FBI Opens Fraud Probe Into eBay Art Auction

S A N   F R A N C I S C O, June 7 -- The FBI, prompted by the derailed sale ofan alleged Richard Diebenkorn painting, is investigating whethergroups of people are driving up prices on eBay by bidding on eachothers’ items.

“We can confirm that there is an investigation and we’reassisting in any way possible,” eBay spokesman Kevin Pursglovesaid today. He declined to elaborate.

The probe is being led by the FBI’s Sacramento office and waslaunched after lawyer Kenneth A. Walton’s attempt to sell anabstract painting that bidders thought was by Diebenkorn, whosework has sold for millions.

FBI agent and spokesman Nick Rossi said today he could notcomment on pending investigations.

Prompted by ‘Shilling’

However, Donald Vilfer, a supervisory special agent in the FBI’sSacramento office, told the New York Times Tuesday thatinvestigators turned their attention to the case after reading aJune 2 story that outlined how Walton and several other eBay usershad engaged in cross-bidding on one another’s items and offeredglowing testimonials to each other on the site.

Self-bidding, known as shill bidding or shilling, is forbidden by eBay rulesand is generally illegal in the traditional auction world.Participation in a bidding ring would be a violation of federalstatutes prohibiting mail fraud and wire fraud. Each count carriesa maximum penalty of up to five years in prison and $1 million infines.

Peter Toren, who worked as a federal prosecutor specializing incybercrime for seven years until going into private law in 1998,equates shill-bidding to attempts by Wall Street deviants to spreadrumors to drive up the price of penny stocks.

Toren, who left the Justice Department before online auctioningbecame popular, said the eBay investigation, to his knowledge, isthe first federal probe into this kind of activity.

“Certainly through the FBI investigation of this scope theycould begin to uncover, at least to some extent, what the problemis,” he said. “Obviously being able to police this sort ofactivity in the online community can be very difficult because ofthe anonymity of the Internet, where people can have multipleidentities and be able to manipulate the system in that way.”