- The Washington Times - Tuesday, February 15, 2000

The Federal Trade Commission announced yesterday it will crack down on fraud at on-line auction sites, the fastest-growing source of the crime on the Internet.

Cyber-con artists are taking advantage of unsuspecting bidders, costing the trust between honest buyers and sellers. So the agency is teaming up with other federal agencies and E-Bay Inc., the largest Internet auction site, to prevent fraud and educate consumers about on-line 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," said Susan Grant, director of the Internet Fraud Watch, a division of the National Consumers League, one of the agencies joining the FTC in its campaign.

The FTC received 10,700 complaints about on-line auction fraud last year a jump from the 107 complaints it received in 1997.

Federal and state law enforcement officials will be instructed how to track down and prosecute Internet fraud cases, and an education campaign will give consumers safety tips.

On-line fraud mostly involves cases in which a customer buys a product and never receives it or the item is not what was promised.

"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," Ms. Grant said.

Chris Painter, the federal prosecutor in charge of tracking computer crime in central California, points to the case of Robert Guest as typical "of how cyber-criminals use the Internet to trap their victims in a web of would-be fraud."

Guest, of Blue Jay, Calif., was sentenced to 14 months in prison after pleading guilty to fraud for collecting $37,000 from bidders who turned to the popular E-Bay auction site to buy digital cameras, laptop computers and "supposedly precious gemstones that weren't of gem quality," Mr. Painter said.

Guest even went so far as to create a reputable "seller's history" with E-Bay before he accepted bids from 30 customers for items they paid for but never got.

Guest's sentence requires him to offer $100,000 for restitution.

Scam artists like Guest have prompted E-Bay to work with law-enforcement agencies to reduce fraud since 1997, said company spokesman Kevin Pursglove.

"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," he said.

About 129.5 million items were listed on E-Bay last year, and $2.8 billion worth of merchandise was sold. Less than one-half of 1 percent involved fraudulent transactions, Mr. Pursglove said.

He said traffic on the site has increased dramatically in the last three years only 4 million items were listed on E-Bay in 1997.

"The FTC has seen an enormous amount of complaints, but it's not surprising because the number of on-line shoppers has grown astronomically as well as the number of items sold on on-line auctions," said Lisa Hone, an FTC staff attorney who handles Internet fraud.

Another problem is fly-by-night peddlers, who set up Internet auction 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," said Attorney General Joseph Curran of Maryland, one of a dozen states that have led the crackdown on cyber-auction fraud.

Mr. Curran adds that these electronic "flea markets" where customers can't see, feel or taste the goods, are tough for states to police. Even so:

* 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 never got delivered. He was sentenced to five years' probation and ordered to pay back the customers.

* Pennsylvania won a legal agreement from one cyber-auctioneer that he won't sell 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 but didn't deliver 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.

The FTC, the Justice Department, U.S. Postal Service, the National Association of Attorneys General and other federal, state and local law enforcers are joining the effort to prevent on-line fraud.

Each organization will turn in complaints to the FTC, Ms. Hone said.

The effort is directed at auction sites because most consumer complaints stem from auctions. Eighty-seven percent of the complaints Internet Fraud Watch received last year involved auction sites, up from 68 percent in 1998.

"Consumers are our best and first line against fraud and we want them to be educated," said Ms. Hone, who recommended using credit cards because they offer the most protection.

Consumers paid with a money order or cashier's check in 85 percent of the complaints.

Federal and state law-enforcement agencies have filed 35 cases against on-line auctions this year, and other investigations are pending.

More than 1,000 auction sites are on the Internet, and stopping fraud will be nearly impossible without proper protection, said 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 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," he said.

This story is based in part on wire service reports.

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