SmartHomeOwners

OTTAWA: Internal records show bank officials first alerted the Public Works Department to the problem last August, but it took until December to fix it.

The auction site, GCSurplus, was launched in January 2009 to sell a broad range of surplus and used government goods, from computers and filing cabinets to aircraft and boats.

The federal government sells about $14 million worth of surplus and used items each year, and the online service was intended to help improve revenues. There are about 30,000 registered online buyers.

The GCSurplus site, modelled partly on eBay, allows users to post bids via the Internet though it is not a live auction displaying the highest bid in real time. Instead, after the auction ends, the winning bid is posted.

Successful bidders can pay by credit card and pick up the goods, but the system as initially designed lacked proper security verification.

``People have been registering on GCSurplus with bogus names and bid very high to win, then pay with stolen credit cards over the phone,'' says a Dec. 1 email from Public Works official Mike Fabbro.

``Because buyers don't have to register a credit card at the outset, we have no recourse.''

Fabbro added in another email that GCSurplus ``was targeted by a very small number of fraudsters, that were very adept at manipulating our process to their financial gain.''

Documents outlining the problem were obtained by The Canadian Press under the Access to Information Act. Public Works took six months to respond to the request.

The internal records show that financial institutions first alerted Public Works to the problem in August last year. Some short-term measures were taken in September and October, including a ban on taking credit card information over the telephone.

Auction officials did not alert Public Works' own special investigations directorate about the problem until Oct. 9.

A secure online payment system was not implemented until Dec. 14, eight months later than initially planned, which required shutting down GCSurplus for five days.

The documents indicate the net loss to the Crown was at least $23,000.

A spokeswoman for Public Works said all the fraud occurred before October 2009.

``Since the implementation of the online payment system in December 2009, there have been no other reported incidents,'' Nathalie Betote Akwa said in an email.

Betote Akwa added that it is the responsibility of the financial institutions, not Public Works, to pursue any charges.