INTERNET FTC makes a bid to stop online auction fraud

Identity theft makes it even tougher to track frauds on eBay and other such sites.
WASHINGTON POST
The white poodle should have been a tip-off.
Antiques dealer Thomas Perry had taken a picture of a giant antique teak ship's wheel outside his gallery in Chester, Conn., and offered it for sale on his One of a Kind Antiques Web site. It added to the charm of the photo that Buffalo, his poodle, had wandered into the shot.
But then Perry's photo popped up on eBay, the online auction site. Someone was offering his ship's wheel for sale, using his written description -- and his poodle.
Perry was about to be dragged into the increasingly murky world of Internet auction fraud.
As eBay has grown rapidly into the world's largest marketplace -- with 69 million registered users and 16 million items up for auction or sale at any given moment -- it also has attracted cyber-versions of the con artists, shoplifters and pickpockets who populate any teeming bazaar.
New twists
Although most cases of online fraud involve failure to deliver advertised goods, online auction fraud is growing steadily more complex and sophisticated, with twists that make it harder to figure out what happened, much less track down the scam artists.
Identity theft is rampant in online fraud, usually involving sellers posing as other people. And one of the newer twists is fake Web sites, including elaborate ones that appear to be legitimate escrow services, just waiting for an unscrupulous "seller" to suggest that his buyer deposit his payment with the escrow service for safety. Another involves bogus eBay "password verification" forms inviting victims to fork over their passwords.
Such deceptions bewilder and fool a lot of people, as Perry knows firsthand. He gets calls from irate eBay buyers who thought they were buying from Perry because a seller on eBay used his name when communicating with them by e-mail.
One bidder had to kiss $5,000 goodbye after he sent a certified check to England for a Cartier pendant that he thought he was buying from Perry.
Federal and state prosecutors are worried enough about what they call a "significant" problem with Internet auction fraud that they announced a major crackdown April 30. The Federal Trade Commission and state prosecutors detailed legal actions they'd taken in 57 recent cases in which online auction sellers had bilked thousands of consumers.
Center of action
Although a few involved Yahoo auctions, the vast majority took place at eBay Inc., the Web's top auction destination, where goods valued at $5.3 billion swapped hands in the first quarter.
For its part, the San Jose, Calif., company contends it has the multiheaded fraud monster under control, with no more crime occurring in its virtual community than you'd encounter in a conventional store. Its managers say fraud touches a tiny fraction of its transactions, partly because of the elaborate "feedback" system that helps build trust among strangers. In each eBay transaction, the buyer and seller can rate each other.
Already, eBay runs sophisticated software analysis against its millions of auction listings, looking for fraud patterns it declines to discuss. It has a bunch of former prosecutors and police officers on its fraud-fighting team.
Last year eBay tightened its registration system, instituting electronic address and credit-card verifications that run in the background when new users sign up.
Quiet about cases
FTC lawyer Tara Flynn said investigators have found that for every victim who steps forward, there can be five to 10 more the investigators run across who were bilked by the same person but kept quiet. "The thing I have found shocking is how few people do complain," she said.
Partly for that reason, FTC officials say they are trying to get a better handle on how big the auction rip-off problem is. Already, the FBI has pegged it as the No. 1 fraud complaint on the Internet, with more than 50,000 cases reported to the FTC last year, up dramatically over previous years.
New Jersey antiques dealer Michael Lehr took a hard hit. He said he bought a painted Rookwood vase on eBay for $1,125 and wired the money to Indonesia -- and then never heard from the seller. But Lehr figured there was little point to filing a claim or law enforcement report, because he doubted American prosecutors could recover funds from a bank in Indonesia, much less arrest a resident there.
"I took the different approach, of being aggressive," he said. Acting like a digital posse, he searched for other fake auctions on eBay and reported what he found to eBay's fraud division. When eBay didn't yank some of the listings, he occasionally took matters into his own hands, entering phony bids to ward off unsuspecting bidders. He ran into other self-styled auction vigilantes doing the same thing, bidding under names such as "Don't bid dummy."