May 18, 2011 – A client seeking legal representation to enforce a collaborative divorce agreement seems legitimate enough, but lawyers should be aware of a scam that nearly duped a local attorney out of approximately $250,000.
The scam, a variation on others in which potential clients (scammers) engage attorneys by email to collect a debt, the debtor (also part of the scam) agrees to pay, issues a fraudulent check, then gets the law firm or lawyer to transfer funds before the check clears.
In the most recent case, the fraudsters used an active account to issue a seemingly legitimate cashier’s check – but tied to an account with little or no funds.
Engaging the lawyer
In March, a potential client emailed the Wisconsin lawyer, who asked not to be named. The potential client wanted the lawyer to help collect the balance due on an alleged out-of-court divorce settlement the client obtained with her ex-husband. The agreement looked legitimate.
The client, who the lawyer corresponded with by phone and email, said she was living in South Korea but her ex-husband lived in Waukesha County. The ex-husband still owed about $650,000 under the settlement, the client said. After obtaining a signed retainer agreement, the lawyer contacted the ex-husband, who was two years’ delinquent on making payments.
The ex-husband agreed to send half the balance due. Several days later, the lawyer received, by postal mail, a J.P. Morgan Chase Bank cashier’s check in the amount of $295,700.
When the lawyer deposited the check into the lawyer’s trust account, the bank manager said the check was legitimate. The bank manager also said it would take three to four business days for the check to clear, but it would not be necessary to wait. Good thing the lawyer did.
The scam
Don’t be fooled by …
- emails that are personally addressed to you;
- follow-ups to an initial email message;
- legitimate-looking referrals from another local attorney. Some lawyers routinely forward emails asking about family law matters to lawyers they know who practice in that area;
- legitimate-looking identification;
- innocent-looking subject line messages such as “collaborative family law agreement”;
- detailed background information; or
- phone calls that appear to be from local numbers. It is easy to fake a local area code and phone number with calling cards.
Source: Lawyers Can Get Scammed, Too, Tom Watson, Wisconsin Lawyer, Sept. 2010
In that three- to four-day period, the client sent numerous emails and left numerous phone messages, asking the lawyer to retain the legal fee and wire transfer $249,500 to an offshore bank, leaving detailed instructions for the transfer.
Sensing red flags, the lawyer called Nerino Petro, practice management advisor for the State Bar’s Law Office Management Assistance program. Petro told the lawyer it was most likely a scam and to wait until the information could be verified before transferring funds.
On the fourth day, the check bounced. Petro, who did some investigating, learned the cashier’s check was drawn on a legitimate bank account in Ohio with a legitimate routing number, but the account did not have nearly enough funds to cover the amount.
Had the lawyer wire transferred the funds upon the client’s immediate request, the lawyer would have been on the hook for $249,500, the bank told the lawyer.
“I think lawyers should always have a policy in place, even for cashier’s checks, that funds will not be disbursed to the client until the check has cleared,” noted the lawyer. The lawyer contacted the client to collect a legal fee and inform her that the check bounced, with no response.
On Petro’s advice, the lawyer planned to contact the state attorney general and the Federal Trade Commission to report the fraud. In his blog, Compujurist, Petro provides a detailed account of this particular transaction with the exact language the client uses to engage the lawyer. Petro said the scams are becoming more sophisticated and scammers are using realistic-looking documents, local phone and email information.
“The bogus cashiers’ check in this instance passed the scrutiny of the member's bank personnel,” Petro wrote in his blog. “The bottom line is that these things make it tougher to discern between legitimate and bogus requests.”
In response to Petro’s blog post, a lawyer who practices in Maryland and Washington D.C. commented on her own experience with the same scam. The potential client had contacted the lawyer through her LinkedIn account and provided the copy of a bogus passport upon request.
In addition, the potential client provided a collaborative divorce agreement that was allegedly signed by legitimate and distinguished attorneys in California. The D.C. lawyer planned to inform those California attorneys that their names were used.
“These crooks are extremely devious, with their legal-looking documents and checks, legitimate Attorney names – all very dangerous to the reputation of Attorneys,” the D.C. lawyer wrote. “Can you imagine how helpless are the uneducated public?”
This latest scam to hit Wisconsin lawyers is a variation on others that have been circulating for years, Petro said. Notably, Texas lawyer Richard Howell, with 23 years of experience, got duped out of nearly $183,000 through an international check fraud scam targeting lawyers in 2009.
Petro urges members who run into situations like this to contact him. Petro oversees the Practice411 program, which provides advice and information about practice management issues. He can be reached by email at practicehelp@wisbar.org or (800) 444-9404, ext. 6012.
By Joe Forward, Legal Writer, State Bar of Wisconsin
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