S A N   F R A N C I S C O, June 7, 2001 -- The FBI, prompted by the derailed sale of an alleged Richard Diebenkorn painting, is investigating whether groups of people are driving up prices on eBay by bidding on each others’ items.

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

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

FBI agent and spokesman Nick Rossi said today he could not comment on pending investigations.

Prompted by ‘Shilling’

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

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

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

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

“Certainly through the FBI investigation of this scope they could begin to uncover, at least to some extent, what the problem is,” he said. “Obviously being able to police this sort of activity in the online community can be very difficult because of the anonymity of the Internet, where people can have multiple identities and be able to manipulate the system in that way.”

‘Wild Abstract Painting’

Walton, 32, said Tuesday that he had not been contacted by the FBI and knew nothing about a federal investigation. Today, the voicemail greeting at his office indicated he would be away this week. A message left by the AP was not immediately returned.

No one knows if the painting in question is in fact an original Diebenkorn. Walton didn’t make such a claim when he offered the “great big wild abstract painting” he said he’d bought at a garage sale for auction on eBay on April 28.

The bidding began at 25 cents, went to $10 and slowly climbed. By May 8, a Dutch man named Rob Keereweer won the painting for $135,805. But it never changed hands.

Part of a Bigger Picture?

Investigators for eBay dissolved the sale and barred Walton from the site after discovering that he had placed a $4,500 bid on the painting himself, using an online alias. Walton said that bid was made for a friend, and had “absolutely no effect on the eventual price for which the painting sold.”

Allegations of Internet fraud are climbing at a drastic but largely unmeasured rate, with law enforcement agencies and other regulatory bodies only recently beginning to track and try to tackle the problem.

The FBI and the National White Collar Crime Center in West Virginia opened a complaint center last month, and receive an average of roughly 1,000 complaints a week, said Jule Miller, FBI spokeswoman in Washington. Investigators have yet to break down the numbers into categories of Internet crime but hope to do so within the next few weeks, Miller said.

“It’s a little soon. They’re kind of inundated with these complaints right now,” she said.