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3 men charged with driving up the prices on fake paintings

SAN JOSE, Calif. (AP) — Three men were charged Thursday with joining together to drive up prices in Internet art auctions on eBay, including one in which a Dutch user bid $135,000 for a fake Richard Diebenkorn painting.

The men allegedly created more than 40 different user names on eBay with false registration information, then used those aliases to inflate bids on paintings they were auctioning.

The scheme garnered bids totaling $450,000 in hundreds of auctions from November 1998 to June 2000, according to federal prosecutors in Sacramento.

Self-bidding, known as shill bidding, is forbidden by San Jose-based eBay Inc. and is generally illegal in traditional auctions. EBay's deputy general counsel, Rob Chesnut, said he believed this was the first criminal case to result from alleged shill bidding online.

Kenneth A. Walton, 33, a lawyer in Sacramento; Kenneth Fetterman, 33, of Placerville; and Scott Beach, 31, of Lakewood, Colo., were charged with a total of 16 counts of wire and mail fraud, which carry up to five years in prison, a $250,000 fine and possible restitution to victims.

Fetterman also is charged with money laundering, which carries up to 20 years and a $500,000 fine.

Walton is cooperating with the investigation, said his attorney, Harold Rosenthal.

Beach did not return a message seeking comment. No listing for Fetterman could be found.

According to the federal indictment, Walton put the initials "RD 52" in the bottom right corner of an unsigned orange and green abstract painting that he and Fetterman had picked up at an antique store.

Prosecutors said Walton then listed the painting on eBay — with photos showing the signature — and wrongly said he had bought it in Berkeley, where Diebenkorn worked in the early 1950s.

The three men allegedly made more than 50 phony bids on the painting, driving its price from 30 cents to $135,505, before a Dutch man stepped in and bought it for $135,805. Diebenkorn's real paintings have sold for millions.

Investigators for eBay later dissolved the sale and barred Walton from the site after discovering he had placed a $4,500 bid on the painting himself. Walton has said that bid was made for a friend.

The indictment said the three men also drove up bids together on another work purportedly by Diebenkorn and artists such as Alberto Giacometti, Clyfford Still and Maurice Utrillo. Fetterman and Walton allegedly came up with fake user names with "Giacometti" and "Still" in them, to make it seem as if the painters' family members were bidding.

In one case, prosecutors said, the men created a phony e-mail account for a supposed expert on Still and congratulated the buyer for recognizing an "excellent example" of the American abstract expressionist's work.