Internet fraud schemes are prevelant and diverse. Lately, they have been increasingly targeting lawyers and law firms – and more importantly, the banks where lawyers have their client trust accounts. While most are pretty obvious, there has been documented cases where attorneys have fallen victim. And as a result, thousands of dollars out of trust accounts have been lost.
The most common scenario involves an alleged overseas company that contacts a U.S.-based attorney by e-mail and purports to retain that lawyer as a settlement agent to collect a debt from a debtor. The “Client” tells the attorney that it is imperative that he or she wire the money as soon as possible after receiving it from the debtor. The attorney then promptly receives a check from the purported debtor and deposits it into his or her trust account. Attorney then confirms with his/her bank that the money has been credited to the account and wires it as directed, minus their fee, to the purported client. A few days later, bank tells the attorney that the check is a counterfeit. The bank then debits the trust account for monies lost.
What can really get the attorney into trouble is if the banks action then takes the trust account into overdrawn. This could happen if the amount was large, or the attorney is solo practitioner relying upon a stream of fees to pay the bills. At that point, the trust account bank is obligated to report the attorney to the State Bar of California. This could lead to an investigation by the State Bar and potential attorney discipline.
Adding to the attorney’s woes, claims by a bank or others arising from the scam are generally denied by malpractice insurers based on the argument that the claim does not arise from “professional services” or the disgorgement or reimbursement claims do not represent “damages” as typically defined in the policies.
So, be wary of any of the following:
- Direct email solicitating representation from an unknown individual.
- Unknown individual is out-of-country, or a representative of an out-of-country business.
- Debt collection legal services being sought from an unknown individual.
- The individual refuses any contact other than by email correspondence.
- The debt collection services resolves almost immediately, with little to no effort by the attorney.
- Individual demands that funds be immediately wire transferred to an out-of-country account.
For some more useful advice on lawyer Internet scams, read: