Web-Scamming the Lawyers

Law Practice

Even attorneys can be bilked in phony-check schemes

November 2008 Issue
By Richard Acello

Photo by iStockPhoto.com

If there’s one group of professionals that might be regarded as immune from Internet scam artists, it would be lawyers. But attorneys are the marks in a series of scams preying on a lawyer’s need for new business and a banker’s trust in good customers.

Incidents stretch from Atlanta to San Francisco, and though the facts may vary, the cases fit a pattern.

A lawyer receives an e-mailed solicitation from an overseas firm to work as a settlement agent in the speedy collection of a debt from another company. The debtor company sends a cashier’s check to the lawyer. The lawyer deposits the check into his trust account, subtracts his fee, then wires the settlement amount to the client’s account.

The trouble is the debtor company’s check is bogus.

Rich Kolko, an FBI special agent in Washington, D.C., says these lawyer scams—while new to the profession—are similar to those in which recipients get e-mails from fake websites that look very legitimate, down to using well-established financial institutions’ logos and trademarks.

Kolko says there are “very few lawyer cases” in this category.

One of those lawyers is Atlanta securities attorney Gregory Bartko, who is being sued in federal court for $200,000 by Wachovia Bank, which is seeking overdraft fees and reimbursement of money Wachovia wired to a Korean bank on Bartko’s instruction.

Bartko thought he was working on behalf of Taiwanese textile company Tah Tong, but he now believes the firm’s name was being used. He thinks the scammer is someone fraudulently representing himself “when he’s probably up in Canada. Tah Tong is a real company that we believe has nothing to do with this.”

Bartko also believes that neither Wachovia nor Sun Trust—the bank named on the cashier’s check—complied with proper clearing procedures. He argues that he should not have been able to wire the cash unless the check had cleared. “I was able to wire out even though the check had been dishonored,” he says. Officials at Sun Trust declined to comment for this article, and Wachovia didn’t respond to a request for comment.

CALCULATING CHANCE

But banks sometimes take risks with trusted customers. and lawyers have been trained to satisfy client wishes, including the desire to conclude matters expeditiously.

“There’s such a push to develop business, [lawyers are] actually particularly susceptible,” says Mike Downey, a partner at Hinshaw & Culbertson in St. Louis who advises law firms on risk management issues, particularly client intake. “In an economic downturn, lawyers are looking for things to do, and if you receive an e-mail and you can verify the information, you might think it’s not that unusual.”

To avoid being scammed, Downey recommends investigating potential clients, including asking how they found you, requesting common contacts and checking their Web presence to see whether it is more than a website. Beware of potential clients who want things done quickly, Downey says, and don’t take the job if you’re not willing to assume the risk.

Kolko goes further: “Don’t send the money to anyone; don’t send your personal information. If you don’t know who you’re talking to on the Internet, don’t do it.”

Comments

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Posted by B. McLeod - Nov 25, 2008 07:55 am CST

Wow, banking with Wachovia. Well who would have seen that coming?

For any colleagues doing business with this bank, please do yourselves/your firms a giant service. Get out your Wachovia banking agreements, and read them. What happened to Bartko is only a small shadow of what could happen. Many of the Wachovia documents pre-authorize them to hand over your funds in response to any purported legal process, received in or from any jurisidction (e.g., Nigeria), without any effort to verify its authenticity. If Wachovia incurs any legal fees in the process (or in the process of pretty much any other activity covered under their agreements), they get to bill you for the fees on top of everything. In any controversy, the loser pays attorney fees, but only if the account holder is the loser. Many of the forms also waive jury trial and stipulate to arbitration (helping to keep the “customer service” less public). Don’t be the next Bartko. Mind the dog.
Posted by W.Buchmaier - Nov 25, 2008 09:36 am CST

I almost became the victim of a similar scam. However, in my case the foreign company asked me to incorporate a subsidiary in the US, all funded by a first collection from a customer in Canada. I spent about 10 hours of my time explaining the options taxation etc. and received the phony bank check from the customer which was credited to my trust account without problems and without any restrictions. Something did not smell quite right but my guards were down as the case was referred to me by another local lawyer and after all you are dealing with foreigners (which I do a lot in my practice) and they sometimes have unusual practices. When asked to wire out the money I was almost on my way to the bank when hit suddenly hit me what the scam is (mainly because the check was issued by Citybank in Charleston, SC and Citybank to my knowledge does not have retail banking facilities in SC (and the payor being located in Canada). I tried to find out whether Citybank a a bank check verification hotline and after one hour search I found it (obviously not to keen that somebody verified their bank checks). I finally was sure that the whole thing was a scam when the check did not verify at the verification hotline and the copy of a Spanish passport that I requested from my client (claiming the Bank wanted verification) listed Spain instead of España as issuing country (guess you can be pretty stupid and still make money in this business likely because law enforcement is not much smarter either as we will learn below).

As the crooks started contacting me more often and more urgently to ask for the money (to be wired to Korea) I figured that there are sitting ducks and easy to catch. So I contacted the FBI where I was told by some type of receptionist, who refused despite several calls to take down any record or to let me talk to any officer, that answers the phone locally that there is nothing the can do and that I am luck that they do not investigate me because after all I am involved in an illegal scheme (yes as victim!). So no wonder that the FBI has few records as they do not take on any reports of this type of crime.

Local police took a report and told me their is nothing they can do either, as the crooks are clearly outside their jurisdiction.

My bank (First Citizen Bank, South Carolina) told me there is nothing they can do either. Citybank told me to send a letter to their fraud department, which I did, but that would take to long anyways and to my knowledge nothing ever happened from their side either.

The Secret Service (with jurisdiction over currency crimes) asked me at least to fax the documentation I have but otherwise I did not hear anything from them either.

So after all I spent 10 billable hours plus another 10 hours trying to help catching the perpetrators and in exchange learned that it is under auspices of the FBI a perfectly safe crime to commit. I guess it comes as no surprise that by now I have in my inbox
almost daily several e-mails that look like a variation of this scam.

The scam is also furthered by our Supreme Court (South Carolina) who put unreasonable responsibility on lawyers for moneys received in trust. As the check is fully credited without restrictions in the trust account, I would probably loose my license if it turns out to be good. After all I continued holding the money against the instructions of the client.