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TWO PLEAD GUILTY TO MAIL AND WIRE FRAUD IN EBAY SHILL BIDDING
SCHEME THAT AUCTIONED FAKE DIEBENKORN PAINTING FOR $135,805
April 17, 2001
SACRAMENTO--United States Attorney John K. Vincent announced today that two men pled guilty in federal court in Sacramento, California to multiple counts of mail and wire fraud for their participation in a ring of fraudulent bidding in hundreds of art auctions on eBay, including one last May in which an eBay user was induced to bid over $135,805 for a fake Richard Diebenkorn painting.
According to Assistant U.S. Attorneys Christopher P. Sonderby and Michael J. Malecek, who are prosecuting the case, KENNETH A. WALTON, 33, an attorney from Sacramento, California, pled guilty to three counts of wire fraud and four counts of mail fraud for making the fraudulent or "shill" bids; SCOTT BEACH, 31, of Lakewood, Colorado, pled guilty to one count of wire fraud and three counts of mail fraud. The fraud counts each carry a sentence of up to five years in prison, a $250,000 fine, and up to a three-year period of supervised release. The defendants entered their guilty pleas before United States District Judge Lawrence K. Karlton. Sentencing is currently scheduled for June 26, 2001.
As part of his plea agreement, WALTON must: (1) cooperate fully with the government; (2) pay full restitution to the victims of his crimes, including payments of more than $60,000 to eBay users who thought they bought paintings by Clyfford Still, Diebenkorn and Alberto Giacometti; (3) relinquish the fake Diebenkorn to the government; (4) pay a $700 special assessment; and (5) not participate in any internet auctions for the period of his supervised release. Further, WALTON agreed that his guilty plea results in his immediate disbarment as an attorney from the California State Bar.
As part of his plea agreement, BEACH must fully cooperate with the government, pay restitution of at least $39,000 to defrauded eBay users, pay a special assessment of $400, and not participate in any internet auctions for the period of his supervised release.
Each defendant stipulated that he intended to cause a loss of between $200,000 and $350,000 through the fraudulent scheme. The government has agreed to recommend reductions in the sentences of WALTON and BEACH should they fully cooperate with authorities.
The third defendant, KENNETH FETTERMAN, 33, of Placerville, California, remains a fugitive.
Defendants WALTON and BEACH admitted that they, along with FETTERMAN, created more than 40 User IDs on eBay using false registration information, and then used those aliases to place fraudulent bids to artificially inflate the prices of literally hundreds of paintings auctioned on eBay from November 1998 to June 2000.
WALTON and BEACH admitted that the three defendants shielded their true identities from eBay by providing bogus names, postal addresses, and telephone information, and by providing e-mail addresses obtained from free e-mail providers known to collect little or no verifiable information on their account holders. By creating multiple User IDs, the defendants intended to trick other eBay users into believing that the "shill" bids they placed on each other’s items were legitimate. BEACH admitted that he shared his on-line aliases with FETTERMAN to advance their scheme.
WALTON admitted that his User IDs hosted more than 250 auctions from December 1998 to May 2000, and that more that three-quarters of those auctions involved the placement of fraudulent bids. BEACH admitted that his User IDs hosted an additional 250 auctions from October 1998 to May 2000, and that nearly half of them involved the placement of fraudulent bids.
In total, the sixteen-count Indictment filed on March 8, 2001 alleges that the three defendants hosted more than 1,000 auctions on eBay from late 1998 until May 2000, and that they placed fraudulent bids on more than half of those auctions. The Indictment alleges that the total value of the winning bids in all auctions hosted by the three defendants in which they placed shill bids exceeded $450,000.The Fake Richard Diebenkorn Auction in May 2000
WALTON admitted that he forged the initials "RD 52" in the bottom right corner of an unsigned painting that FETTERMAN and WALTON had bought for resale from an antique store located in Little Rock, California. WALTON chose those initials to defraud eBay users into believing the painting had been created by renowned artist Richard Diebenkorn.
WALTON admitted that on April 28, 2000, WALTON listed "RD 52" for sale on eBay under his alias golfpoorly, and placed digital photos of the painting on the eBay site, including a close-up of the forged initials. In describing the painting to users, WALTON misrepresented that it had been purchased in Berkeley, California, to promote the falsehood that the painting had been acquired from an area where Diebenkorn created artwork in the early 1950's. The defendants then made more than 50 fraudulent bids on the auction of "RD 52," in amounts ranging from 30 cents to $135,505, causing an eBay user from the Netherlands to place a winning bid of approximately $135,805.Forged Signatures, Suggestive E-mail Accounts, and a Fictitious Art Expert
WALTON and BEACH also admitted to placing fraudulent bids on other paintings they sold on eBay that appeared to bear signatures of renowned painters, including another Diebenkorn painting, as well as paintings purportedly signed by William Wendt, Percy Gray, Alberto Giacometti, Clyfford Still and Maurice Utrillo. WALTON admitted that he and FETTERMAN created and utilized User IDs with the names "Giacometti" and "Still" in them to cause eBay users to believe that a family member of the famous artists was bidding in the auctions of those paintings. FETTERMAN and WALTON also created an e-mail account for a fictitious expert on the art of Clyfford Still, and then sent an e-mail to the winning bidder of a painting with the signature "C. Still" on it, congratulating the user for recognizing an "excellent example" of Still’s work. These paintings received bids from unsuspecting eBay users of as much as $33,000.
The charges in the Indictment against FETTERMAN are only allegations and he is presumed innocent until and unless proven guilty beyond a reasonable doubt.
The case was investigated by the Federal Bureau of Investigation, the Internal Revenue Service, Criminal Investigations, and the Sacramento Valley Hi-Tech Crimes Task Force.
eBay also substantially assisted in this investigation.###
- More information on: Related Case
- More information on: Defendant's Plea Agreement
- More information on: Defendant's Indictment
- More information on: Prosecuting Crimes Facilitated by Computers
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