Bidding only crooks can win

Fraud: Scammers are using online auction sites, such as eBay, to turn buyers and real sellers into victims.

February 06, 2003|By Paul Wenske | Paul Wenske,KNIGHT RIDDER/TRIBUNE

KANSAS CITY, Mo. - For a couple of days in December someone was auctioning Sony camcorders from Kevin Pilgrim's eBay account. But the auctioneer wasn't Pilgrim, who lives in Raytown, Mo.

More than two dozen online bargain hunters agreed to pay $605 apiece, in some cases wiring money to Germany. But there were no camcorders. The auction was a fraud.

The scammers who hacked into Pilgrim's eBay account to woo bidders did their dirty work before eBay shut his account down.

A frustrated Pilgrim watched the crime unfold, able to do little more than desperately e-mail warnings to bidders. Even the FBI told him that while these electronic purse snatchings were rampant, they could not afford to tie up agents' time on each one that popped up.

"We get calls like this every day, and that shows how rampant this is," said Jeff Lanza, a spokesman for the FBI in Kansas City.

Although auction fraud is skyrocketing, consumer protection is not keeping pace. As a result, auction users face growing risks. More are pressing for safeguards; some are becoming online vigilantes.

"You've got this monster market on the Internet, but you can be witnessing a crime in real time and be helpless to do anything," Pilgrim said. "There's no 911 number you can call."

Online auctions attract millions of users willing to buy everything from toasters to sailboats from strangers. The largest, eBay, posted revenues last year of more than $240 million. It's been reported that 35 million people buy and sell in online auctions.

"What we say is that we do $30 million a day in business," said eBay spokesman Kevin Purseglove. He said fraud taints no more than 0.01 percent of the transactions.

But that means lots of users get burned. Some experts believe the number of frauds may increase because they are so hard to track.

"By the time they're discovered, they're someplace else," said John Giubileo, vice president of products and services at eSecurityOnline.

The National Consumers League's Internet Fraud Watch reported that online auction complaints accounted for 87 percent of all Internet fraud complaints it received last year. The league said Internet fraud last year cost consumers $7,209,196 - $484 per victim.

The Federal Trade Commission's Consumer Sentinel, which gathers online fraud complaints for a law enforcement consortium, received more than 20,000 Internet auction fraud complaints in 2001.

While there are a lot of scams, each might affect no more than 50 people, a number unlikely to ring bells at the FBI.

While online auctions rely on trust between buyers and sellers, scammers take advantage of that trust to do their dirty work.

In the past, many scammers simply opened their own accounts to hoodwink bidders. But they were more easily traced. Now, the scammers - often international gangs - hack into the accounts of users with good reputations, sellers who showcase their positive feedback, and use those good reputations to ambush bidders.

That's what happened to Pilgrim. On Dec. 16, when he checked his e-mail, he found 18 eBay users wanting to buy camcorders from him. When he tried to access his account, he found he was locked out. The password had been changed.

He reported the fraud using an eBay message prompt. An automatic response said eBay would get back to him in "12 to 36 hours." He then called the local police, who said they were not equipped to investigate Internet crimes.

The next morning, the final day of the auction, Pilgrim called the FBI and the Justice Department's Internet Fraud Complaint Center, which gave him a complaint reference number.

He frantically returned e-mails to as many bidders as he could, warning of the fraud: "I was concerned that people thought I was the guy perpetrating the fraud."

More than 40 people had responded to the auction. An unknown number already had paid. Craig Rettmer, a Kansas City audio engineer, was one of the unlucky ones who lost $605.

"Kevin [Pilgrim] was quick to tell me he wasn't selling anything," said Rettmer. "I felt like such a fool."

Victims were beguiled by the scammers' slick appearance on the Net. After taking over Pilgrim's site, the scammers advertised Sony digital camcorders at a "buy now" price $200 below retail. The site included technical information and even offered gift wrapping. "They made you feel very comfortable," said Rettmer, who intended to give his daughter a camcorder for Christmas.

In retrospect, the payment directions should have raised a red flag. Bidders were told to wire payments by Western Union to an address in Nuremberg, Germany. Hoping to get his camera before Christmas, Rettmer wired cash. Other bidders paid by credit card and remain hopeful that they will get their money back.

The auction was over and the scammers were gone when eBay suspended Pilgrim's account Dec. 18. Purseglove, of eBay, acknowledges that the company appeared slow to react in Pilgrim's case but called that unusual. He said eBay tries to respond immediately to customer concerns.

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