This post serves as a follow-up to the blog post, “Don’t Fall for Email Check Scams,” published in 2012.
Unfortunately, in the world of fraud, “bad check” scams targeting lawyers show no signs of going away, and in many cases seem to be getting more sophisticated.
These are not the notoriously bogus Nigerian princes with dragon-guarded bank vaults – these are scams often using the real names of existing people and businesses, and they can come with remarkably convincing client IDs, invoices, and other documents that, on the surface, can appear very real. The fake checks themselves have fooled bank tellers and branch managers.
WSBA regularly receives alerts from both WSBA members and staff concerning attempted scams. “It’s been consistently happening, but people still don’t seem to know about it,” says Assistant General Counsel Julie Shankland. One request she reviewed recently involved the cross-checking of the address listed in the client’s documents – one of the main tips for determining fraud. She found that it was actually the address of the flagship Top Pot Doughnuts in downtown Seattle.
Taking a Closer Look
Even for vigilant lawyers, the smoke and mirrors involved in some of these cases have the potential to make the line between what’s real and what’s bogus difficult to distinguish until it’s too late. While a donut shop address is a clear red flag, there are plenty of scammers who are craftier in their approach.
In the worst-case scenario, an attorney sends a large sum of money to an overseas account before the bank has confirmed the authenticity of the check deposit from which the money was drawn. The check is deemed fraudulent and the attorney’s trust account is overdrawn. A lawyer’s best hope in this case is to be pardoned by the bank, but that kind of luck is not guaranteed. This is where things can get ugly. A recent article in the ABA Journal describes one such case of a bank issuing a federal complaint against an Illinois attorney who wired $570,000 to Japan, unknowingly the victim of a phony divorce settlement.
“Fraud continues to be a significant and costly problem for LawPRO. Fraudsters are successfully duping lawyers and law clerks, and it’s not just real estate lawyers who are being targeted. Litigation, business and family lawyers are frequent targets of bad cheque scams involving debt collections, spousal support payments and business loans.”– From the “Fraud Fact Sheet”
How it Works
Most commonly, these scams seem to take the form of a phony party attempting to collect on a breach of payment – goods or services were requested, partially or fully paid for, but not received. Here’s how it usually works:
- The Initial Contact: Most often this comes as an email or a LinkedIn message, but in some cases the scammer will phone your office – in very rare cases, they will show up in person. Typically, an email will be brief and generic. To give a real example: Counsel, I am inquiring about the possibility of your firm representing me in the litigation of a breach of payment agreement. If this falls within the scope of your practice get back to me so that I can send the copies of our agreements and more information. Regards [name], [telephone number]. The email often lacks any line breaks and ends with an email address that appears unprofessional or doesn’t match the sender’s email.
- The Disguise: The scammer alleging as the “owed” party may be posing under any number of disguises: a dental office with an outstanding order for medical supplies, a chemical company trying to collect on delinquent accounts, or even a phony lawyer seeking to refer a client for a real estate matter that falls in your law office’s jurisdiction. Typically they claim to be based overseas – often the UK or Japan – and seeking remittance from a party in your area.
- The Check: A check arrives from the owing party, often with little to no cajoling on the lawyer’s part and very soon after the initial contact. Its authenticity may appear very convincing.
- The Deposit: The check is deposited in a lawyer’s trust account and the bank typically makes the deposited funds available before it is fully able to clear the check. Be aware that scammers often strategically time their scams around bank holidays, when it will take longer than normal for the bank to clear the check.
- The Remittance: The scammer will request that a partial or full deposit of the debt be wired to a foreign bank account, often with reason for the case to be rushed along, such as – this is a real example – “I need to donate the money to charity so they can finish building an orphanage.” The lawyer may also be instructed to withdraw the retainer fee from the deposit as payment.
- The Fallout: The bank will notify the lawyer that the check was in fact counterfeit, resulting in the trust account suffering a loss in the amount of the deposited check.
There are many ways you can uncover a scam, but to ensure the joke’s never on you, the main thing is to do your digging and if there are any doubts, dig deeper. “Do your due diligence,” advises Shankland. “Check everything out.” Likewise, the old rule, “If it seems too good to be true, it probably is,” applies very much to these cases, because they so often promise a tempting amount of money in exchange for very little work.