A Utah man charged with defrauding eBay auction winners out of nearly $1million for laptop computers they never received pleaded guilty to some of the charges in U.S. District Court in Salt Lake City. During the hearing in U.S. District Court, Russell Dana Smith, aka John Leary, pleaded guilty to four counts of mail fraud, one count of credit union fraud, and one count of failure to file a tax return.
Court records indicate that 54 counts were originally filed against him, including counts in connection with 53 victims. But Judge Tena Campbell told Smith that in exchange for his guilty plea for the six counts, prosecutors would dismiss the remaining 48 counts filed against him.
Two counts of mail fraud involving Smith's eBay scheme were in connection with the sale of laptops from October 2002 to May 2003 under the business name Liquidation Universe. For each of these counts, Smith faces a maximum sentence of 20 years in prison; a fine of $250,000 or twice the gross gain or loss, whichever was greater; and supervised release for three years.
For the two additional counts from March to April 2001 in connection with his eBay auction business called Rapid Computer Services, he faces a maximum sentence of five years in prison, a fine of $250,000 or twice the gross gain or loss, whichever was greater; and supervised release for three years.
Court records state that some of the auction winners paid for the computers by sending checks via the US Postal Service to Smith in Utah; others transferred funds directly to Smith's Zion's Bank account; and yet others made payments through PayPal, which Smith had transferred into his bank accounts, court records state. Others received refund checks, but the checks never cleared.
As part of the plea agreement, Smith agreed to pay restitution to the victims by forfeiting assets obtained in fraud-related activities including many laptop computers, DVD players and other items, court records state.
According to Melodie Rydalch, public information officer at the U.S. Attorney's office in Salt Lake City, that figure will be finalized as a part of sentencing and will include restitution to victims beyond those included in the counts he pleaded guilty to. "Restitution can be ordered for all relevant conduct," Rydalch explained. "We have proceeded with a large forfeiture action against him - we are working to get permission from DOJ to use some of the proceeds from his assets to help pay restitution to victims. When restitution is ordered, the court works out a payment plan with the defendant."
The credit union count involves $7,000 withdrawn from Smith's Jordan Credit Union account, court records indicate. He withdrew the funds knowing that they were from Western Union/BidPay.com on which a stop payment had been issued. For this count he faces a penalty of up to 30 years in prison; a $1 million fine or twice the gross gain or loss; and supervised release for five years.
In addition, Smith's failure to file his 2002 tax return carries of maximum penalty of one year in prison; a $100,000 fine, or both; and supervised release for one year.
Hani Durzy, spokesman at eBay said that Smith was suspended from auctioning on eBay in May 2003, once the online auctioning company established that he represented various people and accounts. "We had been tracking his business through various claims when we contacted the South Salt Lake Police Department in Utah, and they initiated the investigation," he said.
Debbie Matties, spokeswoman at the Federal Trade Commission said she could not comment directly on the Smith case, but recommended that eBay buyers use credit cards since they offer the best protection in the event of fraud. She added that people should still be wary of individuals, even if they have great feedback ratings on the Internet. "Sometimes they will sell lower cost items like books to gain reputable feedback (on the Internet) and then switch to higher dollar items like computers. People should be wary of buying from people they don't know."
Smith is scheduled for sentencing on August 25 in U.S. District Court in Salt Lake City.