Two Men Plead Guilty to eBay Art Scam

Two men pleaded guilty Tuesday in Sacramento, California federal court to scamming eBay users out of US$450,000 over two years by self-bidding on their own auctions to drive up prices.

Sacramento attorney Kenneth Walton and Scott Beach, of Lakewood, Colorado, were indicted in March on charges of wire and mail fraud for using self-bids, or shills, to illegally inflate the prices of more than half of the 1,000 auctions they hosted at eBay from November 1998 to June 2000.

“While it’s hard to rejoice about a guilty plea, we feel that we’re very satisfied with the agreement that we reached with the government,” Walton’s attorney, Harold Rosenthal, told media sources.

One Still at Large

As part of their plea, Walton agreed to pay back at least $65,000 and Beach at least $39,000. The pair are barred from participating in any Internet auctions for a period of up to three years and Walton agreed to surrender his license to practice law in California.

In return for the guilty pleas by Walton to seven counts of fraud and by Beach to four counts of fraud, federal prosecutors agreed to ask for leniency when the two are sentenced in June. Each of the fraud counts carries a maximum penalty of 5 years in prison and fines of $250,000.

Still at large for his part in the scam is Kenneth Fetterman of Placerville, California.

Phony Diebenkorn

Authorities started investigating the trio after they auctioned what was ultimately revealed as a fake Richard Diebenkorn painting. The painting garnered a winning bid of $135,000.

Walton reportedly found the unsigned painting at a Littlerock, California antiques store and forged the inscription “RD 52” on it.

After placing the painting up for sale at eBay, the three defendants made over 50 phony bids to artificially inflate the price of the painting by using alternate eBay identities. The defendants created the aliases by providing eBay with phony names, addresses and phone numbers.

An amateur art collector from Amsterdam won the Diebenkorn auction, but eBay voided the sale, saying it had detected shill bidding.

Fraud Detection

eBay spokesperson Kevin Pursglove told the E-Commerce Times earlier that the San Jose, California-based 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.”

Pursglove said that with approximately 6 million items listed on eBay each day, it would be impossible to catch each and every fraudulent action as it occurs. However, recently introduced software gives eBay a better shot at stopping shill bidding. 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.

Previously, the auction house was only able to detect shill bidding when the auction was over.

4 Comments

  • I have recently discovered this same similar thing goes on here at art/craft fair. Fraudulent art activities. Sellers are selling reprinted art, placing paint on them and calling them originals. They go as far as to even forge signature of some unknown artist. I just in the past day or two discovered this and AM planning to put some of this activity to rest. The promoters of these shows are somewhat responsible. Do you agree?

    The reason I AM writing about this is because my wife is an artist who works so hard along with many of our friends. This sort of activity gives artists less of an opportunity to offer their work. The fraudulent paintings sell for 35.00 up to 175.00 so far. Your feedback is encouraged.

    Thank you

      • The story says this was happening over a period of years… How long do you want to give Saint Ebay?

        If it would make them more money they would stop it.. if they havent stopped it chances are it is making them money…

  • Has eBay added cross check programs to verify the validity of information entered at the time of membership registration?

    Has eBay added programs that will automatically NARU a newer ID when the older ID (linked by eBay’s own ID History files) is NARU’d?

    Why aren’t “all accounts” that have been proven to be guility of shill bidding permanantely suspended?

    Why doesn’t eBay report “all” of this type fraudulent activity to the authorities?

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