It may be the stickiest scam on the Internet — a nine-year saga of deceit that has seen thousands of altered postage stamps sold to unwitting collectors on eBay and other Internet auction sites. More striking than its longevity, though, is that the mastermind has never been charged with a crime, even though his identity apparently is known to eBay security, law enforcement officials and some of the nation’s leading stamp experts.
The man believed to be behind the scheme is a longtime stamp dealer living in upstate New York. He has been investigated by law enforcement, suspended by eBay and exposed in Internet forums devoted to stamp collecting. Yet the massive operation continues to churn out philatelic fakes, burning collectors and, some say, undermining the very foundations of the hobby.
A retired FBI agent who worked numerous stamp fraud cases during his years with the bureau describes it as the “the most prolific and most notorious” scam ever perpetrated in eBay’s problematic stamp-collecting category. (MSNBC.com is not identifying the suspect because he has not been charged with a crime.)
The scheme was exposed on MSNBC.com in 2002, in a two-part series looking at whether eBay adheres to its stated anti-fraud policy. Months later, eBay suspended accounts identified in the article, but a small group of collectors that uncovered the scam says the forger merely moved the operation to another Internet auction site for a few months before returning to eBay, setting up new accounts and picking up where he left off.
The scheme’s most recent incarnation ground to a halt Jan. 29, when eBay security suspended two accounts after the collectors produced conclusive evidence that forged stamps were being sold. But the frustrated philatelists say there is little doubt that the crook will soon be back in business on eBay — the leading Internet auction site, with tens of thousands of stamps listed for sale at any one time — cloaked in new online identities.
The rip-offs have been occurring intermittently on eBay and other auction sites since at least 1998, generating millions of dollars in illicit profits for the mastermind, according to the collectors, who have united under the rubricStamp Collectors Against Dodgy Sellers, or SCADS.
Case has unique features
The stamp scam is in some ways a typical case of Internet auction fraud — the no. 1 source of consumer complaints to the federal Internet Crime Complaint Center, accounting for 62.7 percent of the 231,493 reports filed in 2005. But in other ways it is quite unusual:
- Evidence documenting the scam is overwhelming, thanks to a vast store of documentation assembled by the stamp collectors.
- Sophisticated forgery techniques that are used repeatedly and easily traced demonstrate how simple it is for serial fraud artists to sidestep efforts by Internet auction sites to kick them off.
- Because there is solid circumstantial evidence pointing to the mastermind’s identity, the case illustrates how high the bar has been set for prosecution of Internet auction fraud cases — especially if they involve many transactions for relatively small amounts of money.
The stamp scam likely would never have come to light had the collectors not noticed in the late 1990s that an increasing number of stamps being sold on eBay had been altered. After months of sleuthing, they determined that some of the stamps were being purchased in poor condition on eBay and then resold after undergoing undisclosed cleaning or repairs — making them appear to be in better condition and thus worth more to collectors. In other cases, they found that stamps had been altered to make them appear to be completely different postage franks that were far more valuable than the originals.
At that point, the collectors formed SCADS and began compiling a library of “before” and “after” images showing what undisclosed alterations had been done to each stamp and how much profit the scam was generating. The database has grown to include nearly 2,000 matches.
They also created a Web site and began publicizing the exploits of the forger, which used post office boxes and addresses in upstate New York to send and receive stamps.
‘A little pissed off’
“I am not a stamp expert. I’m just a collector who got a little pissed off by what I saw as criminal activity going on with impunity,” said George Kopecky of Atlanta, a SCADS member who has spent approximately 5,000 hours documenting the scam and trying to bring its perpetrators to justice. “I seem to have an overinflated sense of justice. This shouldn’t happen in this country. When you watch a whole bunch of people being ripped off, to me the thing to do is to try and do something about it rather than just walking away.”
He said he and his SCADS colleagues track the sophisticated forgeries by compiling images of stamps from auction listings, then matching them to altered stamps when they resurface on eBay and other sites. They can trace them through their “fingerprints,” unique traits that make each stamp identifiable — uneven perforations, stains, rips, ink “cancels,” thin spots and color irregularities.
“You basically get snowflakes — no two alike,” the 60-year-old Kopecky said.
Kopecky, an accountant by trade, said the perpetrator uses a variety of techniques to make a stamp appear to be more valuable than it really is, including removing ink “cancels,” clipping or adding perforations and painting on design elements.
“This is a very sophisticated repair and restoration operation,” Kopecky said. “They can reperforate stamps so they look natural … and even add the tiny perforation tips back on if they’re missing. The paper looks slightly different from the back, but otherwise it’s impossible to detect.”
Unethical and illegal
Altering collectible stamps without disclosing it is both unethical and illegal, according to officials with the American Philatelic Society, the national organization of stamp collecting.
Fred Baumann, a spokesman for the APS, explained that stamps are presumed to be in the condition in which they were found unless it is explicitly stated otherwise, and are valued accordingly.
"Provided you offer a stamp with the description that it has been professionally restored ... there’s nothing wrong with that," he said. "But if you’re offering it as being original and untouched and in pristine condition when you’ve used an eraser, a steam iron and put new gum on the back … certainly the item will not have the value that it appears to."
Ken Lawrence, a leading authority on stamps and former vice president of the philatelic society, said after reviewing 10 "before" and "after" images provided by Kopecky that he had no doubt that “whoever is reselling these is selling fraudulently altered material. If this is the same person who made the alterations, this is the person who is perpetrating the fraud.”
The alterations were expert enough to fool Norman Hinds, 52, a former stamp dealer from Vero Beach, Fla., who said he lost $1,000 buying stamps from the forger on eBay before learning about SCADS and realizing he’d been duped.
“Some of the stamps I bought I sent off for certificates to have them authenticated. Every one of them had major problems,” he said, referring to alterations that were not disclosed in the auction listings. “What this guy is doing to people who don’t know a lot is just tragic.”
Kopecky estimates that the perpetrator, possibly working with accomplices, has made off with “between $1 million and $2 million” over the years, despite intermittent interruptions when their accounts get suspended.
EBay suspends 11 accounts
After initially showing reluctance to tackle the fraud, eBay has come round to SCADS' way of thinking. Since May 2003, it has suspended 11 accounts the collectors identified as being used in the scam.
SCADS members regarded eBay’s initial suspension of accounts as a milestone in their effort to clean up the site’s stamp forum, which had the reputation of being a hotbed of misrepresentation and fraud.
That’s not hard to do, said Rosalinda Baldwin, CEO of The Auction Guild, an Internet auction watchdog, given that eBay doesn’t take every possible step to verify that people opening accounts are who they say they are.
“Can someone keep registering under false IDs and false registration and get away with it? Oh yeah, even the idiots can do that,” she said.
EBay spokesman Hani Durzy acknowledged that what the site calls “PSUs” — previously suspended users — are sometimes able to sign up for new accounts without being detected, but he said eBay is devoting more resources to keeping them off for good.
‘We are actually very good’
“There are steps that we take, though for obvious reasons we don’t go into details of what they are,” he said. "I would maintain that we are actually very good at keeping suspended users off, but we’re not as good as we could be.”
But Kopecky and others familiar with the stamp scam say the case clearly demonstrates that eBay’s efforts to expel scam artists are ineffective because the identity of the mastermind is known to the site’s security team.
Kopecky and several stamp experts interviewed by MSNBC.com, who spoke on condition of anonymity, said that solid circumstantial evidence points to the former stamp dealer, whose family has been in the philatelic business for decades and who formerly ran a brick-and-mortar stamp business. (Attempts by MSNBC.com to contact the former dealer by phone for comment were unsuccessful.)
Among the pieces of evidence:
- In an article published in 1999 in Linn’s Stamp News, the ex-stamp dealer acknowledged that he used the eBay ID “chickfrdstk,” which SCADS later showed was used to purchase stamps that were subsequently altered and resold as originals. The account was one of those suspended by eBay in 2003.
- At the request of MSNBC.com, two handwriting experts examined handwriting samples provided by Kopecky that he said were obtained from four eBay accounts used in the fraud. One expert, Diana Hall of Handwriting Sciences of San Bruno, Calif., said, “It is my expert opinion that all samples were written by the same person.” The second analyst, Linda James of Advanced Document and Handwriting Examination Services of Dallas, said that it is “probable” that all four samples were written by the same person.
- Two eBay accounts used in the scam provided an address in upstate New York to eBay sellers and purchasers; that same address shows up on an Internet telephone search engine as the former stamp dealer's residence until 2004.
- A postal inspector told MSNBC.com that several post office boxes in upstate New York that SCADS identified as having been used in connection with the sale of the altered stamps were rented by the ex-dealer.
Attempts to interest law enforcement
Upon realizing that the stamp scammer could evade eBay security with impunity, Kopecky and others stepped up efforts to get law enforcement involved.
For the first time, he said, they had eBay’s support.
Kopecky said the auction site’s security chief, Rob Chestnut, responded aggressively after becoming aware that the site’s stamp category was full of fraud, creating a “stamp watch committee” in to monitor auctions and appointing Kopecky as a member.
Kopecky said Chestnut also assigned a member of site’s security squad — the “trust and safety team” — to work with him to try and find a law enforcement agency willing to prosecute the mastermind of the scam.
After documenting at least $450,000 in fraudulent sales, eBay approached the U.S. Postal Inspection Service with records linking numerous eBay accounts used in the fraud to the former dealer, but couldn’t persuade the agency to prosecute, according to Kopecky and officials of the philatelic society.
Kopecky, philatelic society officials and Patrick Lemon, a retired FBI agent who also is a stamp collector, also sought to interest law enforcement in the case, including postal inspectors, the U.S. Attorney’s Office for the Northern District of New York and the New York Attorney General’s Office.
In each instance, they said, they were rebuffed.
Ex-FBI agent ‘very disappointed’
“I’m personally very disappointed with all facets of law enforcement in regard to this situation,” said Lemon, who handled numerous stamp fraud investigations during his FBI career. “There are a lot of people doing it, but this guy is by far the most prolific and most notorious.”
Robert Lamb, who recently retired as executive director of the philatelic society, said he didn’t believe his organization’s complaints were taken seriously.
“Law enforcement agencies tend to think of stamps as something that children collect and not understand that we’re talking hundreds of thousands of dollars” in fraudulent sales, said Lamb, who also is a former assistant secretary of state and ambassador to Cyprus.
Thomas Moehring, a postal inspector in New York, confirmed that both he and his predecessor had looked into the case and had determined that some of the post office boxes used in connection with the eBay sales were indeed opened by the former stamp dealer. But he said that they concluded that the former dealer was “flying just below the radar of what’s prosecutable”
“In this specific case … it wouldn’t meet the guidelines for the U.S. Attorney for the Northern District of New York,” Moehring told MSNBC.com. “They have finite resources and to go in and say ‘Maybe this guy took a $60 stamp and was able to sell it for $80,’ that’s just not going to fly.”
He also said that even if prosecutors did bring a case, it would be tough to win because of the subtlety of many of the alterations and the fact that the auctions often carried disclaimers stating that the purchaser was buying the goods “as is.”
“It would be a battle of the experts,” he said. “Combined with the disclaimers, it would be very, very difficult.”
Greg West, an assistant U.S. attorney in the Northern District of New York, said he was unfamiliar with the case in question, but confirmed that federal prosecutors do have guidelines that help them determine whether to pursue a case.
‘We have leeway’
"They’re not absolute, and in the case of a persistent fraud, we have leeway," he said. "... They are exactly what we characterize them as — guidelines."
West referred inquiries about the stamp case to two investigators in the agency's Albany office who did not respond to a request for comment.
A spokesman for the New York Attorney General’s Office, who spoke with MSNBC.com on condition of anonymity, denied that the agency had rejected the case, saying that an investigation remains open.
"We are continuing to gather information and trying to determine how to proceed," he said.
Lemon, the retired FBI agent, said that as a former lawman he understands the reluctance to take on a case where the victims are spread far and wide and individually didn’t lose large amounts of money.
“The FBI obviously has lots of other priorities, and local jurisdictions have no interest because small dollar amounts and the case reaches outside their jurisdiction,” he said.
Nevertheless, he said, it galls him that no agency will go after a crook who is causing grievous harm to a hobby that is enjoyed by millions of collectors around the world.
“All they would have to do is make an example out of a couple people and it would come to a screeching halt,” Lemon said.
Kopecky made a similar point, saying prosecutors will never find a better vehicle for sending an anti-fraud message.
“If what I’ve assembled here doesn’t justify prosecution of some sort, they might as well give up policing this, because there will never be better evidence,” he said.
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