Art scam artist guilty of laundering money on eBay

(03-03) 18:34 PST SACRAMENTO (AP) -- A con artist who faked famous art and sold it on eBay pleaded guilty Wednesday to federal money laundering charges.

Kenneth Fetterman led a ring that bid in hundreds of eBay art auctions to drive up prices on the paintings, including one supposedly done by artist Richard Diebenkorn that was sold in May 2000 to a buyer from the Netherlands for $135,805.

Fetterman, 36, of Placerville, pleaded guilty to six counts of money laundering, each carrying the potential of a 20-year prison term at his May 11 sentencing.

Kenneth A. Walton, 36, a former attorney from Sacramento, previously pleaded guilty to three counts of wire fraud and four counts of mail fraud for making fake bids on April 17, 2001 as part of the scam.

Scott Beach, 34, of Lakewood, Colo., pleaded guilty earlier to one count of wire fraud and three counts of mail fraud for his actions that same day in 2001.

Sentencing for Walton and Beach is set for June 2.

The three created more than 40 separate user identifications on eBay, the online auction house, then made fake bids to drive up the prices of hundreds of paintings sold between November 1998 and June 2000, prosecutors said.

Fetterman was living with Terri Ann Galipeaux, 48, of Stateline, Nev., when he was charged and fled with her to avoid arrest. She was convicted of harboring a fugitive and served 10 months in prison.

Fetterman was arrested nearly a year later, on Jan. 11, 2003, in Wichita, Kan., during a routine traffic stop on his way to a Frisbee golf match.

PALO ALTO, Calif. (Reuters) - A federal prosecutor has alleged eBay Inc. unit PayPal violated a 2001 anti-terror law aimed at fighting money laundering when it provided payment services to online gambling companies, the Web auctioneer said in its annual report filed on Monday.

Silicon Valley-based eBay said it received a letter on Friday in which the U.S. Attorney for the Eastern District of Missouri accused PayPal of violating a provision of the USA Patriot Act.

The provision prohibits the transmission of funds that are known to have been derived from a criminal offense, or are intended to be used to promote or support unlawful activity.

The prosecutor also said the company could be forced to forfeit the money it received in connection with the alleged illegal activity and that it could also be criminally liable.