The Risk Manager, Winter 2009

We have received a report of a scam targeting lawyers that we want to pass on to you. Although there can be some variation in the scammer’s approach, the following details outline how it is supposed to work:

• A person claiming to represent what turns out to be a fictitious company in a foreign country e-mails a lawyer in the U.S. seeking representation.
• This person informs the lawyer that the company has a customer in the U.S. that is delinquent in payment of funds due the company.
• The lawyer is asked to represent the company in collecting the funds. The company is agreeable to virtually any terms of representation. The lawyer accepts the representation and e-mails a retainer agreement that is signed and faxed to the lawyer.
• The company promptly e-mails the lawyer with the information that the customer has agreed to pay some or all of the delinquent funds – often close to $300,000.
• The lawyer is requested to provide an address to which the customer can send a certified check. The lawyer is instructed that upon receipt of the certified check to deposit it, subtract his fee, and wire the balance to a designated overseas account.
• The lawyer is then sent a counterfeit certified check delivered by an independent overnight carrier. (In one case the certified check was in the amount of $298,720.) The unsuspecting lawyer deposits the check in his client trust account, withdraws his fee, and, believing that the funds are guaranteed, routinely wires the balance to the overseas account.

The problems for a lawyer caught up in a scam like this once the counterfeit certified check is discovered are obvious and enormous. They include being implicated in a fraud and potentially found responsible for restoring the transferred funds since the likelihood of recovering them is nil. Forewarned is forearmed.

Remember that the best risk management practice with any check deposited in a client trust account is to make no disbursements on it until the check clears regardless of its apparent validity. In today’s economy bank failures are a common experience making this practice even more important. Advise clients at the inception of a representation that they will not receive funds until a check received in payment of their matter clears. Put this in your letter of engagement.