Public Works shuts down federal online auction site after fraud

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OTTAWA - The federal government is temporarily shutting down its vaunted online auction site after being hit with credit-card fraud.
Public Works halted all sales last week on its GCSurplus site, and has called in a Dallas-based technology firm to process future credit-card transactions.
The secure credit-card payment system begins on Dec. 14 "to reduce fraudulent and unethical activity on the site," the department said in a cryptic email to users.
In the meantime, the site (www.gcsurplus.ca) is going dark for three days to handle the transition, Dec. 10-13.
The online service is used to auction a broad range of surplus and used government goods, from vehicles and filing cabinets to machinery and aircraft.
A spokeswoman for Public Works, Nathalie Betote Akwa, did not respond to repeated requests for more information, citing the "legal aspect" of the case.
It was not immediately clear whether the GCSurplus problems are related to recent media reports of a mysterious investigation at Public Works.
Last week, the Public Works minister issued a news release denying there was an investigation into the October 2007 sale of seven prime office buildings to Larco Investments Ltd.
"There is no investigation into the sale of federal government properties and no investigators have been called in to investigate this matter," Christian Paradis said.
But that same day, Tory MP Jacques Gourde confirmed in the House of Commons that there were indeed undisclosed "investigations" at Public Works. He did not provide details.
Paradis has said whistleblower legislation that was passed in 2005, the Public Service Disclosure Protection Act, prevents him disclosing any probe information. The legislation is partly intended to safeguard the identity of public servants who come forward with allegations of wrongdoing.
But Liberal MP Martha Hall Findlay, who has been pressing the Conservatives for details, says the government can't hide behind the statute.
"The act is not a tool for a blanket refusal to disclose information," she said Friday.
The federal government sells about $14 million worth of surplus and used goods annually, mostly through traditional auctions and standing offers with selected buyers.
But in an effort to boost potential revenues, Public Works launched its GCSurplus site on Jan. 5 this year to encourage more auction participants, who can enter their bids online after viewing the goods.
Unlike eBay, the site is "closed;" that is, the highest current bid is not displayed in real time. Instead, after the auction deadline passes, the winning bid is posted.
The department has said it wants eventually to move to an "open" real-time system, similar to eBay or the U.S. government's surplus auction site (www.GovSales.gov), which has been shown to encourage higher bids.
The GCSurplus email sent to users this week said Public Works has hired Chase Paymentech, a Dallas-based subsidiary of JPMorgan Chase, to handle its credit-card payments from Dec. 14 forward.
The company, which processed more than 21 billion payments last year, says it currently handles about half of the world's Internet transactions.
The email suggested that the fraudulent activity arose from the transfer of confidential credit-card information to the federal government: "Your credit card information ... will not be accessed or stored by GCSurplus, Crown Assets Distribution or PWGSC (Public Works and Government Services Canada) in any way."
Public Works keeps 25 per cent of most auction sales, prompting complaints of gouging from other departments who supply the surplus goods.
National Defence is the largest source of used and surplus goods, though armaments and ammunition are sold only to approved countries through contracted intermediaries.

Organizations: Public Works and Government Services Canada, Larco Investments, EBay House of Commons Public Service Conservatives JPMorgan Chase National Defence

Geographic location: OTTAWA, U.S.

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