After an on-line auction last month saw a painting listed for 25 cents go for $135,000, the FBI has opened a probe into whether people are committing fraud by bidding up the prices of each other’s items on the eBay Inc. site, officials said Wednesday.
Self-bidding, also known as shill bidding, is forbidden by eBay rules and is illegal in much of the traditional auction world. But crime experts said the explosion of Internet auctioneering was proving hard to police, giving fresh life to old scams.
“We’re looking at a number of different types of traditional fraud which are now taking place through a new media,” said Nick Rossi, an FBI spokesman in Sacramento.
Participation in a bidding ring violates federal laws prohibiting mail and wire fraud. Each count carries a maximum penalty of five years in prison and $1 million in fines.
Rossi declined to comment on the eBay investigation, which company spokesman Kevin Pursglove confirmed started after a May auction amazed art aficionados around the world.
Sacramento-area lawyer Kenneth Walton listed the abstract painting on the site with an opening bid of 25 cents, saying he had found it at a Berkeley, Calif., garage sale and his wife refused to let him keep it because “it looks like it was done by a nutcase.”
But the style of the piece, its purported age and the carefully photographed “RD52” signature included on the eBay Web page prompted frenzied bidding by buyers who hoped the painting was in fact an undiscovered painting by the late California modernist Richard Diebenkorn–whose works sell for millions at established auctions.
The painting eventually sold to an amateur Dutch collector for a whopping $135,805. But in the glare of media publicity surrounding the deal, eBay voided the sale after saying it had detected “shill” bids during the auction. Investigators for eBay said Walton placed a $4,500 bid using an on-line alias; Walton has said he made the bid for a friend. He could not be reached for comment Wednesday.
EBay said it was cooperating with the investigation.
“As always, it has been eBay’s practice to actively assist federal authorities in any of their investigations,” Pursglove said. “This points out the fact that eBay and federal authorities take issues such as `shilling’ very seriously.”
To avoid being victimized by shill bidding, consumers should research the product on which they are bidding and get to know the seller, said Delores Gardner, a Federal Trade Commission attorney specializing in Internet auction fraud.
Gardner said the number of complaints about on-line auctions increased from 107 in 1997 to 10,700 last year, out of roughly 19,000 complaints of general Internet fraud in 1999.
