eBay Wins Schmidt Auction

After officially retiring from public service Thursday, Howard Schmidt, the former chairman-elect of the now defunct President's Critical Infrastructure Protection Board, announced that he will be heading back west to a new job as the vice president of security for online auction site eBay Inc.

Schmidt, who is now taking part in a reserve military exercise, said last week that he had narrowed his selection of future employers to two companies and that he was looking forward to returning to private life. He didn't name the other company.

Schmidt, who is also the former chief security officer at Microsoft, played a key role in drafting the Bush administration's National Strategy to Protect Cyberspace, which was released on February 14 to criticism that it lacked teeth. However, Schmidt, like his former boss at the White House, Richard Clarke, has maintained that government regulation would run counter to the administration's goals of forming a partnership with the private-sector owners and operators of the nation's critical systems and facilities. Schmidt's departure from government and the administration's reluctance to appoint a single, high-profile individual to lead cybersecurity efforts led to fears of a cybersecurity leadership void at the Department of Homeland Security.

Now, his move to consumer-focused eBay comes as online fraud complaints are at an all-time high. Despite recent surveys that indicate consumers are feeling more comfortable with online business transactions, the number of Internet-related fraud complaints jumped from 220,000 in 2001 to 380,000 in 2002, according to statistics released in January by the Federal Trade Commission. In fact, 45 per cent of dual-channel retailers last year reported losing more from online fraud than from fraud in their brick-and-mortar operations.

EBay has been one of the most popular targets for Internet fraud rings. Joseph Sullivan, senior counsel at eBay and a former federal cybercrime prosecutor, told a gathering of law enforcement officials in February that Eastern European organised crime groups have recently initiated a campaign to target eBay and its business partners, including the online payment processor PayPal, which it acquired in November.

To battle fraud rings, eBay is working closely with law enforcement agencies, going so far as to set up undercover accounts that can guarantee law enforcement agents become the highest bidders during suspected fraudulent online auctions. This is an area where Schmidt is expected to play an important role, given his reserve military duty as a criminal investigator and his relationships with various state and local law enforcement organisations.

If recent history is an indicator, Schmidt will have his work cut out for him at eBay. Within weeks of the September 11, 2001, terrorist attacks, more than half a dozen eBay users alerted the online auction company to an alleged identity theft and a series of fraudulent auctions that stemmed from Ukraine. The victims of the alleged scam then accused the company of being slow to respond because of a 30-day waiting policy for accepting fraud complaints online.

Schmidt's decision to go to eBay was based on "quality of life" issues, according to a former administration official who worked closely with Schmidt and asked not to be identified.

He said Schmidt was approached by Cable & Wireless PLC and several other companies about potential jobs. However, it was the ability to move back to Seattle and commute to San Jose that swayed him to take the position with eBay, the official said.

"He was not happy in Washington," said the former official. "He was surprised at the challenges in getting cybersecurity on the agenda of official Washington."

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