FTC Wins Judgment Against Net Auction Scammers

A federal district judge has permanently barred two Chicago area residents from participating in Internet auctions.

The injunction sought by the Federal Trade Commission (FTC) follows the indictments of James D. Thompson and Susan B. Germek for mail fraud in which the two are accused of using stolen identities to sell nonexistent goods and making it appear that innocent third parties were the actually perpetrators of the fraud.

The court entered a default judgment against Thompson barring him from making misrepresentations about any product or service for sale on the Internet, including any violations of the FTC’s Mail Order Rule; using consumers’ personal information without their authorization; and selling or otherwise disclosing consumers’ personal or financial information. The court also ordered Thompson to pay $88,056.18 in consumer redress.

The stipulated final judgment against Germek, who agreed to settle the charges against her, contains the same conduct provisions. Under the settlement agreement, Germek agreed to pay $5,713.59 to be used for consumer redress and also agreed to a suspended judgment ordering her to pay $41,186.94 if she is found to have misrepresented her financial situation.

On the mail fraud charges, Germek pled guilty on one count and is awaiting sentencing; no trial date has been set for Thompson.

According to the FTC, beginning in early 1999, Thompson and Germek opened numerous accounts on Internet auction Web sites, offering various items of merchandise for sale, including computer software, electronics, purses and die cast cars. The defendants allegedly accepted payment from consumers, then failed to deliver the promised merchandise.

The FTC says the defendants constantly changed their Internet auction account names to conceal the fact that they were defrauding consumers. By 2001, the FTC alleges, Thompson and Germek were engaging in serial identity theft, setting up bank accounts and post office boxes in other peoples names, and directing that payment be sent to them.

The identity theft initially led both consumers and law enforcement officials to believe the identity theft victims were responsible for the auction fraud. According to the FTC, the identity theft victims were people with whom Thompson had personal relationships, people whose identity information Germek had taken from the records of a suburban Chicago hotel, and even a person who had died.

“Defendants have defrauded many consumers, causing tens of thousands of dollars in consumer injury. Moreover, third parties whose personal information was misappropriated by the defendants for use in conjunction with the this scheme have suffered injury,” The FTC complaint stated. “For example, some these third parties have been wrongly accused of defrauding consumers, some have had unauthorized charges placed on their credit cards and others have had to spend considerable time undoing the action taken with their misappropriated identities.”

Auction fraud is a hot button issue, rising to 46 percent of all complaints issued, according to the Internet Fraud Complaint Center (IFCC)

However, the increase in person-to-person fraud during online auctions could be good news for established online retailers.

“We believe that the existence of e-commerce and auction fraud on the Internet may lead some online shoppers to familiar (and trusted) suppliers and brands,” analysts with Deutsche Bank said back in a June brief to investors. “We believe that companies, such as Amazon, having established a reputable trust with its customers, will continue to represent a secure shopping destination for these users.”