Cyber Con Men Beware!

0 Comments | Insight on the News, April 17, 2000 | by Kristina Stefanova

Online-auction fraud complaints have increased a hundredfold during the last three years. Now, the feds are cracking down on the fastest-growing source of crime on the Internet.

As cyberspace con artists increasingly prey on unsuspecting online-auction bidders -- incidents of Internet fraud have increased 100 times in two years -- the Federal Trade Commission, or FTC, has teamed up with eBay Inc., the largest Internet auction site, to educate consumers about online shopping.

"We feel it's urgent to get the message out that consumers need to be careful in these transactions and try to protect themselves from fraud," says Susan Grant, director of the Internet Fraud Watch, one of several other agencies participating in the campaign, including the Justice Department, the U.S. Postal Service and the National Association of Attorneys General. "Certainly, consumers need to be aware of the fact that there are some bad apples out there whose intention is to rip them off, and they need to know how to safeguard themselves."

The FTC received 10,700 complaints about online-auction fraud last year -- a jump from the 107 complaints it received in 1997. Most commonly, customers complain that they never receive the products the ordered over the Net, or the items aren't what was promised. Consumers paid with money orders or cashier's checks in 85 percent of the complaints monitored by Internet Fraud Watch.

Chris Painter, the federal prosecutor in charge of tracking computer crime in central California, points to the case of Robert Guest as typical. Guest, of Blue Jay, Calif., was sentenced to 14 months in prison (plus $100,000 in restitution) after pleading guilty to fraud for collecting $37,000 from eBay bidders seeking digital cameras, laptop computers and fake gemstones. Guest created a reputable "seller's history" with eBay before he accepted bids and payment from 30 customers for items he never shipped.

Scam artists such as Guest have prompted eBay to work with law-enforcement agencies to reduce fraud since 1997. "We believe the best way for e-commerce sites to thrive in the years ahead would be to create an environment of trust and safety on each and every site," says company spokesman Kevin Pursglove.

EBay listed some 129.5 million items last year and brokered $2.8 billion worth of merchandise. Less than one-half of 1 percent involved fraudulent transactions. But traffic on the Website continues to increase dramatically. "The FTC has seen an enormous amount of complaints, but it's not surprising because the number of online shoppers has grown astronomically, as well as the number of items sold on online auctions," says Lisa Hone, an FTC staff attorney who handles Internet fraud.

Another problem is fly-by-night peddlers, who set up Internet home pages, stage an auction and disappear with the cash. "There are a thousand-plus auction sites, and it's beyond comprehension how to regulate them," says state Attorney General Joseph Curran of Maryland, one of a dozen states that have led the crackdown on cyber-auction fraud.

Electronic "flea markets" -- where customers can't see, feel or taste the goods -- are tough for states to police. Even so, federal and state law-enforcement agencies have filed 35 cases against online auctions this year. Among them:

* Alabama authorities won a property-theft conviction against David White, who was charged with using fictitious names to auction goods all over the world that were never delivered. He was sentenced to five years' probation and ordered to pay back the customers.

* Pennsylvania won a legal agreement from a cyber-auctioneer preventing him from selling knockoffs of trademarked collectibles. State Attorney General Mark Fisher also has filed a civil complaint against an electronic salesman who failed to deliver 500 Furbies he auctioned and ordered him to repay 38 customers $2,200 for Pokemon cards they ordered but did not receive.

* New Jersey has filed a complaint against a couple accused of offering Beanie Babies and Bruce Springsteen concert tickets for sale to the highest bidder but not delivering the merchandise.

More than 1,000 auction sites are on the Internet, and stopping fraud will be nearly impossible without proper protection, notes Thomas Vartanian, chairman of the American Bar Association's Cyberspace Law Committee. "It's really a two-sided solution to making sure the Internet remains a very economical, efficient and profitable way of doing business," says Vartanian, "and that's to make sure that there isn't a possibility of fraud on the Internet and that people feel as safe and as confident doing business on the Internet as they do in the real world."