Dishonest clients can mire attorneys in messy bank,
By Amy Yarbrough
It began with what seemed like an innocuous email: “Kindly get back to me if you handle civil litigation cases.
We are in need of a lawyer.” But before long, attorney Richard Wood started to
get suspicious and luckily avoided getting taken by a scam.
One of many attorneys who have been
contacted by fraudsters posing as potential clients, Wood offers some age-old
“If it’s too good to be
true, it probably is,” Wood said, noting that at first the email appeared to be
a valid solicitation. “Be aware. Be very careful and do lots of due diligence.”
Hoping to ultimately use a bogus check to steal money from
Wood’s client trust account, someone posing as a manager of a U.K.-based dental
supply wholesaler emailed Wood on Dec. 5, claiming to need help with a
collection matter. They provided him with what appeared to be a legitimate
agreement tied to the collection dispute, involving two real companies, so Wood
sent them a retainer agreement and began taking steps to collect the money.
Within days, Wood learned the debtor company had agreed to
settle the debt and that a check was being sent to him to be deposited in his
client trust account. Wood became suspicious when he saw that the $495,500 check
was made out to his law office, rather than “in trust for,” as he had
instructed, and even more so when the so-called client suggested he take his
retainer out of the money he was supposed to be holding in trust.
“All in all, I was just feeling very uncomfortable with the
situation,” said Wood, a San Ramon-based attorney whose practices areas include
business law and litigation.
Those red flags led Wood to contact his bank, and the bank
listed on the check to report possible fraud. Before the matter could be fully
investigated, he received another email asking him to wire the money to a
supposed creditor, calling the matter “urgent.” Wood put a hold on the funds in
his client trust account and went so far as to warn the companies that were
supposedly parties in the collection matter. Since that last “urgent” email on
Dec. 26, he has not heard from the fraudsters again.
Sadly, the Internet scam Wood encountered has been a
pervasive problem for years, particularly for collection lawyers. According to
a January 2011 ethics
alert by the Committee
on Professional Responsibility and Conduct, under the worst-case scenario if the lawyer’s trust account is overdrawn by the
amount of the counterfeit check, the lawyer’s bank is required to report it to the
State Bar. The attorney then becomes the subject of an investigation that could
lead to discipline.
To avoid falling prey to the scam, the best tactic is to
avoid such solicitations altogether. If you believe the inquiry is legitimate
and worth pursuing, try to verify the information in the solicitation,
including phone numbers, addresses and websites. The alert also recommends waiting
until you’re satisfied that the client is legitimate before accepting
third-party funds, holding all funds deposited into your trust account until
after they have been cleared and reviewing your business-related insurance
policies to determine what, if any, options might be available to cover you for
claims arising from Internet scam activities.
On average, the State Bar’s Ethics Hotline receives about 10
calls a month involving attorney collection scams, according to Randall Difuntorum,
director of the State Bar’s professional competence office. Some are from
attorneys who have received a suspicious inquiry and are concerned about the
duty of confidentiality that may be owed to a prospective client and the
formation of an attorney-client relationship.
Typically, the purported prospective client asks for help
with collection services involving a third party who owes them money and the
client appears to be located in Canada or China, Difuntorum said. Additional
information about Internet/email scams can be found on the Ethics
and Technology page.
Wood is relieved he discovered the scam in time and said he
hopes his experience serves as a cautionary tale for other attorneys, reminding
them to pay attention.
“I was lucky,” he said. “I dodged a bullet.”