EBay Case Leads FBI Probe on ‘Shill’ Bidding

After an online auction last month saw a painting listed for 25 cents go for $135,000, the FBI has opened a probe into whether people are committing fraud by bidding up the prices of each other’s items on the EBay Inc. site, officials confirmed Wednesday.

“As always, it has been EBay’s practice to actively assist federal authorities in any of their investigations,” company spokesman Kevin Pursglove said.

Self-bidding, also known as shill bidding, is forbidden by EBay rules and illegal in much of the traditional auction world. But crime experts said the explosion of Internet auctioneering was proving hard to police, giving fresh life to old scams.

Sacramento-area lawyer Kenneth Walton in May listed the abstract painting on the site with an opening bid of 25 cents, saying he had found it at a Berkeley garage sale and his wife refused to let him keep it.

But the style of the piece, its purported age, and the photograph on the EBay Web page prompted frenzied bidding by buyers who hoped the painting was in fact an undiscovered painting by the late California modernist Richard Diebenkorn--whose works sell for millions at established auctions.

The painting eventually sold to an amateur Dutch collector for a whopping $135,805. But in the glare of media publicity surrounding the deal, Walton’s story began to collapse and EBay voided the sale after saying it had detected “shill” bids during the auction.

According to the New York Times and the Sacramento Bee, the FBI is investigating whether Walton was part of a ring of people who fraudulently cross-bid on each other’s EBay offerings to run up prices.

Penalties for attempted fraud could range up to five years in prison and $1 million for each count.

Walton, who has denied any misdoing and said he used an alias to bid on his own item only to help a friend who did not have an EBay account, said he had not been contacted by the FBI and had no comment.