PC-GUY
1
<big>Crooks Keep Getting Smarter</big>
[font=Times New Roman,Times,Serif]In L.A., Mr. Fawrup Uncovers
Scams With Global Scope;
A Race to Find a Necklace[/font]
[font=Times New Roman,Times,Serif]Mr. Inoue Loses $61,000[/font]
[font=times new roman,times,serif] [font=times new roman,times,serif]By NICK WINGFIELD
[font=times new roman,times,serif]Staff Reporter of THE WALL STREET JOURNAL[/font]
August 3, 2004; Page A1[/font]
[/font] NORWALK, Calif. -- One of eBay Inc.'s official tenets is that "people are basically good." George Fawrup wants to find the eBay users who are altogether bad.
For the last 2½ years, Mr. Fawrup, a veteran California police detective, has been battling one of the Internet era's signature crimes: online-auction fraud. Most of the fraudsters use eBay, the Internet's biggest auction site, and they get craftier by the year.
Last year, Mr. Fawrup received a complaint from an eBay shopper who said he wired several thousand dollars to a woman's account for a pair of high-end stereo speakers that never arrived. At first it looked like an easy case: The bank had the woman's address. Mr. Fawrup arrived at her house to find two detectives from nearby Irvine already there, grilling her about similar ripoffs.
But the woman appeared dumbstruck. She said she'd never sold anything to the victims. She had been hired by a European nonprofit health organization to receive charitable donations in her account and forward them to Western Union offices in Germany and Romania. The woman, a medical researcher, assumed the organization was legitimate in part because it asked her to write short research papers on AIDS.
Mr. Fawrup told her what was really happening: She was laundering money for international criminals. She paid back out of her own pocket the roughly $25,000 sent by the victims and wasn't arrested. Mr. Fawrup referred the case to the Federal Bureau of Investigation, but he says they haven't been able to find the real culprits.
The frustrating ending is no surprise. "There are a lot of bandits and few marshals" on the Internet, says Mr. Fawrup. He has been a supervisor at the Southern California High Tech Crimes Task Force since early 2002, although he will soon start a new antifraud job.
The task force's special agents are gumshoes in a growth industry. By letting strangers sell goods to each other without meeting, eBay has created a marketplace of awesome breadth -- and a huge potential for fraud. The company says only a tiny fraction of its sellers are crooks and the vast majority of transactions on the site, which totaled $24 billion in 2003, go smoothly. The Federal Trade Commission says it received more than 166,000 Internet-related fraud complaints last year with reported losses of nearly $200 million. About half of the complaints involved online auctions. Mr. Fawrup alone says he's received more than 1,000 fraud complaints about eBay since 2002, with five to eight more coming every day.
Despite those numbers, the high-tech crimes unit at the Los Angeles County district attorney's office estimates it has filed only about 15 cases since 2002 involving Internet-auction fraud. The biggest obstacle often is finding a suspect. Fraudsters, some of them in distant countries, use an endless supply of tricks to disguise their identities.
Law-enforcement officials say they don't have enough staff or expertise to keep up. Many fraud complaints aren't investigated because the losses fall below a threshold set by county prosecutors -- a number Mr. Fawrup prefers to keep secret for fear of aiding criminals.
EBay executives point out that plenty of people get cheated in more traditional forms of commerce too. "This is no different than the offline world -- the bad guys come up with more creative ways of doing things," says Rob Chestnut, vice president of rules, trust and safety at eBay headquarters in San Jose, Calif. Law-enforcement officials and eBay's fraud team "evolve with them and hopefully slightly ahead of them," he says.
For items that aren't delivered or are significantly misrepresented by sellers, eBay offers buyers up to $200 in fraud protection, minus a $25 deductible. Buyers who use PayPal, an electronic payment service that eBay bought in 2002, are covered up to $500.
When people get ripped off at eBay and similar sites, they're usually encouraged to report the case to a clearinghouse for complaints operated by the FBI and the National White Collar Crime Center. If the victim is in the Los Angeles area, the clearinghouse has often forwarded the complaint to Mr. Fawrup's desk in a windowless basement office in Norwalk, just southeast of Los Angeles.
The 51-year-old state-police veteran has had an eclectic career, including a stint as a motorcycle cop in the California Highway Patrol. He investigated allegations that Mark Fuhrman, a Los Angeles police detective, perjured himself during testimony at the O.J. Simpson trial. (Mr. Fuhrman pleaded no contest and was given three years probation.) In 1999, Mr. Fawrup helped apprehend Jelani Efron King, known as the "Westside rapist" for a string of violent assaults.
Mr. Fawrup's high-tech crimes task force is one of five regional units created by California in the late 1990s. The goal is to pool expertise from law-enforcement agencies including state police and the U.S. Secret Service to fight such crimes as online child pornography, DVD piracy and Internet fraud.
The task forces work closely with eBay's own staff of 1,000 people assigned to investigate and prevent fraud. The eBay team includes several former federal prosecutors, a former Scotland Yard detective and a former cybercrime investigator with the Italian police. The company regularly meets with law-enforcement officials in the U.S. and abroad. EBay says it recently trained the New York City Police Department's auto-crime unit on how to investigate people who sell stolen or nonexistent cars over the Internet. The company has won the praise of law-enforcement officials for quickly suspending accounts of potential fraudsters and helping track down suspects.
Nonetheless, criminals keep finding ways to trick people. Some pose as buyers and manipulate the system to get valuable merchandise without paying. Last summer, a New York woman shipped a necklace valued at $150,000 to an eBay buyer in Sherman Oaks, Calif. She used an escrow service, favored in some big-ticket transactions. These services are designed to protect both buyer and seller: The seller ships the item after the escrow service reports receiving payment, and the buyer agrees to release the payment when he or she receives the merchandise in the expected condition.
Unfortunately, it turned out that this escrow service was bogus: It reported receiving $150,000 but actually hadn't. The seller had been impressed with the service's professional-looking Web site, but it was apparently the creation of the buyer or an accomplice.
Mr. Fawrup assigned the case to one of his detectives, Agustin Del Valle. Noting that the complaint had just been filed the day before, the detective hopped in his car and sped to the Sherman Oaks address to which the victim had sent the necklace. It turned out to be a Mail Boxes Etc. store. A clerk gave Mr. Del Valle access to the postal box. Inside was the unopened package containing the necklace, along with several other items.
Dead Ends
Tracking down the perpetrator proved more complicated. Mr. Del Valle says "all his leads went to dead ends." Then the Beverly Hills police apprehended a man with a trunkload of merchandise thought to have been procured through fake escrow services. Law-enforcement officials say he is the same man who tricked the New York woman. The L.A. county district attorney's office, which expects to file charges soon, declined to say how the man was found or what evidence the office has against him.
Mr. Fawrup describes the suspect as a "smurf." That's cop-talk for a low-level grunt who does the dirty work for crime bosses. Law-enforcement agents believe the masterminds in this case are in Eastern Europe because the suspect appears to have made frequent trips to Budapest, Hungary, with merchandise in tow.
The eBay fraudster's greatest friend is a trusting buyer. Last year Luke Inoue, a car collector in Hawaii, bid in an eBay auction for an Acura NSX sports car. The auction closed without anyone bidding above the seller's minimum bid. But the seller contacted Mr. Inoue via e-mail suggesting a deal. Mr. Inoue, believing the seller to be a reputable eBay merchant in Southern California, agreed to buy the car for $61,000. He says he wasn't worried because he had bought a car on the Internet before.
The NSX never arrived. Mr. Inoue reported the fraud, and the case ended up with Mr. Fawrup. The detective discovered that the car did exist, and had been advertised in an online classified ad by its owner, a Pasadena dentist. A man posing as a buyer approached the dentist and, pretending to be interested in the car's condition, obtained car-registration papers and a vehicle-inspection report from a Pasadena Acura dealership. The con man then advertised the car on eBay, lifting the photos from the original classified ad. He offered to show the registration papers to Mr. Inoue -- a gesture that Mr. Inoue says increased his trust in the seller, although he ended up not bothering to take a look.
Mr. Fawrup found that the $61,000 payment was forwarded to a bank in Eastern Europe. He referred the case to the FBI, which says it's investigating.
Sometimes police get luckier, since not all suspected eBay fraudsters are savvy about disguising their identity. For months the Los Angeles Police Department, acting on information from Mr. Fawrup, were looking for an Australian man who was suspected of scamming eBay users in Southern California for tickets to Los Angeles Lakers games that he never delivered. Los Angeles police, with the help of counterparts in Australia, got a tip that the man, Scott Raymond Thomas, was headed to Los Angeles for a vacation.
Mr. Thomas was arrested at Los Angeles International Airport after he cleared customs and charged in June with three counts of felony grand theft. He pled not guilty and said through his lawyer, Harold Greenberg, that he had nothing to do with any fake eBay sales. Officials say losses due to the alleged fraud topped $100,000.
'Phishing'
Last year, scammers stepped up use of a technique called "phishing." They sent out mass e-mails to Internet users asking for passwords and other personal information, disguising the messages as official communications from eBay and other companies. In eBay's case, the goal of the ruse was to swipe the identities of users -- in particular, eBay sellers who had built a reputation for honesty through customer comments and other information posted on the site. However, thanks to articles in the media warning people not to get "phished," Mr. Fawrup says the task force sees fewer instances of this fraud.
Mr. Fawrup's experience with Internet-auction fraud has made him a resource for other members of law enforcement. Last year, he says, a police officer in Redondo Beach, Calif., called to say that a local citizen spotted his stolen bicycle for sale on eBay. The officer wanted to know how he should pursue the thief. Mr. Fawrup's advice: Bid on the bike. The officer won the auction and arrested the seller when he went to pick up the bicycle, Mr. Fawrup says.
Come September, Mr. Fawrup will be on a new antifraud beat. He's been reassigned to a unit in Commerce, Calif., that investigates people who try to redeem empty cans, bottles and plastic from out of state. The project director of the high-tech crimes task force, Lt. Rick Craigo, says Mr. Fawrup will be replaced. But both men agree their numbers are still too few to catch most Internet evildoers. Says Mr. Fawrup: "I've been able to do so little."
[font=Times New Roman,Times,Serif]In L.A., Mr. Fawrup Uncovers
Scams With Global Scope;
A Race to Find a Necklace[/font]
[font=Times New Roman,Times,Serif]Mr. Inoue Loses $61,000[/font]
[font=times new roman,times,serif] [font=times new roman,times,serif]By NICK WINGFIELD
[font=times new roman,times,serif]Staff Reporter of THE WALL STREET JOURNAL[/font]
August 3, 2004; Page A1[/font]
[/font] NORWALK, Calif. -- One of eBay Inc.'s official tenets is that "people are basically good." George Fawrup wants to find the eBay users who are altogether bad.
For the last 2½ years, Mr. Fawrup, a veteran California police detective, has been battling one of the Internet era's signature crimes: online-auction fraud. Most of the fraudsters use eBay, the Internet's biggest auction site, and they get craftier by the year.
Last year, Mr. Fawrup received a complaint from an eBay shopper who said he wired several thousand dollars to a woman's account for a pair of high-end stereo speakers that never arrived. At first it looked like an easy case: The bank had the woman's address. Mr. Fawrup arrived at her house to find two detectives from nearby Irvine already there, grilling her about similar ripoffs.
But the woman appeared dumbstruck. She said she'd never sold anything to the victims. She had been hired by a European nonprofit health organization to receive charitable donations in her account and forward them to Western Union offices in Germany and Romania. The woman, a medical researcher, assumed the organization was legitimate in part because it asked her to write short research papers on AIDS.
Mr. Fawrup told her what was really happening: She was laundering money for international criminals. She paid back out of her own pocket the roughly $25,000 sent by the victims and wasn't arrested. Mr. Fawrup referred the case to the Federal Bureau of Investigation, but he says they haven't been able to find the real culprits.
The frustrating ending is no surprise. "There are a lot of bandits and few marshals" on the Internet, says Mr. Fawrup. He has been a supervisor at the Southern California High Tech Crimes Task Force since early 2002, although he will soon start a new antifraud job.
The task force's special agents are gumshoes in a growth industry. By letting strangers sell goods to each other without meeting, eBay has created a marketplace of awesome breadth -- and a huge potential for fraud. The company says only a tiny fraction of its sellers are crooks and the vast majority of transactions on the site, which totaled $24 billion in 2003, go smoothly. The Federal Trade Commission says it received more than 166,000 Internet-related fraud complaints last year with reported losses of nearly $200 million. About half of the complaints involved online auctions. Mr. Fawrup alone says he's received more than 1,000 fraud complaints about eBay since 2002, with five to eight more coming every day.
Despite those numbers, the high-tech crimes unit at the Los Angeles County district attorney's office estimates it has filed only about 15 cases since 2002 involving Internet-auction fraud. The biggest obstacle often is finding a suspect. Fraudsters, some of them in distant countries, use an endless supply of tricks to disguise their identities.
Law-enforcement officials say they don't have enough staff or expertise to keep up. Many fraud complaints aren't investigated because the losses fall below a threshold set by county prosecutors -- a number Mr. Fawrup prefers to keep secret for fear of aiding criminals.
EBay executives point out that plenty of people get cheated in more traditional forms of commerce too. "This is no different than the offline world -- the bad guys come up with more creative ways of doing things," says Rob Chestnut, vice president of rules, trust and safety at eBay headquarters in San Jose, Calif. Law-enforcement officials and eBay's fraud team "evolve with them and hopefully slightly ahead of them," he says.
For items that aren't delivered or are significantly misrepresented by sellers, eBay offers buyers up to $200 in fraud protection, minus a $25 deductible. Buyers who use PayPal, an electronic payment service that eBay bought in 2002, are covered up to $500.
When people get ripped off at eBay and similar sites, they're usually encouraged to report the case to a clearinghouse for complaints operated by the FBI and the National White Collar Crime Center. If the victim is in the Los Angeles area, the clearinghouse has often forwarded the complaint to Mr. Fawrup's desk in a windowless basement office in Norwalk, just southeast of Los Angeles.
The 51-year-old state-police veteran has had an eclectic career, including a stint as a motorcycle cop in the California Highway Patrol. He investigated allegations that Mark Fuhrman, a Los Angeles police detective, perjured himself during testimony at the O.J. Simpson trial. (Mr. Fuhrman pleaded no contest and was given three years probation.) In 1999, Mr. Fawrup helped apprehend Jelani Efron King, known as the "Westside rapist" for a string of violent assaults.
Mr. Fawrup's high-tech crimes task force is one of five regional units created by California in the late 1990s. The goal is to pool expertise from law-enforcement agencies including state police and the U.S. Secret Service to fight such crimes as online child pornography, DVD piracy and Internet fraud.
The task forces work closely with eBay's own staff of 1,000 people assigned to investigate and prevent fraud. The eBay team includes several former federal prosecutors, a former Scotland Yard detective and a former cybercrime investigator with the Italian police. The company regularly meets with law-enforcement officials in the U.S. and abroad. EBay says it recently trained the New York City Police Department's auto-crime unit on how to investigate people who sell stolen or nonexistent cars over the Internet. The company has won the praise of law-enforcement officials for quickly suspending accounts of potential fraudsters and helping track down suspects.
Nonetheless, criminals keep finding ways to trick people. Some pose as buyers and manipulate the system to get valuable merchandise without paying. Last summer, a New York woman shipped a necklace valued at $150,000 to an eBay buyer in Sherman Oaks, Calif. She used an escrow service, favored in some big-ticket transactions. These services are designed to protect both buyer and seller: The seller ships the item after the escrow service reports receiving payment, and the buyer agrees to release the payment when he or she receives the merchandise in the expected condition.
Unfortunately, it turned out that this escrow service was bogus: It reported receiving $150,000 but actually hadn't. The seller had been impressed with the service's professional-looking Web site, but it was apparently the creation of the buyer or an accomplice.
Mr. Fawrup assigned the case to one of his detectives, Agustin Del Valle. Noting that the complaint had just been filed the day before, the detective hopped in his car and sped to the Sherman Oaks address to which the victim had sent the necklace. It turned out to be a Mail Boxes Etc. store. A clerk gave Mr. Del Valle access to the postal box. Inside was the unopened package containing the necklace, along with several other items.
Dead Ends
Tracking down the perpetrator proved more complicated. Mr. Del Valle says "all his leads went to dead ends." Then the Beverly Hills police apprehended a man with a trunkload of merchandise thought to have been procured through fake escrow services. Law-enforcement officials say he is the same man who tricked the New York woman. The L.A. county district attorney's office, which expects to file charges soon, declined to say how the man was found or what evidence the office has against him.
Mr. Fawrup describes the suspect as a "smurf." That's cop-talk for a low-level grunt who does the dirty work for crime bosses. Law-enforcement agents believe the masterminds in this case are in Eastern Europe because the suspect appears to have made frequent trips to Budapest, Hungary, with merchandise in tow.
The eBay fraudster's greatest friend is a trusting buyer. Last year Luke Inoue, a car collector in Hawaii, bid in an eBay auction for an Acura NSX sports car. The auction closed without anyone bidding above the seller's minimum bid. But the seller contacted Mr. Inoue via e-mail suggesting a deal. Mr. Inoue, believing the seller to be a reputable eBay merchant in Southern California, agreed to buy the car for $61,000. He says he wasn't worried because he had bought a car on the Internet before.
The NSX never arrived. Mr. Inoue reported the fraud, and the case ended up with Mr. Fawrup. The detective discovered that the car did exist, and had been advertised in an online classified ad by its owner, a Pasadena dentist. A man posing as a buyer approached the dentist and, pretending to be interested in the car's condition, obtained car-registration papers and a vehicle-inspection report from a Pasadena Acura dealership. The con man then advertised the car on eBay, lifting the photos from the original classified ad. He offered to show the registration papers to Mr. Inoue -- a gesture that Mr. Inoue says increased his trust in the seller, although he ended up not bothering to take a look.
Mr. Fawrup found that the $61,000 payment was forwarded to a bank in Eastern Europe. He referred the case to the FBI, which says it's investigating.
Sometimes police get luckier, since not all suspected eBay fraudsters are savvy about disguising their identity. For months the Los Angeles Police Department, acting on information from Mr. Fawrup, were looking for an Australian man who was suspected of scamming eBay users in Southern California for tickets to Los Angeles Lakers games that he never delivered. Los Angeles police, with the help of counterparts in Australia, got a tip that the man, Scott Raymond Thomas, was headed to Los Angeles for a vacation.
Mr. Thomas was arrested at Los Angeles International Airport after he cleared customs and charged in June with three counts of felony grand theft. He pled not guilty and said through his lawyer, Harold Greenberg, that he had nothing to do with any fake eBay sales. Officials say losses due to the alleged fraud topped $100,000.
'Phishing'
Last year, scammers stepped up use of a technique called "phishing." They sent out mass e-mails to Internet users asking for passwords and other personal information, disguising the messages as official communications from eBay and other companies. In eBay's case, the goal of the ruse was to swipe the identities of users -- in particular, eBay sellers who had built a reputation for honesty through customer comments and other information posted on the site. However, thanks to articles in the media warning people not to get "phished," Mr. Fawrup says the task force sees fewer instances of this fraud.
Mr. Fawrup's experience with Internet-auction fraud has made him a resource for other members of law enforcement. Last year, he says, a police officer in Redondo Beach, Calif., called to say that a local citizen spotted his stolen bicycle for sale on eBay. The officer wanted to know how he should pursue the thief. Mr. Fawrup's advice: Bid on the bike. The officer won the auction and arrested the seller when he went to pick up the bicycle, Mr. Fawrup says.
Come September, Mr. Fawrup will be on a new antifraud beat. He's been reassigned to a unit in Commerce, Calif., that investigates people who try to redeem empty cans, bottles and plastic from out of state. The project director of the high-tech crimes task force, Lt. Rick Craigo, says Mr. Fawrup will be replaced. But both men agree their numbers are still too few to catch most Internet evildoers. Says Mr. Fawrup: "I've been able to do so little."