Washington Post: Thieves Find Exactly What They're Looking for on EBay
Mentor
Thieves Find Exactly What They're Looking for on EBay
Auction Site Used to Cash In on Stolen Goods
By Ariana Eunjung Cha
Washington Post Staff Writer
Thursday, January 6, 2005; Page A01
SAN JOSE -- Stealing the merchandise was the easy part. The ring of
young men and women had become pros at snatching cashmere sweaters,
perfumes and other expensive items from the likes of Abercrombie &
Fitch, Victoria's Secret and Pottery Barn.
The problem was how to turn the goods into cash. Hocking the wares on
the black market was out. They didn't have the contacts. And any
attempt to return the goods for refunds would probably be rebuffed
without some proof of purchase.
Soon they hit upon a solution: eBay.
The Silicon Valley-based auction house has become a fabulously
successful mechanism for sellers of all kinds: mom-and-pop jam makers,
collectors of fine antiques, people who just want to make a few bucks
off the stuff collecting dust in their basement. With its global
customer base of more than 100 million and software that allows
strangers to exchange goods and money without ever meeting, it has
maximized profit for its retailers.
It has done the same for thieves.
The shoplifters discovered some stores would allow them to return the
goods without receipts for store credit or gift cards. They then sold
those vouchers on the giant online marketplace. It was easy, instant
and anonymous. The money flowed in -- they got 76 cents per dollar of
stolen merchandise, a huge takeaway considering that shoplifters
traditionally net 10 percent or less of the retail value of the items.
The group made more than $200,000 in 10 months.
Law enforcement officials estimate that thousands of criminals
continue to pull similar scams on the Internet, and enforcement is
difficult. Breaking up the store-credit-for-cash scheme involved a
massive, year-long sting that took authorities across five Northeast
states and required them to mine hundreds of computer files, conduct
secret surveillance at stores and place an agent undercover to
infiltrate the ring.
In late December, Herion Karbunara, 25, pleaded guilty to organizing
the scam. He received two years in jail. Two accomplices -- Lindsey
Holland, 20, and Helen Macy, 21 -- received probation for returning
stolen items to shops to collect the store credit. Anne Leeman, 39,
also accused in the scheme, pleaded guilty the previous month. Charges
in the case are still pending against Christine DeGrandis, 33.
Arif Alikhan, an assistant U.S. attorney in California, said the
Internet has transformed those who in another era might have been
petty thieves into major worries for law enforcement.
"There are a growing number of small-time thieves who have used the
Internet to go big-time based on the anonymity that they think
exists," said Alikhan, who specializes in cyber-crime and intellectual
property cases.
The Federal Trade Commission last year received a record number of
complaints, some 166,000, related to Internet fraud linked to losses
of nearly $200 million. Half of the cases involved online auctions.
Those crimes are no longer limited to someone getting a bum deal on a
lamp or Beanie Baby. A group of amateur motorcycle thieves from Austin
filched nine bikes and sold them for $15,000 to a man who took them
apart and auctioned off the spare parts online. A wife-and-husband
team from Atlanta removed the bar codes from low-cost items and put
them on expensive rugs that they purchased from Home Depot and Lowe's
stores. They then returned the items, accepting gift cards for the
real price of the merchandise, often hundreds of dollars more than
they paid. They then would sell the gift cards on eBay. Prosecutors
say the pair made at least $150,000 from the crime.
EBay spokesman Hani Durzy said that most auctions proceed without
problems but that the company estimates a minuscule number -- 0.01
percent -- are fraudulent. There is no way to know exactly how many
sales involve stolen goods.
"It would be impossible for us to be able to pinpoint a stolen good
before it gets reported to us," Durzy said. "We don't own it. We don't
ship it. We never handle it."
But with 30 million auctions happening on any given day, even 0.01
percent means at least 3,000 could involve some sort of crime. Durzy
said eBay over the years has increased its security team to 1,000
people -- or 13 percent of its total employees -- to help combat the
problem. It introduced a computer analysis system to flag suspicious
auctions, and it is actively cooperating with government investigators
around the world.
Karbunara, who was living in Woburn, Mass., began shoplifting in
January 2002, authorities said. He paid a group of women from $50 to
$200 a day to help him. As part of one scam, one woman would shoplift
some merchandise and another would purchase identical items. Karbunara
would scan the receipt into a computer, print counterfeits and then
the women would return to the stores to get credit on their credit
cards, prosecutors claimed.
In March 2003, Karbunara moved his operation online. He would return
shoplifted items for gift cards and sell them on eBay. Under the name
"apolonia1trading," he posted offers for cards worth as much as
$1,200.
A suspicious retailer tipped the attorney general's office to the fact
that a gift card from her store issued from stolen merchandise was
being auctioned on eBay. By tracing Karbunara based on information
from eBay's logs, law enforcement officials began secretly following
him. They saw that he would wait in the parking lot as the women took
brown paper bags into stores and then returned with stolen
merchandise. They would then change their clothes and wigs and go to
another store, working their way around the mall. On one occasion, law
enforcement officials followed him and his accomplices as they hopped
from shopping center to shopping center from Boston all the way to
southern Maine.
"It took a lot of work by state police and store security to figure
out what the entire scheme was," Grossman said.
Karbunara's ads on eBay were simple postings, Grossman said, with the
picture of the store logo, the dollar amount of the card and an offer
to sell it at a discount. With the sale of gift cards exploding in
recent years, there was nothing suspicious except for maybe the number
of cards he was selling. He often had dozens of cards for sale at one
time, for a total of 600 cards over the time he was running the
scheme.
For the most part, the people who purchased the cards paid for them
using PayPal, an online payment system that shields credit card
numbers and bank account information from sellers. However, buyers did
have to supply their names and mailing addresses to receive the cards.
Gift card fraud is one of the fastest-growing problems for merchants,
according to Richard C. Hollinger, a professor of criminology at the
University of Florida. The National Retail Federation, an industry
group based in the District, said one of its member companies recently
tracked 42 gift cards it found online and found that 22 had been
stolen or purchased with stolen credit cards.
Hollinger said the number of cards that people such as Karbunara post
should tip off eBay to the scam quickly.
"The only people that deal in those kinds of quantities are
professional criminals," Hollinger said.
In response to concerns by retailers, eBay recently restricted the
sale of gift cards to one per seller per week with a maximum value of
$500. But there's little eBay can do about another part of its system
that Karbunara exploited -- the ratings customers use to evaluate one
another. To the average customer, Karbunara appeared to be an honest
and reliable eBay seller. As soon as he received payment for the
stolen gift cards, he promptly mailed out the credits to unsuspecting
customers who until the day his account was deactivated gave him their
highest recommendation to other potential buyers.