on "equipment and computer errors", according to the prosecutor.

Laboure-Roi sells 10-11 million bottles of wine a year for an annual turnover of 35 million euros. It exports 75 percent of its wine around the world.

"Of course, I fear the reaction of suppliers, clients and banks. One has to be ready for everything," said Louis Cottin.

Retailers are treading with caution.

"It's very serious," said Patrick Bernard, CEO and owner of Millesima, an international retailer who carries a portfolio of Laboure-Roi wines.

The growing scandal and Burgundy's reliance on export markets pushed the BIVB to join the civil lawsuit.

"More than half of Burgundy wines are exported to some 150 countries. This is why any suspicion of dishonest practice that might tarnish the reputation of these wines cannot be tolerated," Michael Baldassini, deputy chairman of the BIVB, said in a statement.

Louis Cottin, who with his co-defendants faces a two-year prison term and hefty fine if convicted, insists the problems have been corrected.

"For three years, we have passed all of our traceability audits," he said. "The quality of our wines after September 2008 is perfect."

But prosecutors are not backing down.

"There is a really good chance they will be charged," said Lallement.

[A man checks on a wine cellar in 2011. AFP Photo / Jeff Pachoud]