The Risk Manager, Fall 2015
An odious development on the Internet and Social Media is the growth of scams targeting lawyers often with great success. In our newsletters we alerted you to several of these scams and outlined the technique of using fraudulent checks to trick lawyers into disbursing funds from a client trust account. By now we hope all Kentucky lawyers know what a typosquatter is, how ransomware works, and the danger of biting on a phishing scam. Recently the Bar of the City of New York Committee on Professional Ethics issued Formal Opinion 2015-3: Lawyers Who Fall Victim to Internet Scams (April 2015). In addition to providing an overview of the problem the Committee offered two good checklists:
RED FLAGS WHICH MAY ALERT AN ATTORNEY TO AN INTERNET SCAM
A lawyer’s suspicion should be aroused by any one or more of these common “red flags” indicating a scam:
- The email sender is based abroad.
- The email sender does not provide a referral source. (If the email sender is asked how he found the firm, he may respond that it was through an online search. If prospective clients rarely approach the recipient attorney based on an Internet search, this should be an immediate red flag.)
- The initial email does not identify the law firm or recipient attorney by name, instead using a salutation such as “Dear barrister/solicitor/counselor.”
- The email uses awkward phrasing or poor grammar, suggesting that is was written by someone with poor English or was converted into English via a translation tool.
- The email is sent to “undisclosed recipients,” suggesting that it is directed to multiple recipients. (Alternatively, the attorney recipient may be blind copied on the email.)
- The email requests assistance on a legal matter in an area of law the recipient attorney does not practice.
- The email is vague in other respects, such as stating that the sender has a matter in the attorney’s “jurisdiction,” rather than specifying the jurisdiction itself.
- The email sender suggests that for this particular matter the attorney accept a contingency fee arrangement, even though that might not be customary for the attorney’s practice.
- The email sender is quick to sign a retainer agreement, without negotiating over the attorney’s fee (since the fee is illusory anyway).
- The email sender assures the attorney that the matter will resolve quickly.
- The counterparty, if there is one, will also likely respond quickly, settling the dispute or closing the deal with little or no negotiation.
- The email sender insists that his funds must be wired to a foreign bank account as soon as the check has cleared. (The sender often claims that there is an emergency requiring the immediate release of the funds.)
- The email sender or counterparty sends a supposed closing payment or settlement check within a few days. The check is typically a certified check or a cashier’s check, often from a bank located outside of the attorney’s jurisdiction.
DUTIES OF A LAWYER WHO SUSPECTS OR LEARNS THAT HE IS THE TARGET OF AN INTERNET SCAM
- An attorney who discovers that he is the target of an Internet-based trust account scam does not have a duty of confidentiality towards the individual attempting to defraud him, and is free to report the individual to law enforcement authorities, because that person does not qualify as a prospective or actual client of the attorney.
- However, before concluding that an individual is attempting to defraud the attorney and is not owed the duties normally owed to a prospective or actual client, the attorney must exercise reasonable diligence to investigate whether the person is engaged in fraud.
- In addition, because Internet-based trust account scams may harm other firm clients, a lawyer who receives a request for representation via the Internet has a duty to conduct a reasonable investigation to ascertain whether the person is a legitimate prospective client before accepting the representation.
- A lawyer who discovers he has been defrauded in a manner that results in harm to other clients of the law firm, such as the loss of client funds due to an escrow account scam, must promptly notify the harmed clients.