Posted Jun 11, 2009 02:39 pm CDT
Updated: Bradley Arant Boult Cummings fell victim to a sophisticated debt collection scam, to the tune of more than $400,000. But its quick reporting of the crime has led to the arrest of suspects.
The Nashville Post (sub. req.) reported yesterday that the law firm wired more than $400,000 to the foreign bank account of a scammer posing as a client. Lawyers at the firm believed the funds were covered by a check it had deposited—a check that turned out to be phony.
The law firm says it quickly reported the scam to the FBI, leading to the arrest of suspects and the freezing of the funds. “It was an elaborate criminal plan on many levels,” Bradley Arant managing partner John Grenier said in a statement released to the ABA Journal. The firm quickly reported the crime, leading to “the apprehension of the suspects in this scheme and the freezing of the funds.”
The Tennessee Bar Association sent a blast e-mail Wednesday warning about the scam. It works this way, according to the story:
A target law firm gets a referral from someone posing as an out-of-state lawyer to enforce a simple contract dispute or to collect a debt from a local corporation. The law firm agrees to represent the “client,” a foreign corporation.
The law firm sends a demand letter, the debtor forwards a check, and the law firm deposits the check in its trust account. It then wires the money to the bank account of the foreign client, after keeping part of the sum for fees and costs.
“Things fall apart,” the TBA says, “when the bank on which the check is drawn notifies everyone that the check is a counterfeit fraud—by which time it is too late to stop the wire transfer, and the law firm’s client trust account is now out the proceeds.”
Other lawyers contacted by scammers have said the “clients” often identify themselves as real overseas companies with online websites. In one instance a phony check had a fake 800 number for Citibank with an automated line that tells inquirers their checks are legitimate.
Grenier said in the statement that the scam was elaborately planned. “This was a complex international fraud scheme where the criminals assumed the identity of a legitimate overseas company and asked for help collecting a debt from a legitimate U.S. company whose identity they had also assumed, leading to the transfer of funds to a bank in Asia,” he said.
“The scheme also included counterfeit cashier’s checks, phony introductions from U.S. counsel, assumed identities of real staff at actual companies, and fraudulent automated funds verification systems.”
The statement says Bradley Arant is working to have the transferred funds returned to the firm. “It is important to note that no client funds are at risk.”
Bradley Arant Boult Cummings is the product or a January merger between Bradley Arant Rose & White and Boult, Cummings, Conners & Berry.
Updated on June 12 to include Grenier’s statement.