Counterfeit check scams continue
to target law firms
A lawyer receives what appears
to be a legitimate solicitation email from a prospective client seeking
representation in a debt collection matter. The terms of a relationship,
including a fee agreement, may be negotiated. The lawyer then receives what
appears to be a valid cashier’s check, supposedly a settlement check from
a debtor, from a reputable bank. After the money is deposited in the
lawyer’s client trust account, the “client” asks that the
funds, less the fees, be wired to a foreign bank.
The cashier’s check was
fraudulent and the lawyer is left holding the bag.
This scenario continues to be
replayed as part of a sophisticated Internet scam that often targets collection
lawyers. The Santa Clara District Attorney’s office recently was alerted
by a local law firm that was contacted by a “client” who said his
east coast company provided materials to a local medical company that
hadn’t paid its bill. The out-of-state company provided
legitimate-looking documents, such as contracts and invoices, to support its
claim, and the law firm found a website for the client’s company. A
retainer agreement was executed.
The client said it would make a last
ditch attempt to collect the debt before authorizing a lawsuit. Two days later,
the firm received a $270,000 cashier’s check from the medical company.
The client told the firm to withhold its fee, plus a little extra, and wire the
remaining funds to an account that turned out to be overseas. Despite pressure
from the client for the money, the law firm waited for the check to clear.
That never happened.
The alleged debtor was a real
company that was not involved with the “client,” who remains
unidentified and may be located overseas. According to Santa Clara County
Deputy district Attorney Mike Fletcher, the suspects “generated very
authentic-looking documents, created a website and are executing a
sophisticated scheme with the potential to significantly harm law firms.”
But in addition to winding up
with an overdrawn bank account, victims can face State Bar discipline and
damage to his or her reputation. In order to help lawyers avoid being taken in,
the bar’s Committee on Professional Responsibility and Conduct (COPRAC)
issued an ethics
alert earlier this year describing both how the scams work and how lawyers
can protect themselves.
The scam leaves the lawyer
appearing to have retained a client, triggering various ethical duties governed
by professional responsibility rules. The ethics alert offers both a warning
and suggestions for how lawyers can protect themselves.
“If it is too good to be
true, it usually is,” the alert concludes. “Hitting the delete
button may be the best course of action for the attorney, not to mention those
caught up in the cascade of adverse consequences of a successful scam.”
The FBI reports the debt
collection scam is well-known and occurs nationwide. Another scheme has the
fraudulent client posing as an ex-wife “on assignment” in an Asian
country and pursuing collection of divorce settlement funds from her ex-husband
in the U.S. Once a law firm agrees to represent the wife and contacts the
ex-husband, it receives a “certified” settlement check. As with
other scams, the wife instructs the firm to wire the funds, less its retainer
fee, to an overseas bank account.
If funds are sent before
discovering the check is counterfeit, the firm is left in the lurch.
The FBI urges firms or victims
of an internet scam to file a complaint with the Internet
Crime Complaint Center.