The U.S. Attorney's Office in Sacramento charged Kenneth Walton of Sacramento, Calif.; Kenneth Fetterman of Placerville, Calif.; and Scott Beach of Lakewood, Colo. with wire fraud and mail fraud, federal authorities said in a statement. Additionally, attorneys charged Fetterman with money laundering.
Representatives for the U.S. Attorney's Office did not immediately return calls seeking comment.
The three defendants are accused of making fraudulent bids on hundreds of art auctions on eBay, including the infamous faked Diebenkorn work. According to the indictment, the three defendants, using a variety of eBay user IDs, placed bids on more than half of the 1,100 auctions they listed on eBay between 1998 and May 2000. Prohibited by eBay, the practice is known as "shill bidding" and is typically done to drive up the price of auctions or to convince potential bidders of the legitimacy of a questionable item.
The faked Diebenkorn caused a stir when it was listed on eBay last year. The painting purportedly was bought in Berkeley, Calif., near where Diebenkorn had lived and worked in the 1950s. Although the listing did not state that the painting was by Diebenkorn, the auction tantalized potential bidders because it was signed "RD 52."
But the indictment accuses Walton of forging the initials on the painting, which, it charges, he bought in Little Rock, Calif. An eBay member from the Netherlands placed a winning bid for the painting of $135,805 after the three defendants allegedly made more than 50 fraudulent bids that drove up the price.
The Federal Bureau of Investigation, the Internal Revenue Service and the Sacramento Valley Hi-Tech Crimes Task Force, assisted by eBay, investigated the alleged shill-bidding ring, authorities said in a statement.
eBay spokesman Kevin Pursglove said the company was pleased that federal authorities investigated the case and followed through with the indictments.
"eBay has never and will never tolerate shills," Pursglove said.
As online auctions have increased in popularity, auction sites have had to combat a growing problem with fraud. In December, for instance, federal authorities in Southern California arrested one man and indicted another in connection with two separate schemes that allegedly defrauded eBay members of tens of thousands of dollars.