Jeweler to pay $400,000 in auction fraud settlement

A Manhattan jewelry dealer who directed his employees to secretly place bids that inflated the price of goods his company auctioned on eBay has agreed to pay $400,000 to settle a civil fraud complaint, the New York attorney general, Andrew Cuomo, said Friday.

The settlement also bars the merchant, Ezra Dweck, and his company, the EMH Group, from participating in online auctions for four years, according to a statement by Cuomo's office. The settlement includes a $100,000 fine and $300,000 in restitution.

EMH deals in "large quantities" of diamonds, gold and platinum jewelry and supplies "most of the major U.S. chain stores," according to the company's Web site. Cuomo's lawsuit said Dweck listed items on eBay as having no reserve price--meaning they would be sold no matter how low the highest bid was--but that he distributed spreadsheets to employees instructing them on what bids they should place to drive up the final sale price. Cuomo said the company placed 232,000 bids totaling more than $5 million over a one-year period.

The deceptive practice of insiders posing as bidders, known as shill bidding, has a long and notorious history in traditional auction markets. It has become a growing concern for the operators of online markets and regulators.