July 30, 2012
Internet Scammers Continue to Target Lawyers and Law Firms
by James M. McCauley
The FBI continues to report that Internet scammers are targeting lawyers and law firms with fictitious collection cases in which a cashier’s check is delivered to the lawyer’s office. In all cases the identity of the debtor and creditor appear legitimate. The cashier’s check tendered to the lawyer by the debtor turns out to be counterfeit, but the scammer hopes that this is not discovered until after the lawyer has deposited the check and disbursed funds to the creditor or client. Typically the lawyer’s bank will tell the law firm that the deposited funds are available for disbursement and the lawyer disburses the funds to the creditor or client pursuant to the latter’s direction. When the check is ultimately flagged and dishonored, the bank will charge back against the lawyer’s trust account. The resulting overdraft (usually in amounts between $250,000 and $450,000) becomes a problem for the lawyer and for which the lawyer’s bank disclaims liability. Further, the lawyer’s professional liability insurer may deny coverage for the loss.
In a slight variation of the scheme’s execution, the law firm receives an e-mail from what appears to be an attorney located in another state requesting assistance for a client. The client needs aid in collecting a debt from a company located in the law firm’s state. In some cases, the name of the referring attorney and the debtor company used in the e-mail were verified as legitimate entities and were being used as part of the scheme. The law firm receives a signed retainer agreement and a check made payable to the law firm from the alleged debtor. The client instructs the law firm to deposit the check and to wire the funds, minus all fees, to an overseas bank account. The law firm discovers after the funds are wired that the check is counterfeit.
Here are some precautions you should consider:
- If you decide to represent a client via e-mail, especially one who purports to reside overseas, add a paragraph to your fee agreement allowing you to hold funds collected from the debtor for a sufficient period of time to verify the validity of the paying instrument.
- Consider including a similar provision for retainers paid by your client. (In one variation of this scam, the overseas client uses a counterfeit check to pay the lawyer’s retainer then quickly fires the lawyer, demanding an immediate refund by wire transfer.)
- Although the latest alert refers to counterfeit checks, lawyers have also been scammed by counterfeit money orders. If you collect a debt under the scenario described above, wait at least ten business days before disbursing any funds regardless of the instrument used to pay the debt. In some circumstances, it may be appropriate to double this waiting period.
- If you are the victim of a scam, file a complaint with the Internet Crime Complaint Center at www.ic3.gov. No duty of confidentiality is owed by the lawyer to the scammer.