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MCLE Self-Assessment Test

Dishonest clients can mire attorneys in messy bank, Internet scams

By Amy Yarbrough
Staff Writer

ScamIt 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 advice.

“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.”