NEW YORK (CNNfn) - Online auction site eBay Inc. confirmed Wednesday that the FBI has launched a probe into whether people are committing fraud by bidding up the prices of their own items.|
"The FBI is investigating...It's very clear to us that eBay is not the subject of the investigation. They're looking at the practice of an individual. We have cooperated and we will continue to cooperate with the FBI," eBay spokesman Kevin Pursglove said.
The federal investigation centers around Sacramento lawyer Kenneth A. Walton, who listed an abstract painting supposedly done by renowned artist Richard Diebenkorn on the eBay (EBAY: Research, Estimates) site last month with an opening bid of 25 cents.
Nick Rossi, a spokesman for the FBI's Sacramento field office said he could not comment on the matter, but has acknowledged that the Bureau is "looking at a number of different types of traditional fraud which are now taking place through a new media."
The New York Times and the Sacramento Bee both reported Wednesday that the FBI is investigating whether Walton was part of a ring that had engaged in cross bidding on one another's items.
A Dutch collector eventually paid more than $135,000 for Walton's painting, but publicity around the sale led eBay officials to determine that the work may not have been authentic and that Walton had "shilled," or bid on his own item, officials said.
Shilling, or bidding on your own item, is against eBay's rules and is illegal in traditional auction houses.
"I can bid on your item, and at the same time you can bid on your own item," Pursglove said of the practice called shilling.
Pursglove said the 32-year-old Walton has been permanently suspended from eBay and that the company is taking its own steps to try to prevent future shilling problems.
Despite this high profile case, Pursglove said shilling is a relatively uncommon occurrence on the eBay site, which receives 1,000 bids a minute each day on average. Often he said people caught bidding on their own items through the company's shilling software are doing it simply out of ignorance of the rules.
"People have actually placed a bid on behalf of somebody else. The person selling the item is bidding on it," Pursglove said. "We've talked to these folks and we've come away really convinced they were doing it for a friend or family member that didn't have an eBay account. Also, people have done it because they are attempting to drive up the price on their own item."
Walton could not be reached by telephone Wednesday afternoon. But Lynn Alexander, the human resources director at the Sacramento law firm of Kronick, Moskovits, Tiedemann & Girard where Walton is an associate, referred reporters to Rudy Curiel, an art appraiser who said Walton hired him several weeks ago to determine the painting's authenticity.
Alexander declined to say whether Walton was still employed at the firm, or whether he showed up for work Wednesday.
Walton has denied any wrongdoing and said he used a different online alias to bid on his own item only to help a friend who did not have an eBay account.
Is it a Diebenkorn?
Curiel said he and a team of about five other scholars and art historians are continuing to evaluate the work to determine if it actually is a Diebenkorn piece.
"It's not conclusive at this point. We're still going through the last consensus at this point, and I could just say I don't think anybody right now would want to say that it's not authentic," Curiel said.
Curiel said a museum and a Northern California art dealer referred Walton to him.
Curiel and his team are researching the painting's ownership history, which he said is sketchy and unclear as well as actually testing the paint for type and age.
Richard Diebenkorn was a well-known modern abstract artist who painted heavily between the 1950s and 1970s. If Walton's piece is authentic, it would date to 1952 and would be worth between three quarters of a million dollars and $1 million.
Shares of eBay closed up 3-13/16 to 75-5/8 Wednesday.
-- wire services contributed to this report