Three Men Charged in Shill Bidding Test Case
SAN JOSE, CALIFORNIA
Three men were charged March 8 with joining
together to drive up prices in Internet art auctions on
eBay, including one in which a Dutch user bid
$135,000 for a fake Richard Diebenkom painting.
The men allegedly created more than 40 different
user names on eBay with false registration informa-
tion, then used those aliases to inflate bids on paint-
ings they were auctioning.
The scheme garnered bids totaling $450,000 in hun-
dreds of auctions from November 1998 to June
2000, according to federal prosecutors in
Sacramento.
Self-bidding, known as shill bidding, is forbidden
by San Jose-based eBay Inc. and is generally illegal
in traditional auctions. EBay's deputy general coun-
sel, Rob Chesnut, said he believed this was the first
criminal case to result from alleged shill bidding
online.
Kenneth A. Walton, 33, a lawyer in Sacramento;
Kenneth Fetterman, 33, of Placerville, California
and Scott Beach, 31, of Lakewood, Colorado, were
charged with a total of 16 counts of wire and mail
fraud, which carry up to five years in prison, a
$250,000 fine and possible restitution to victims.
Fetterman also is charged with money laundering,
which carries up to 20 years and a $500,00 fine.
Walton is cooperating with the investigation, said
his attorney, Harold Rosenthal.
"He feels very bad about all of this and is going to
do whatever he can to make it right," Rosenthal
said.
Beach did not return a message seeking comment.
No listing for Fetterman could be found.
According to the federal indictment, Walton put the
initials "RD52" in the bottom right comer of an
unsigned orange and green abstract painting that he
and Fetterman had picked up at an antique store.
Prosecutors said Walton then listed the painting on
eBay -- with photos showing the signature -- and
wrongly said he had bought it in Berkeley, where
Diebenkom worked in the early 1950's.
The three men allegedly made more than 50 phony
bids on the painting, driving its price from 30 cents
to $135,505, before a Dutch man stepped in and
bought it for $135,805 . Diebenkom's real paintings
have sold for millions.
Investigators for eBay later disolved the sale and
barred Walton from the site after discovering he had
placed a $4,500 bid on the painting himself. Walton
has said that bid was made for a friend.
The indictment said the three men also drove up
bids together on another work purportedly by
Diebenkom and artists such as Alberto Giacometti,
Clyfford Still, and Maurice Utrillo. Fetterman and
Walton allegedly came up with fake user names
with "Giacometti" and "Still" in them, to make it
seem as if the painters' family members were bid-
ding.
In one case, prosecutors said, the men created a
phony e-mail account for a supposed expert on Still
and congratulated the buyer for recognizing an
"excellent example" of the abstract expressionist's
work.
EBay rules prohibit shill bidding and even legiti-
mate bids from relatives and roommates of sellers.
Chesnut said eBay constantly is monitoring for vio-
lations of that policy. Still, he suggested that buyers
check the bid histories of their fellow auction par-
ticipants to see if they notice suspicious patterns.
"Anything that might in any way undermine trust in
the community is unacceptable," Chesnut said.
CROW RIVER TRADING Co.
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