NEW YORK.- Bob Tedesch of the New York Times wrote that Kenneth Walton, who pleaded guilty in 2001 to federal wire and mail fraud charges for trying to sell a fake Richard Diebenkorn painting on eBay for $135,000 in a shill-bidding scam, has run afoul of eBay again. This time, though, it was not the authorities that did him in. It was his mom, albeit unintentionally.Mr. Walton has yet to be sentenced in the shill-bidding case, in which he arranged with his co-defendants to artificially inflate the price of the fake painting with a series of bids intended to stimulate interest. He agreed in a plea bargain in 2001 to abstain from personal involvement in online auctions - a pledge he has fulfilled, according to his lawyer, Harold Rosenthal. At around the time Mr. Walton was charged in the bidding case, he had started a business called HammerTap, which sold software allowing eBay auctioneers to manage their sales. He registered his companys Web site in his mothers name, and otherwise kept the sites management anonymous, issuing press releases that quoted only an unnamed company spokesman.
Last March, eBay said it called HammerTap as part of a continuing effort to determine the legitimacy of businesses that copy eBay data without the sites permission and use the information for profit. HammerTap, which scans eBays past sales to predict future selling prices, would have been given permission to accept direct data feeds from eBay had Mr. Walton not been involved.But according to Hani Durzi, an eBay spokesman, when an eBay employee called Ms. Walton at HammerTap and asked to speak to the companys owner, "she said Oh, you mean Ken?
"Our person said, Uh, whats his full name? Mr. Durzi said. "And the reply was Ken Walton. Mr. Durzi said eBay told Mr. Walton to either "stop what he was doing or wed take steps to stop it for him." So Mr. Walton sold the business late last year for an undisclosed price to Bright Builders, a company in Provo, Utah, that sells Web site software and services that had been a HammerTap re-seller.
Patrick Hanly, an assistant United States attorney involved in the shill-bidding case, indicated that prosecutors did not regard Mr. Waltons connection with the HammerTap software as a violation of his plea agreement. Mr. Walton declined comment, but Mr. Rosenthal, his lawyer, acknowledged that Mr. Walton had started and had run the company. Mr. Rosenthal said Mr. Walton was using the proceeds from the sale to pay the more than $62,000 in restitution the court ordered him he owes his victims. "Ken was able to use some of his talents legitimately," Mr. Rosenthal said, "and he used them to make amends."
According to Ina Steiner, editor of the online auction news site AuctionBytes.com, and who first reported Mr. Waltons HammerTap involvement last month, the disclosure was "disturbing. "One of the features of HammerTap software is shill-bidding detection," she noted. Mr. Walton and Scott Beach, who pleaded guilty to mail and wire fraud in the Diebenkorn case, are scheduled to testify against Kenneth Fetterman, the third defendant in the case, who had evaded arrest until last year. That trial is set to begin in federal district court in Sacramento in early June. Following their testimony, Mr. Walton and Mr. Beach will be sentenced. The potential penalty is a fine of up to $250,000 for each count of fraud, as well as prison time.
It has not been disclosed how much money Mr. Walton made from HammerTap during his tenure. But Greg Cole, president of Bright Builders, said his company alone sold about 2,000 licenses of HammerTaps Deep Analysis software, at $179 each, on HammerTaps behalf. Mr. Cole said he continues to sell the software and plans to upgrading it in the next couple of months. "I understand he did some stuff," Mr. Cole said. "But as far as my transactions with him go, hes been very honorable."
