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Feds, states target Web auction scams

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Citing a dramatic rise in Internet auction fraud, the Federal Trade Commission and 29 state attorneys general announced a crackdown against Web auction criminals Wednesday. Some 57 criminal and civil law enforcement actions have been filed by the agencies as part of “Operation Bidder Beware.” But officials conceded that the cases represent a tiny fraction of consumer complaints.

WASHINGTON STATE Attorney General Christine Gregoire said “law enforcement will do what it can,” but consumer education will be the key to slowing the rise of auction fraud.

Every month, 32 million people visit online auction sites, said Gregoire. “But despite their popularity, all is not well.” Consumer complaints of auction scams tripled last year, she said, and show no signs of abating.

To that end, Wednesday’s press conference also called attention to a new consumer education program led by the FTC. Commissioner Howard Beale said, the largest online auction site, cooperated in the investigations and will soon sport a prominent link to the FTC’s new auction fraud prevention Web site.

eBay estimates that only one in 10,000 transactions on its site is fraudulent. But the FTC received 51,000 auction complaints last year, triple the amount from 2001.

Most of the 57 actions brought by the FTC and the state offices involve simple online auctions scams: either sellers who accept money from winning bidders, but never ship the merchandise, or buyers who accept the goods but never send the money.

“It is just a drop in the bucket, but at least they are doing something,” said auction watchdog Rosalinda Baldwin, who runs She sends out a weekly newsletter warning auction site users about a myriad of scams. “Can we hope that this is just the start? Maybe it will set a precedent or framework for reporting and prosecuting. I guess I am just so thankful to see some action, any action, on the part of the FTC.”

Gregoire said the press conference was held largely to “put a human face” on the thousands of auction fraud victims.

“We cannot turn our back on these cases,” Gregoire said.

Rick Skinner, a Virginia resident who lost about $1,300 when he thought he had purchased a laptop computer, appeared with Beale and Gregoire. Skinner’s case was a bit more complex: he used a fake escrow service, Premier Escrow, according to the FTC. But it looked real enough to fool him.

“It showed the money was there so I shipped the laptop,” he said. According to the FTC, Premier Escrow even tricked one consumer into shipping a car to a buyer.

Such fake escrow services have been used in hundreds of scams, and were chronicled in an special report last year, “The lure of online auctions.”

A U.S. district Court in Virginia has ordered Premier Escrow’s site to be taken down, and defendants’ assets frozen, pending trial, the FTC said.

But investigators have yet to determine who’s behind

The site was also used last year to defraud Phoenix dentist Bruce Lachot out of $55,000. Lachot says he sent the money to thinking he was buying a new BWM over the Internet. He never got the car.

The FTC issued a nine-page press release on Wednesday crowded with similar cases. In one, the agency alleges that James Thompson, who lives near Chicago, used 30 different identities to defraud 65 consumers out of at least $91,000 since 1999. Among the items bought, but never delivered: plasma televisions, diamonds, digital cameras, and dental equipment. In other complaints, sellers misrepresented their goods, such as counterfeit Louis Vuitton handbags that were advertised as “100 percent authentic.”

The FTC’s list included a couple of cases that had already been prosecuted. Candice Morgan pled guilty to four misdemeanors for the fake handbag sale on April 4, was forced to pay restitution and accepted a ban from Internet sales for three years, according to the FTC. The agency also says Ray Pourchez was sentenced to 33 months in prison after he failed to deliver laptop computers he sold.

“The message to con artists is real world law enforcement will not let you get away with virtual fraud,” Beale said.

Still, the focus of the attorneys general and the FTC is largely on teaching consumers how to avoid becoming victims in the first place, Gregoire said. Her straightforward advice: always use a credit card.

“The single common denominator in our cases is consumers paying in another form other than a credit card,” she said, such as a money order or wire transfer. “Our single biggest piece of advice to consumers is three things: Use a credit card, use a credit card, and use a credit card.”

Other consumer advice that will be part of the FTC’s campaign

Save all transaction information.

Be familiar with an auction site’s protections for buyers, and don’t assume that all auction sites have the same rules.

Learn about a seller before bidding on an item, and avoid doing business with sellers who can’t be identified or try to move a transaction off an auction site with promises of a better deal.

Investigate unfamiliar escrow or online payment services to make sure they are legitimate.

Never give out Social Security, driver’s license, credit card or bank account numbers unless the seller and payment service has been verified as legitimate.

The Associated Press and Reuters contributed to this report.