Federal prosecutors issued an indictment on Friday against three eBay users for self-bidding on their own art auctions in an attempt to spike bid prices.
The indictment alleges that the three men used 40 different names on eBay to place over 50 false bids on paintings they auctioned online from November 1998 to June 2000, including a fake Richard Diebenkorn painting that garnered a US$135,000 bid.
Rob Chesnut, eBay's deputy general counsel, told the Associated Press that he believed the indictment marks the first criminal case to result from alleged shill bidding online.
eBay spokesperson Kevin Pursglove told the E-Commerce Times that the Web auction house assisted the investigation by providing federal authorities with access to eBay tools that can help pursue individuals who perpetrate auction fraud.
"Anytime we see a series of listings that may be a fraud, we will often contact the authorities and let them know what kinds of information we have available," Pursglove said. "A lot of the information we have is confidential and covered by our privacy policy, but we make it very clear to our users that if they engage in any fraudulent activities we will cooperate with the authorities to the max."
Where There's A Shill…
According to published reports, Kenneth A. Walton, a 33-year-old lawyer from Sacramento, California; Kenneth Fetterman, a 33-year-old man from Placerville, California; and 31-year-old Scott Beach of Lakewood, Colorado were charged with a total of 16 counts of wire and mail fraud.
If convicted, the men face up to five years in prison, as well as fines and the obligation to pay restitution to the victims.
The shilling scheme, which included the creation of phony e-mail accounts from art experts, raised $450,000 in auction bids. In May 2000, eBay voided the $135,805 sale of the fake Diebenkorn painting after discovering that Walton had placed his own bid on the item using a different online identity.
Watchdog Software
Pursglove said that because approximately 6 million items are listed on eBay each day, it would be impossible to catch each and every fraudulent action as it occurs. However, eBay's new proprietary software tools gives the online auction leader the best possible chance to do so, Pursglove said.
The software searches the bidding history of individual bidders to look for historical shill patterns, and identifies shill patterns as they are occurring, Pursglove said.
Second Opinion
On March 5th, eBay announced a new partnership with Eppraisals.com, the largest online art, antiques and collectibles appraisal company.
For a fee of around $15, eBay users can get an appraisal on an object up for bid by sending Eppraisals the object's item number or URL. Pursglove said Eppraisals will help eBay customers determine if an item is priced or described accurately, with a turnaround time of around 48 hours.
Pursglove said that eBay's alliance with Eppraisals "will go a long ways towards building
confidence shoppers have on our site."
Talkback: 
