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FBI focuses on rise in fraud cases on Internet


WASHINGTON - The FBI is cracking down on Internet auction fraud, a tidal wave of crime that now claims millions of victims a year.

The most common rip-offs are nondelivery, misrepresentation of goods or "shill bidding" - posting fake bids to drive up the price of merchandise. Of an estimated 500 million Internet auction sales last year, the FBI estimates that about 5 million were scams.

The bureau announced yesterday that it was working with local authorities to round up 88 major online scammers who had bilked victims nationwide out of $117 million, mostly through Internet auction schemes. So far about 60 targets of "Operation Cyber Loss" are in custody.

Many of the complaints that led to this week's charges were received by the FBI's Internet Fraud Complaint Center in Fairmont, W.Va.

The center, funded by the FBI and a consortium of law enforcement agencies and private companies, is a kind of national 911 for online fraud cases.

Most of the 56,170 victims who reported their cases to the FBI center in its first year's operation live in New York, Pennsylvania, Florida, Texas and California, FBI officials said.

Four cases, involving losses totaling more than $250,000, resulted from items offered on eBay, a popular auction site headquartered in San Francisco.

One offered classic cars for about $10,000 each that were never delivered. Another, which also sold on the Yahoo auction site, stiffed 200 victims out of thousands of dollars' worth of Beanie Babies and computer games, FBI officials said.

Charles Sweet, 37, formerly of Key Largo, Fla., was charged by the FBI's Miami office with accepting $72,724 for computer monitors and printers he never delivered to eBay auction customers between November 1999 and March of last year, according to court papers.

Sweet, who is still at large, faces up to five years in jail and a fine of up to $1 million.

Investment scams were another form of high-dollar Internet crime.

David Lohr, 34, of Fort Lauderdale, Fla., was charged yesterday with conspiracy to commit wire fraud, securities fraud and money laundering for allegedly stealing more than $13 million from customers who thought they were investing in PaydayToday.com.

Lohr claimed the company lent money to check-cashing companies for interest payments of 30 percent a month, according to court papers. The FBI says Lohr never lent money to anyone. He is alleged to have solicited investors through his Web site with promises of 4 percent interest monthly. The FBI seized more than $6 million from Lohr's accounts and a luxury boat.

Most victims of Internet auction fraud who contacted the FBI were males between the ages of 20 and 50. The most common frauds involved Beanie Babies (27 percent), video consoles, games and tapes (24 percent) and laptop computers (18 percent). The average victim lost $776.

Most scammers were individuals, not companies. Most victims paid by money order or check. Customers typically knew only an e-mail address or post office box number, according to the FBI.

One of the biggest scams was a $14 million Miami-based operation in which 46,000 victims paid $300 each for memberships in a nonexistent "Internet Mall" for "E-Commerce opportunities."

Auction sites such as eBay try to prevent fraud by offering "feedback forums" where users can check a sellers' past performance in delivering quality merchandise on time. For a small fee - usually 3 percent to 5 percent of purchase price - auction sites also offer agreements that will withhold a buyer's money from the seller until the buyer's satisfaction is verified.

On eBay, each item purchased is insured up to $200 at no charge as long as the buyer files a claim within 60 days of the purchase date, said eBay spokesman Kevin Pursglove. Pursglove said eBay posts about 6 million items for sale each day. Only one confirmed fraud occurs per 40,000 eBay listings, he said.

Internet scams have been difficult to prosecute because local police lack the authority and resources to investigate the cases.

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