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Scam Casts Doubt On eBay's Antifraud Software

The online auctioneer's software failed to catch an Arizona couple that allegedly stole more than $100,000 from more than 500 bidders
SAN JOSE, Calif. (AP) - Robert Beck suspended his distrust of online auctions and went for a top-of-the-line speaker system. He cast a winning bid of $1,900, paid by credit card and waited for his first eBay purchase.

The speakers never arrived.

Last week, detectives confirmed to the 25-year-old engineer that the sellers, an Arizona couple, had cashed out their bank account and fled. The couple allegedly stole more than $100,000 from more than 500 bidders.

The case has cast suspicion on eBay Inc.'s anti-fraud software, which the San Jose-based company installed nearly a year ago to counter complaints about fly-by-night sellers.

Beck and other victims say the software--which ostensibly gets better the longer it's in use--should have alerted eBay to cancel the auction long before hundreds of people parted with their money.

"The red flags in this case were all over the place," said Beck, a St. Louis resident. "For eBay to say that the software works--the principle of it makes me sick."

EBay spokesman Kevin Pursglove said the company's Fraud Automated Detection Engine, or FADE, was never meant as a panacea.

"The reality is that no single tool is going to be able to eliminate fraud in the off-line world or the online world," said Pursglove, who would not discuss specifics of the Arizona case.

EBay maintains that less than one-one-hundredth of 1 percent of all listings are fraudulent.

Chief executive Meg Whitman introduced FADE in June and promised it would make "major strides" combating fraud. The company has also forged closer ties to police officials, the U.S. Postal Service and international delivery services.

FADE collects data from defrauded customers, then alerts eBay's private fraud busters of new auctions that match patterns of known scams. Red flags include unexpected changes in a seller's behavior; a new user with large quantities of very expensive merchandise; or an address linked to a country--Eastern Europe tends to be suspect--with a high incidence of eBay fraud, Whitman said at a shareholder meeting.

EBay reserves the right to cancel any suspicious auction-- ideally before users part with their cash.

Auction enthusiasts said they never expected FADE or any other tool to eliminate all fraud, but they question why the software couldn't catch the Arizona suspects, whose actions caused alarm even among some novice users.

"This was like watching a car accident in slow motion," said David Steiner, president of AuctionBytes.com, a watchdog group for eBay buyers and sellers. "You could see all the signs of what was going to happen. ... If it can't catch this, FADE is almost laughable."

In early January, the couple from Munds Park, Ariz., began auctioning DVDs for $5 to $10 each under the name "mylittle1s." On a customer comment page, dozens of buyers praised the vendor for shipping products quickly.

About a month later, they switched from DVDs to more expensive electronics. But they also switched from a home address to a PO box and said items wouldn't be shipped until weeks later.

Other warning signs began popping up. They stopped responding to E-mail, complaints poured in and mylittle1s' feedback rating plummeted.

An eBay user alerted Coconino County, Ariz., sheriff's detective Bruce Cornish.

On March 4, Cornish went to the couple's address--a vacant, doublewide trailer a short drive south of Flagstaff. He identified them as Michael and Nancy Dreksler, who used online aliases Tony and Renee Boseli. He contacted eBay, which halted the couple's auctions the next day.

Cornish says he suspects the Drekslers, who are also wanted in Arizona for forgery, fled to Colorado. So far, he has found 510 victims who lost a total of $104,644.

Chris Welty, a researcher for IBM Watson Research Center in Hawthorne, N.Y., said anti-fraud software often lulls consumers into feeling secure, but the technology is notoriously fallible.

"Think of it as locking your car door. It's not going to prevent a good car thief from stealing your car, but it's going to protect you from some teenager walking down the street and taking it for a ride," he said.

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