|Ebay's Figurine Scandal!|
|Auction site merchant disappears with the goods.
By Nick Wingfield
THE WALL STREET JOURNAL
WHITE LAKE, Mich. , Feb. 22 Stewart Richardson seemed to be the model of a successful eBay entrepreneur, and January promised to be one of his best months yet. For five years he had built up a business on eBay as an online dealer in collectible figurines. In some cases, he was able to auction off whimsical ceramic creatures from the Wee Forest Folk line for hundreds of dollars apiece. ON THE FEEDBACK bulletin board on eBay Inc.'s auction Web site, customers posted rave reviews of their experiences with Mr. Richardson and his business. A few days into the new year, he completed his biggest series of online auctions ever, collecting hundreds of thousands of dollars within a matter of weeks. Then, on Jan. 17, Mr. Richardson told the handful of employees at his figurine shop here in this blue-collar Detroit suburb that he was going out to lunch. He hasn't been heard from since. Thursday, Mr. Richardson's store was locked and appeared to be in disarray. A woman inside refused a reporter's request to unlock the door, and a sign told UPS delivery personnel to go away. Scores of online bidders who bought the little porcelain mice, moles, angels and other figures in Mr. Richardson's last auctions say they never received the items they paid for. The Oakland County, Mich., Sheriff's Department says it has handed the case over to the Federal Bureau of Investigation. A person familiar with the investigation says authorities don't know where Mr. Richardson is but that the FBI is treating the case as a fraud investigation. _____________________________ MR. CLARK'S CONCLUSION! _____________________________ There seems to be little doubt among his would-be customers that Mr. Richardson pulled off one of the most remarkable con jobs in the almost seven-year history of the eBay auction site, the Internet's most successful commercial outpost. "The guy ran off with the money," says Gene Clark, a computer consultant in East Brunswick, N.J., who says he paid Mr. Richardson $700 for four porcelain mice that never arrived. A person familiar with the law enforcement investigation estimates that Mr. Richardson reaped about $225,000 from the recent series of auctions, which ended Jan. 4, but some of the bidders say that figure is too low. According to his wife, Mr. Richardson withdrew a total of $220,000 from various business bank accounts in the days before his disappearance. EBay says it shut down Mr. Richardson's account with the company on Jan. 23 after it received a flurry of complaints from users and concluded that his recent auctions amounted to a major case of fraud. "This is a pretty extraordinary situation," says Rob Chestnut, the ex-federal prosecutor who leads eBay's fraud-prevention team. ______________________________ MIDDLE OF OUR LIFE! ______________________________ Mr. Richardson's wife, Arlene Murray, who was his business partner, also was caught off guard. "The man just left in the middle of our life," Ms. Murray says. Indeed, a person close to the investigation says he believes that Mr. Richardson acted totally behind the backs of his wife and employees. If Mr. Richardson's eBay sales ultimately prove to be fraudulent, the scam would rank among the costliest frauds ever perpetrated over eBay. The case, first reported in the online SuperSeller Auction Newsletter, suggests that even with a big company's aggressive policing measures, fraud is an unavoidable risk of Internet commerce. ______________________________ INSURANCE POLICY! ______________________________ EBay says that fraud is a persistent problem, but the company adds that it affects fewer than 0.01% of the millions of transactions the auction site handles every year. The San Jose, Calif., company, which makes most of its money on commissions from its auction sales, had revenue of $749 million last year. It says it isn't liable for any fraud-related losses on its site, because the transactions occur strictly between buyers and sellers. The company's insurance policy provides a maximum $175 per auction to reimburse any defrauded bidders. The company employs a team of about 20 fraud investigators. They look into complaints about sellers and then contact law-enforcement authorities and shut down the sellers eBay accounts if there's enough evidence of wrong doing. EBay says it has an arsenal of fraud-prevention weapons, many of which it won't disclose. One example: It verifies the credit-card numbers sellers provide when they open eBay accounts and cross-checks the credit-card billing addresses to make sure they match the addresses the sellers have listed on their eBay accounts. At the heart of its efforts to weed out crooked sellers is it's feedback system, which allows buyers and sellers to rate each other based on their satisfaction with a transaction. For example, a buyer might rate a seller positively for delivering an item in the promised condition or a seller might rebuke a buyer for slow payment. The system aims to give a buyer and seller who are usually strangers some way to gauge each other's integrity. Even so, scammers have found many ways to use eBay. In past cases, sellers have operated with rings of shill bidders, cohorts who bid on an item solely to run up its price. Last year, in the most notorious such case, two men pleaded guilty to wire- and mail-fraud charges involving several instances of shill-bidding in eBay art auctions. Those auctions included the sale of a painting purported to be by the late artist Richard Diebenkorn. Bidding on the painting, which turned out to be a fake, reached $135,805. ______________________________ CASHING IN! ______________________________ In other cases, eBay executives say, individuals have conducted legitimate auctions for several weeks or months to build up positive ratings, and then cashed in on their track records by holding a series of phony auctions, often for pricey items. Still, Mr. Richardson's case stands apart. For one thing, he had a real bricks-and-mortar business here, a shop called the Retired Figurine Exchange Inc. And then there was his sterling record and relatively long history on eBay. In all, Mr. Richardson earned 6,185 positive feedback points since he started selling on the site in 1997, with an additional 58 negative and 56 neutral ratings from buyers who bought from him, according to eBay records. Those scores meant that 98% of the sales Mr. Richardson made resulted in satisfied buyers. "Mr. Richardson was fussy about his reputation," says Vickie Johnson, an employee who handled eBay sales for him from his shop. She says he fretted if anyone posted negative feedback about a sale. But Mr. Richardson's standing was especially high among eBay's small, but passionate, community of figurine collectors. Figurines of many types are hot items among collectors. Mr. Richardson sold the most popular brands Lladrós, Hummels and Swarovskis, as well as the Wee Forest Folk, a 25-year-old line of miniatures designed by Massachusetts artist Annette Petersen. The Wee Forest Folk, typically no more than a few inches in height, include a range of furry critters in human garb, such as mice dressed up as witches or moles made up as Christmas carolers. The figurines have whimsical titles like Nightie Bear, which features a Teddy-bear-toting, pajama-clad bruin, and Stand by Your Mole, which depicts a mouse and mole Country Western duo. Recent models of the figurines often sell for no more than $40, but some dating from the 1970s fetch thousands of dollars. Mr. Richardson's wife says he never showed much personal interest in the figurines, but they were a big hit with customers. "When he found something that interested him," she adds, "he was very focused, and business was one of his obsessions." ______________________________ PASSION FOR MONEY! ______________________________ "I think Stewart had a passion for making money," Ms. Murray said in one of several recent phone interviews, though she declined subsequent interview requests, citing her lawyer's advice. Mr. Richardson's enthusiasm for eBay, the source of most of his sales, rubbed off on others. A friend, Howard Barnett, began selling collectible glass and other items on eBay in 1998 at Mr. Richardson's urging. "Stewart got me started on eBay," he says. "He told me how great it is." Mr. Richardson seemed to have hit the motherlode in late December when he began to list hundreds of figurines for sale on eBay. "The selection included porcelain and glass pieces by Lladró, Hummel and Swarovski," says Ms. Johnson, who worked for him for just a few months before he disappeared. The 150 or more Wee Forest Folk Ms. Johnson says he put up for auction was an impressively broad collection of the figurines. She says that Mr. Richardson told his staff that the latest batch of figurines were part of an estate sale he was handling on behalf of a family in Phoenix. He scheduled bidding on the auctions to end Jan. 4 and instructed successful bidders to send their payment to him promptly. "This is a large estate auction!" read the description on the eBay site for one of the figurines, a mint-condition 1978 Chief Nip-a-Way from Wee Forest Folk, a mouse dressed up as an American Indian. It is very important that we receive your payment within seven days of auction end, the posting declared. The winning bid on Chief Nip-a-Way: $1,035. The buyer says the figurine was never delivered. At his shop here in White Lake, Mr. Richardson kept tight control of the supposed estate auction. Ms. Johnson says she helped prepare the auction materials, but that Mr. Richardson limited her involvement, insisting on handling all correspondence with bidders himself. After the auctions closed, bidders began sending payments to Mr. Richardson. Most winning bidders paid with credit cards, cashier checks or PayPal, an Internet-payment service popular on eBay. PayPal clients can transfer money into their PayPal accounts via cash or credit card and then use it to pay online vendors. EBay sellers typically require payment before sending merchandise to winning bidders. Ms. Murray, Mr. Richardson's wife, says she was unaware of the estate auction her husband claimed he was handling. Ms. Murray says her husband dealt with all of the business's finances and its Internet operations, while she spent most of her time down the block running a separate gift shop that sold scrapbook supplies. "We were always successful with Stewart's decisions," Ms. Murray says. Ms. Murray and Ms. Johnson say that Mr. Richardson's employees and family got their first inkling something was wrong when he didn't return from his Jan. 17 lunch. Bidders began to suspect something was amiss almost immediately thereafter. For Joyce Schweickert, the realization sank in the next day. The self-employed Bellevue, Wash., collector had won the bidding on several of Mr. Richardson's auctions, she says, and he had agreed to meet her and her husband in Phoenix on Jan. 18 at 7:30 a.m. to personally take them to collect those pieces. She says he also had promised to lead her to many other figurines from the supposed estate sales so that she could photograph them. Ms. Schweickert says she and her husband flew to Phoenix and waited for Mr. Richardson, as arranged, at Rennick's Restaurant at the Phoenix Airport Hilton. Mr. Richardson didn't turn up. When Ms. Schweickert couldn't reach anyone by phone at Retired Figurine Exchange, she called a Michigan friend and asked her to pay a visit to the shop. She said the store was closed up tighter than a drum, Ms. Schweickert recalls. Ms. Schweickert and her husband turned to the Internet to spread word of Mr. Richardson's no-show, posting a message on a discussion Web site for Wee Forest Folk collectors. That posting alerted other eBay buyers, such as Mr. Clark, the New Jersey computer consultant. Mr. Clark sent e-mails to other bidders, including Marten Halma, warning them that their merchandise probably wouldn't show up. "I'm usually very careful. I look at the history and comments on eBay's feedback system," says Mr. Halma, a retired IBM engineer in Poughquag, N.Y., who says he paid Mr. Richardson $4,000 for five figurines. "I felt he was on the up-and-up." One bidder, who asked not to be identified, says she sent a $20,000 registered check to Mr. Richardson but got nothing in return. Estimates of the total sum bidders sent to Mr. Richardson for the apparently bogus auctions vary widely, partly because of a ruse he appears to have employed. When contacting other aggrieved bidders, Ms. Schweickert says she learned that Mr. Richardson sold many of the same items in his auctions twice or three times. After an auction closed, according to Ms. Schweickert, Mr. Richardson contacted the second- and third-highest bidders for particular auctions and told them that the winning bidders had failed to pay. Those bidders would then pay Mr. Richardson, nearly doubling or tripling his take from a single auction. EBay confirms that it has received fraud complaints from losing bidders who bought items from Mr. Richardson outside of the normal eBay auctions. Based on conversations with other buyers, Ms. Schweickert estimates that Mr. Richardson may have collected as much as $400,000 for items that were never received. The person familiar with the law-enforcement investigation says the actual figure may be closer to $225,000 Ms. Murray says the $220,000 her husband withdrew from their business bank accounts shortly before his disappearance included the proceeds from the auctions of merchandise that belonged to Retired Figurine Exchange, she says. Ms. Murray also believes her husband deposited money from the estate auctions in other bank accounts to which she doesn't have access. EBay says that it has encouraged bidders who feel they were defrauded by Mr. Richardson to fill out a fraud complaint form, which eBay then forwards to law enforcement. It says it believes between 100 and 125 bidders didn't receive the goods they bought from Mr. Richardson. The number of bogus auctions is probably higher since many bidders purchased multiple items, eBay says. Mr. Chestnut, eBay's fraud-prevention chief, says Mr. Richardson's case is unusual and that eBay's feedback system remains a good way for buyers to judge a seller's integrity. "It will certainly be difficult to detect situations like Mr. Richardson's, where good sellers apparently turn bad," Mr. Chestnut says. "This is the sort of thing that happens very rarely." EBay says that some buyers may get their money back, depending on how they paid. Those who used credit cards may have the best shot at a refund. Mr. Halma says he recently received a notice from his credit-card company that it would reimburse him. Those who paid with cashier's checks aren't so lucky. The figurine collectors, for the most part, say their experience with Mr. Richardson hasn't turned them off of eBay. Some say they will be more cautious in the future for example, by using third-party escrow services that inspect auction merchandise before payment is delivered. Ms. Murray says she has closed both of the family's businesses as she attempts to return unsold consignment items to their owners. She says she filed for divorce following her husband's disappearance and expects to file for personal bankruptcy shortly to shield herself from creditors. Ms. Murray says she has lately begun using her maiden name instead of Richardson because her husband's surname is a disgrace. Those who knew Mr. Richardson still can't explain why he misused and abandoned an apparently successful business. Ms. Murray says she and her family have found evidence on Mr. Richardson's computer that her husband was gambling over the Internet. She says she thinks that he may have had gambling debts. "I didn't realize the man had it in him to be a criminal," she says.
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