Phantom Figurines

Roland Granger was an experienced antiques salesman with an apparent clean record. Then he discovered eBay. He auctioned rare figurines, collected more than $300,000, did not deliver the goods and skipped town. Learn from this CFE as he investigates the fraud, interviews witnesses and eventually discovers the evidence that gave Roland a six-year prison sentence. 

She was a widow with three grown sons. Her late husband left her with a tidy inheritance that would have been sufficient for most women, but not for Eleanor Wallace; she was far too motivated and independent. At a mere 63 years old, she wanted more from life than idle contentment.

Roland Granger was unhappily married and living on the western side of Michigan, some 200 miles from Eleanor. Like Eleanor, Roland was not one to let life pass by without noticing him. He was two years younger than her, with a head for business and an eye for women.

Eleanor was refined; Roland was brash. She was tall and slender; he was compact with a burgeoning belly. She took great pride in her appearance and kept her hair smartly colored and coiffed. He was gray, balding and often disheveled. She chose her clothing carefully, for appearance and fit, while he kept the appearance of a weekend golfer in mid-July on the 18th green. In a bit of a character turnabout, it was Eleanor who preferred the informal “Ellie.” He insisted on “Roland,” for its formality, because most nicknames lacked respectability, and others he thought were just plain silly.

They met at an antique show. He was a seasoned pro, having been in the business with his wife for several years, and Ellie was still green. She used the money left to her by her late husband to start up her own business. Her sons warned her against such a venture. After all, she was getting on in years and had no experience — better to hand it over to an investor and live on the dividends. But Ellie had more trust in her own instincts than those of a stranger.

Ellie’s business was really more of a consignment shop. She took in trinkets and gadgets, knickknacks and doodads. Those items she liberally called antiques had no place among Roland’s genuine artifacts.

Roland was smooth. His glib ways made it easy for him to sell and for folks to buy. He knew his merchandise and priced it right. Anyone near his booth was a buyer — or so he reasoned. They just did not know it until they heard his pitch. But he was not condescending. He didn’t argue, tussle or mortify. Most of those who waved him off often returned later for small talk and perhaps a purchase or two.

Ellie was impressed. She was a more striking figure than Roland, but she was stiff and uncomfortable in the role of salesperson. She had little confidence in her business acumen and none in her products. During a respite in his day, Roland challenged himself: “See that piece you’ve got?” he asked Ellie, pointing to a costume broach. “I’ll sell it for a glass of wine with you after the show.” He took it back to his booth and returned an hour later with $45.

A HOUSE DIVIDED

It was a sordid affair that blossomed into a model business arrangement. Roland left western Michigan, and his wife of seven years, and moved into Ellie’s modest ranch home in a town 35 miles north of Detroit. They married within a month. Ellie was thrilled to change her name to Ellie Granger.

If Ellie’s sons were nervous about her delving into the business world, they were downright horrified by this new addition to an already turbulent time in their mother’s life. Their horror quickly turned to fury. Her three sons were small-business owners, and each had been taken advantage of one way or another — burned by partners, ripped off by employees, manipulated by lenders or cheated by suppliers. If there was a fraud one of the three hadn’t fallen victim to, they had at least heard of it. They had very strong suspicions about Roland.

And yet they had no proof. They had no criminal history on this character, no references and no background checks. Jeff, the youngest, suggested — with tongue in cheek — hiring a private investigator. The other two thought hard about it but declined. How could they? How insulting would that be? Still, this Roland Granger was an unknown. He had come into their mother’s life from nowhere. And why? For selling a broach? He had left behind a wife and a business. How long before he did it to their mother?

The boys downplayed their concerns, choosing to be tactful. Their hints — though unheeded — were not unheard. “Roland’s right,” she barked at them one night during a family dinner, “you’re all just afraid of losing your inheritance!”

And with those words, sides were chosen, battle lines drawn.

INTERNET AUCTION FIGURINES

When Roland married Ellie, he took over her sinking consignment operation in the small, quiet town and turned it into an antique boutique called Classic Collections. Ellie opened a scrapbooking shop two doors down. With his background in antiques, Roland restructured Ellie’s business. Consignments would be a sideline to get people in the door. To focus the market, Roland suggested ceramic figurines as their staple product, but Ellie was skeptical. Not just any figurines, he assured her, but high-end, retired figurines — Lladros, Wee Forest Folk and Hummels.

Although sales at Classic Collections’ strip mall location were respectable, Roland did not think they were reaching enough people. So he took the show on the road where he was more comfortable and successful. He established a new customer base while reviving his old one. He used newsletters and e-mails to inform customers of new products in his inventory and to let them know he could be a middleman in procuring hard-to-find items.

It was around this time that online auctions began appearing on the Internet. Roland saw the advantages immediately. He had a core of buyers who were, for the most part, well-off but ornery collectors. Complaints about his business were few and revolved around his prices. So he begrudgingly sold below his asking price at times to keep the small niche market coming back. However, on the auction sites, he could let the system take the haggling out of the equation.

Once again, Ellie was skeptical. She was just getting comfortable with the standard business model. But she eventually concurred, not that Roland requested her concurrence. She was very hands-off with the business, except for filling in on occasions when Roland was away. Sales were brisk and profits considerable — better than she could have done — something she never hesitated to let her sons know. Her intermittent stand-ins at the shop ended when Roland hired two young employees.

VANISHING ACT

At the time, I was a special agent working in a Detroit FBI resident agency office, which focused primarily on child pornography, child enticement and related interstate matters. As the only dedicated computer crimes unit in the area, we also were the repository for computer frauds. We began receiving complaints from the Internet Fraud Complaint Center (IFCC), a clearinghouse operated by the FBI. Ironically (and seemingly counterintuitively), the IFCC will forward complaints to the local, county and state agencies with jurisdiction but not to the local FBI. Thus, eBay complaints were handed over to me whenever I stopped by the county cybercrime task force office. The eBay complaints I received on Roland focused on Classic Collections after a two-week online auction that sold his rare and expensive ceramic collectibles. The volume of complaints submitted in just over a week, and the difficulty of an interstate case like this one, meant the county happily passed along the complaints to me.

One mid-morning, I returned to the FBI office after attending a meeting with the task force, at which I was handed another IFCC complaint. When I came in, I walked past a fellow agent who was consoling an irate and visibly shaken, older woman and two young men. I cringed upon hearing the names Roland Granger and Classic Collections, awaiting my first face-to-face meeting with three very ill-tempered victims. The woman, however, wasn’t an ordinary victim. She was Eleanor Granger, who, I learned shortly thereafter, was not filing a complaint for the eBay fraud (she had no idea it had even occurred), but about her husband who had vanished with the entire proceeds from their bank account. The young men were two of her sons.

Through a two-way mirror, I listened intently to the interview. At first blush, I was sure Ellie and her sons were eyebrow deep in a conspiracy; this trip to the FBI was just to establish a line of defense. As I heard Ellie explain it, she and her husband of six years had built up a substantial business and accumulated about $220,000, which was deposited in a joint account at a local bank. Two days ago, her husband vanished during lunch. Concerned that night, she called their best friends, Averill and Linda Burkhart. Averill happened to be the head teller at the bank where the Grangers had their account and had seen Roland just that day around 1 p.m. Averill told Ellie that over the past few weeks Roland had come into the bank to withdraw large amounts of cash. Roland claimed he was purchasing very expensive pieces for the store. Each time, Averill recommended that Roland obtain a cashier’s check for security reasons, but Roland wanted cash.

“How much did he withdraw?” Ellie demanded.

“All told? ’Bout a quarter of a million.”

“You can’t do that!” Ellie screamed, “That was my account.”

“And his,” Averill countered. “We filled out the CTRs by law. His name is on the signature card. It’s a joint account. It was all done legally.”

“What did he say to you this afternoon about where he was going?”

“Nothing. Just said this would be the final payment on the items. Then he withdrew the last 60 grand.”

MOUNTING COMPLAINTS

When they left, I spoke with the agent who took their complaint and explained to her my current involvement with Roland. We agreed that given Ellie’s unmistakable rage and the mountain of third-party complaints against Roland, she was probably not a co-conspirator. I called Ellie the next day and informed her that I would be handling the case. She was relieved someone was taking her problem seriously; though, I didn’t immediately tell her the bank was correct in stating that Roland hadn’t committed a crime by withdrawing money from the joint account. I knew that wouldn’t go over very well.

I needed time to wrap my head around the mounting eBay complaints coming from a wagon wheel of directions. There were the IFCC complaints being funneled to the cybercrimes task force. The task force, in turn, gave victims my name and contact information, so I was receiving direct calls. I also had asked the IFCC to forward complaints directly to me, which sometimes they did, and other times did not. The state and local agencies were also receiving complaints from the victims and the IFCC, which they eventually passed to me.

Victims unintentionally filed multiple complaints because of the time delay and number of agencies involved. For example, John Q. Smith initially reported to the IFCC that he purchased the Lladros figurine, “The Happiest Day,” under the screen name HardcoreBuyer on Monday for $450. A week later, he reported directly to his local law enforcement agency in New Jersey that on the last day of the auction, he purchased the Wee Forest Folk figurine, “Haunted Mouse House,” for $800 using screen name BestBuy. These duplicates were easily overlooked at first glance.

I knew I needed a score card to organize all the information. With the help of FBI administrative experts, I set up a spreadsheet that included screen name, real name, item purchased, amount paid, date and time of bid, method of payment, whether the U.S. mail was used, and the all-inclusive miscellaneous column for printouts of e-mails with Roland, letters, certified mail receipts and canceled checks.

This spreadsheet was invaluable because it kept the data (and me) organized. I was able to identify and eliminate double complaints and those cases that had the necessary elements for mail or wire fraud. I listed the evidence I had to support each complaint as I conducted interviews and responses to grand jury subpoenas came in. [The assistant U.S. attorney (AUSA) used my spreadsheet when he drafted the eventual criminal complaint, and federal pretrial services used it for its sentencing and restitution report.]

MODELING A CASE

Up to this point, I had not approached an AUSA for a prosecutorial opinion. I knew I had a fraud based on the sheer volume of complaints, but I had no concept of how it was committed, and I would not go to an AUSA without solid preliminaries. I also needed an approximate dollar loss. A U.S. attorney’s office usually sets a threshold amount on financial crimes, which varies by district, type of financial crime and extent of the crime problem. It is never a hard and fast rule. If an office declines to take a case because the loss is below the threshold, I recommend to investigators that they take a strong stance. I have never met an AUSA who is not swayed by a passionate and driven investigator. If the federal government declines a case, then it must be prosecuted locally or not at all.I needed to unravel the scheme to defraud, if there was one, and determine if it fit the elements of mail or wire fraud. I knew the federal government would pursue two federal statutes because bank fraud was not applicable and because mail and wire fraud laws are extremely broad; they are the workhorses of federal white-collar crime prosecutions.

BID WINNER

At that point I had more than 40 victims. My spreadsheet was populated with information from filed complaints, but I needed someone to fill me in. Ellie was not going to be helpful. She was just learning the extent of the fraud from the irate victims who began calling her at Classic Collections when she took over operations. Plus, she was miffed at the FBI for not looking into the money Roland withdrew from the bank account. My decision on who to interview first was logical — I picked the person who lost the most money.

Joy Minot of Eugene, Ore., lost $23,718 on nine Wee Forest Folk figurines; she was eager to fill me in. Joy had been a serious collector for more than seven years and was considered one of the foremost experts in the country. About three years before, she heard that Classic Collections had some very rare pieces, which she had purchased without a problem from Roland. Joy was so impressed with Roland that she kept in contact with him via e-mail and even with an occasional phone call for other collectibles. She had no qualms about bidding on figurines (which she won) from the Phoenix estate sale that Roland advertised he had been entrusted to liquidate. She believed he showed more professionalism when he recommended that she meet him at a hotel in Phoenix to pick up her high-value figurines. She understood that the exchange would have to wait until after the two-week eBay auction was complete.

On the day of the meeting, Joy went to the hotel, but Roland never showed. Joy requested that the front desk call his room, but the hotel told her they had no reservations for a Roland Granger currently, in the past or in the foreseeable future. Her heart sank when the horrific realization started to set in. Her anger at herself was soon replaced by her fury at Roland. I learned through dozens of similar statements that fraud victims can have more rage than victims of violent assault because fraud is the only crime requiring voluntary victim assistance; these people felt like fools.

Joy returned home and set up a website dedicated to Roland’s auction misdeeds. I already had most of the victims’ names, but her website supplied me with background on the scheme. However, I faced another challenge. Although the victims were eager to talk to me, it was difficult to keep them on track. I spent a lot of time listening rather than interviewing because 99 percent of our conversations were on the phone. At first I thought this was a sound approach because the victims all seemed to want to vent. And it would have been a good rapport-building technique were it not for the volume of interviews I had to conduct.

Immediately after interviewing Joy, I felt I had enough information to contact an AUSA. However, he was not as enthusiastic as I had anticipated. His response was, “Maybe Granger couldn’t get down to Phoenix or maybe he just forgot.”

“But I have dozens of complaints,” I argued.

“It’s been what, less than three weeks since the auction? So he’s late getting the orders out. What’s his story?”

“He’s got none,” I said. “He emptied out his bank account and fled.”

At least that got his attention. The AUSA’s comments were not from a lack of interest; he was acting out the prosecution in his mind and playing devil’s advocate. There is a fine line between a fraud and a breach of contract, which would have been a civil matter, not a criminal one. I understood his point — a catalog of complaints on a spreadsheet wasn’t going to be enough. I had to prove the Phoenix estate auction was a part of Roland’s scheme to defraud, or I had to at least make a strong case for that possibility.

PROVING A NEGATIVE

I had arrived at the classic impasse of proving a negative. The best approach was to conduct due diligence. According to my victims, Roland’s inventory of figurines available for the auction was worth hundreds of thousands of dollars. I was sure that such an estate auction would be newsworthy for someone, somewhere. So while I wrestled with corralling my victims, I queried the Internet, Phoenix newspapers, obituaries and trade magazines. I even called a special agent with this expertise to do some digging.

I developed a line of questioning for my interviews that stuck to the facts. It is a violation of Interviewing 101 to prepare questions in advance — generally not a strategy I use. However, this time it was necessary. I found it good practice to keep this list of questions at the ready because Joy had put my name and number on her website, and I was fielding an influx of calls. The questions included the basics from my spreadsheet for confirmation, a brief synopsis of the sale, e-mails or letters exchanged and the method of payment.

The victims flooded me with faxes of eBay bids, payment statements and e-mails from Roland announcing that the victims were high bidders and would receive the figurine(s) shortly via FedEx. (Use of FedEx nullified the mail fraud statute unless a U.S. mail letter preceded or followed.)

For my presentation to the AUSA, I adopted the military strategy of “shock and awe.” My spreadsheet was like the sci-fi thriller, “The Blob” — expanding daily — but I wanted to present the AUSA with overwhelming evidence, not overwhelming data. I interviewed more than 20 of the victims on numerous occasions. Due to time constraints, I stuck to those who had purchased multiple figurines or lost large amounts of money. The victims came from 14 states, England and Australia.

But copies and faxes of evidence were not going to cut it. I had no doubt some folks who had heard of the fraud were going to jump in and claim to be victims. So, I needed grand jury subpoenas for original canceled bank checks, credit card statements, wire transfers, cashier’s checks, money orders, PayPal and Billpoint. I even subpoenaed the airline for Joy’s ticket to Phoenix and the Phoenix hotel’s guest register for the week in question, both to verify her story and to attack a potential defense by Roland.

As if Roland’s gall wasn’t enough, I found two more appalling aspects to this fraud: More than a few times he sold the same figurine to the high bidder, the second highest bidder and the third highest. He employed delaying tactics on victims like Joy, while contacting other bidders and telling them the winner had reneged. He then called a third bidder and repeated the claim to pad his nest.

Interviews follow general rules, but often they are dictated by the investigator’s assumptions about who will be most cooperative and have the most information to offer. I knew Roland had two employees who, according to Ellie, were very active in the operation of Classic Collections. The question was, how loyal were they to Roland? Not very, I was happy to learn.

THE WITNESSES

Mark Mollencamp was 23 years old and worked on Internet sales for Roland. As fate would have it, the Immigration and Customs Enforcement (ICE) had been investigating him for trading child pornography. ICE had called my office a few weeks earlier to ask if we had information on Mark. I was glad to have the leverage and used it freely during my interview with him. His statement brought the scam together nicely.

Roland, it seemed, was a serious online gambler. He talked openly to Mark about hoping one day to play in big poker tournaments. Roland’s sales before the two-week eBay auction were legitimate, and one day shortly after Christmas, he told Mark of the big estate sale in Phoenix.

He handed Mark catalogs and circled the figurines to be listed on eBay for the auction. Mark did not see the actual figurines and did not think Roland had traveled to Phoenix before his disappearance. Mark also verified the double and triple sellings.

Roland’s second employee verified Mark’s information in a separate interview. Roland promised both employees a $4,000 bonus at the conclusion of the auction, but he did not pay either of them. They last saw Roland heading out to lunch the day he disappeared.

I had enough at this point to shock and awe the most cautious AUSA. Computer forensics was becoming a hot-button topic at the time, so I finished up the case by seizing and examining the five networked computers at Classic Collections. The forensic examiners discovered incriminating e-mail and evidence to corroborate the motive Mark suggested: thousands of online poker downloads.

RESTITUTION AND BANKRUPTCY

Roland was indicted by a federal grand jury in the Eastern district of Michigan on mail fraud and wire fraud charges, but he was a fugitive for more than three-and-a-half years until he was finally arrested outside Los Angeles.

He pleaded guilty to single counts of mail and wire fraud and was ordered to make restitution to:

• 85 eBay bidders in the amount of $144,688.31 (my spreadsheet had 112 victims, but some of them had insufficient evidence)
• Wells Fargo Bank for charge-backs from Billpoint in the amount of $9,785.39
• eBay in the amount of $27,878.01
• PayPal in the amount of $140,909.89

Total restitution was $323,261.54, which was conservative, based on the investigation and Roland’s admission. So incensed was the federal judge by Roland’s outlandish acts and lack of remorse that he vacated the pretrial service’s recommendation of 37 months of confinement and sentenced him to the maximum of six years.

Not accounted for in the sentence were Ellie’s losses. (She changed her name back before I even had my spreadsheet completed.) In filing Chapter Seven, her attorney and accountant estimated her financial losses at $415,800. She was able to satisfy creditors in the amount of $21,400.06, which she scraped together from savings. Unfortunately, the courts, attorneys, pretrial services and accountants could not put a price on Ellie’s emotional damages.

LESSONS LEARNED

I learned valuable organizational, technical and personal lessons from this case. I knew the wire fraud and mail fraud statutes, but I was overwhelmed when victims began discussing second- and third-bidder options, PayPal, Billpoint and other Internet auction jargon. I had never bid on an online auction site, so I sought information from the victims, eBay and PayPal to plan my investigation. I was shameless in acknowledging my ignorance, and eBay was unsurpassed in its cooperation.

When the numbers became overwhelming, Excel came to my rescue. I know there are many tools available that perform an assortment of data management and analysis, and I am not advocating any in particular, but Excel does the basic grunt work well. However, keep in mind that it is easy to burden the individuals who read your spreadsheet by including too much information. The next stop after overwhelmed is confused, and then frustrated. Let the spreadsheet be a snapshot, something to provide the gist of the case over a cup of coffee. As TV’s legendary Sergeant Joe Friday said, “Just the facts.”

I found the victims of this fraud were often enraged beyond rational thought. At times, I caught myself treating the matter lightly, and more than one victim chastised me for my insensitivity. So I learned patience and added a new dimension to my empathy.

Had I not been actively involved with learning about cybercrime and working with the task force, I would never have received the case, let alone successfully investigated it. For cybercrime, identity fraud, child pornography and the like, task forces are the most effective tool law enforcement has to encourage sharing and learning. If we are not doing that, we aren’t doing justice to the justice system.

All names have been changed in this article. – ed.

John E. Ouellet, CFE, is a contract forfeiture investigator for the West River Group in Oxford, Mich. He retired as a supervisory special agent with the FBI in Detroit. His 23-year career ran the gamut from investigative duties to violent crime to counterterrorism. He worked on numerous task forces, including identity theft and mortgage fraud.

This article is excerpted from “Internet Fraud Casebook: The World Wide Web of Deceit,” edited by Dr. Joseph T. Wells, CFE, CPA ©2010 John Wiley & Sons. Used with permission.

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