Catch Me If You Can

It didn't take long for Higgins to connect the Tyngsboro mailbox to Krista Nelson, whose name was on the box-rental form. Higgins learned that Krista and Jay Nelson lived in a rented house on 32 acres on a mountain in Lyndeborough, New Hampshire, about a half hour's drive from Tyngsboro. He also discovered that a postal inspector based in New Hampshire had already visited the Nelsons earlier in 2000 to inquire about other complaints relating to auctions that traced back to them.

"This was someone who was ingenious at devising new ways to beat the system," says U.S. postal inspector Tom Higgins. "He did it for a living."

Nelson had claimed then that he'd simply fallen behind with his business. He promised that he would refund his customers' money, and he later supplied the New Hampshire postal inspector with a list of all of the customers who'd complained and how much he'd refunded to each. But the scams continued, under different screen names on Yahoo and eBay.

"I figured I'd better step back and consider the scope," says Higgins, explaining why he didn't visit the Nelson home right away. "When you interview someone, you want to know as much as you can. Clearly, this guy wasn't telling the whole story" to the New Hampshire postal inspector.

Higgins started tracking money transfers from Nelson's accounts on PayPal, an online payment service now owned by eBay, into accounts at the Bank of New Hampshire. (Auction bidders often send sellers money through PayPal.) At that point, Higgins was the only person on the Nelson investigation -- and he was conducting it in parallel with seven or eight other investigations for which he was responsible.

Higgins had been on eBay once or twice, but he'd never bought or sold anything on the site. Working the Nelson case was "a fast learning process," he says. "It was like skipping 101 and going right to the master class."

By summer of 2000, Nelson had "left the realm of having dissatisfied customers and stepped over the line to conducting failure-to-render scams," Higgins says. "And everything he was doing involved fictitious information and false identities."

More interested in booze than books

Nelson grew up with adoptive parents in Rockford, Illinois. His father ran a property-management company that dealt with apartment buildings and shopping malls. Nelson studied criminal justice at a local community college and later attended Illinois State University in Bloomington, but he didn't graduate. "I was more interested in drinking," he says. By the time he reached his twenties, Nelson had amassed enough DUI convictions to qualify as a felon, and he had spent time in Cook County Jail.

He had been interested in computers since he was a kid, and when he got out of jail, Nelson managed to land an IT-support position at the Eureka Company in Bloomington. He wasn't beyond fudging the truth to get a better job, though. When he applied for a job as a Lotus Notes administrator at Caterpillar, for example, Nelson said that he had a degree in criminal justice and that he was familiar with Notes. "I got a copy of Lotus Notes for Dummies and learned enough of the buzzwords," he says. After three rounds of interviews, "they hired me on the spot," Nelson says. "I'd never even turned on the program." But he was a quick study, and he says that he was soon competent at creating and maintaining Notes databases.

Nelson's older brother had started selling computer equipment on a fledgling auction site called eBay. When Krista, who worked for State Farm at the time, found out that employees there could get deep discounts on surplus office equipment, she bought Hewlett-Packard inkjet printers from State Farm 10 at a time, and Nelson posted them for sale on eBay. Then his brother connected him with a man who had a large supply of computer software, and Nelson started selling that too.

By 1997, Nelson's auction income had surpassed his Caterpillar salary, and he quit to run his auction business full-time. "I would hire neighborhood kids to bubble-wrap modems for me or type up labels," he says. "I was working 16 hours a day, seven days a week." Several hundred pieces of mail came in every day, and several hundred packages went out, Nelson says.

At that point, at least some of the auctions Nelson ran were legitimate. One of his user names from that era, Diamondsoft, had 58 positive ratings in eBay's feedback system and only one negative rating. (Diamondsoft mostly sold copies of Microsoft Office.) But the negative rating offered a hint of what was to come: "I think they are thieves," the buyer wrote in March of 1999. "My bank paid my check 12/28/98 and I'm still waiting."