Oregon State Bar Bulletin — JUNE 2015



Managing Your Practice

Sophisticated Scams:
Protect Your Clients’ Money
By Jennifer L. Meisberger



While working on my taxes this year, I received an email from a man named Gary Mook, informing me that an inheritance of $22,350,000 was left behind in my name. How exciting! As Gary explained, a verification process was needed to handle my claim to the money. Although a lot of money for little effort can sound appealing, a cursory review of Gary’s email made me cautious, and I chose not to reply, certain it was a scam.

Even if this particular scheme seems obvious to you, it is important to know that lawyers are not immune from falling victim to these types of hoaxes. Scams are evolving, becoming more complicated and difficult to recognize. Not every imposter is from Nigeria, and fraud can happen anywhere — on the Internet, over the phone or even in person at your office. Lawyers are scammed often and at great cost. See the ABA Journal for some recent examples. Attorneys must learn to recognize and steer clear of these schemes to avoid discipline, malpractice and financial ruin.

Scams are Evolving

Perhaps you heard the above example before or something very similar. What if the Internal Revenue Service calls to tell you that you owe money and will be arrested if you do not pay? What if a new client sends you a retainer and then shortly thereafter informs you the matter is resolved and directs you to collect your fees and send the remaining money back? What if you issue a settlement check but the payee returns the check later that day and asks for another form of payment? These are all potential cons. The first example uses an agency known by many but understood by few, which uses fear to extract information from the target. The second example targets lawyers specifically, a group known for being busy and likely to respond as quickly as possible to a client request for a refund. The latest example is more sophisticated still! A payee could leave your office with a check, use a mobile banking application to deposit the check and then return to your office with the check, asking for another method of payment. An unsuspecting lawyer might feel safe collecting and destroying the hard copy check, then issuing another form of payment. However, if that happens, the payee gets paid twice. In this example, a wary lawyer should call the bank and stop payment on the original check.

Trust Your Instincts

When it comes to novel or sophisticated scams, it can be hard to recognize and avoid deceit. Lawyers often receive a high volume of calls, emails and other contacts from people they do not know. As a result, lack of familiarity with someone, without more, may not be the best tipoff that something is wrong. Thankfully, even in a sophisticated scam, there should be a variety of hints. The best warning sign may be that bad feeling you have about the client or the case.

When a fraudster contacted Oregon attorney Darcia Krause last year, Krause asked questions and listened to her instincts to avoid being conned. The potential client contacted Krause for work in a divorce case. The person was not known to Krause. His business was unsolicited, and after inquiry, he claimed he found Krause though the Yellow Pages. The potential client lived out of state, but he claimed he had married in Oregon and now needed an attorney to help him in an uncontested divorce involving a prenuptial agreement.

At first, the case seemed conventional, and payment arrangements were discussed. Krause agreed to take the case, and the man asked to wire a retainer directly to her lawyer trust account. Krause said that she did not accept wire transfers. The man then asked to wire money into the firm’s business account. Krause again said no. The client then sent a $202,000 check to the office via Federal Express. Something about the check was unusual, so Krause called the bank to inquire. The bank explained that the check was delivered to Krause in error. Coincidentally, the client called moments later, claiming that the funds were from someone who owed him money. The client directed Krause to deposit the check and offered to call the bank to ensure everything was in order. Krause deposited the money and confirmed with her bank several days later that the funds had indeed cleared.

After the attorney received money from the client, things got interesting. A short time after the money was deposited, the client contacted Krause, saying that his mother-in-law was in the hospital with a heart condition. In an amazing coincidence, the mother-in-law needed $200,000 for a medical procedure. The client instructed Krause to take $2,000 from the retainer for her fees, and then send him back the remaining $200,000. Skeptical, Krause asked for, and received from the client, various forms of identification and other documents. At first glance, the documents appeared legitimate. The client sent her a letter purporting to be from the mother-in-law’s surgeon regarding her medical condition and need for the medical procedure. Krause even followed up on the surgeon’s letter. Guess what? It used the name of a real surgeon!

Despite all this, Krause was apprehensive about sending the client money. After closer inspection of the documents, Krause determined that the client’s passport and prenuptial agreement were phony. The prenuptial agreement was missing essential information. In addition, Krause discovered that the client’s marriage license was bogus. These things may have gone undetected by an attorney who had never seen a genuine marriage license or who had limited experience with prenuptial agreements. After following her instincts, asking questions and carefully examining the available information, Krause unraveled the mystery. The entire case was a scam, and the retainer check was indeed fraudulent.

Do Your Due Diligence

Even though her bank initially confirmed that the deposited funds were available, Krause trusted her gut, continuing to ask questions until she uncovered the truth. We are all generally attuned to being wary of email solicitations with misspelled words, improper grammar or the dreaded plea IN ALL CAPS. However, as the example above demonstrates, scams can be more sophisticated, incorporating names of real people or documents that seem genuine at first glance. As a result, attorneys must be diligent to protect themselves from sophisticated scams.

When accepting new cases, beware of clients you do not know who cannot adequately explain how they found you. Did they claim to locate you from an ad you never placed, or hear of you from a referral source you do not know? Next, be cautious of a client who cannot meet you face-to-face because they live out-of-state or out of the country. Scammers often claim they can only communicate by email, rather than by telephone, because of time-zone issues. If someone cannot plan a client meeting with you because of “time-zone issues,” walk away. If you take the case, you may end up with a client who is difficult to adequately communicate with. Or worse, you could end up the victim of a costly scam.

Also, be careful of clients who offer you a large sum of money up front to complete a minimal amount of work. Often, these particular con artists provide a phony instrument for deposit and then ask for a refund almost immediately, less the attorney’s fees. If you are not careful, you may inadvertently end up using another client’s money from your lawyer trust account to pay the scammer or overdrafting your account. Lastly, make an effort to independently verify information you get from unfamiliar potential clients. Call the phone number. Investigate the address. Even a quick Internet search of a physical address, email address or phone number can provide a wealth of information.

In my recent brush with fraud, I had doubts about Gary. First, I did not know Gary, nor did I know anyone who passed away with an estate over $22 million. Also, Gary’s email lacked any explanation about who he was or how he came to find me. There was also no contact information other than the return email address. A quick Internet search confirmed my suspicions. Various Internet users posted about receiving the same message, for the same amount of money, all from Gary. Furthermore, Gary’s email address appeared to belong to a man in Wisconsin whose name was not Gary. Gary’s message was definitely a scam. The sender clearly hoped to trick me into sharing personal information and eventually a lot of money. Thankfully, this scam did not involve a bunch of adorable puppies, or I might have emailed back.

Tips for Fraud Protection

Trust your instincts. If something feels too good to be true, it probably is. If someone wants to give you a lot of money for a small or simple task, ask questions. If someone gives you a retainer for services, and then suddenly the matter is resolved and the person requests a refund, be cautious. If someone needs something right away but does not want to give you the necessary background information, slow down. Real clients have real problems that usually require time and thought to solve. Scammers just need you to send money.

Protect your account number. Avoid writing or stamping your account number on the back of checks ready for deposit. Instead, simply use the phrase, “Deposit to account of payee.” This method better protects your account number from scammers who get copies of their cancelled checks.

Trust but verify. Wait the appropriate amount of time after a deposit, and then confirm with the issuing bank that the funds have cleared. “Available” is not the same as “cleared.” Wait at least three banking days for local checks to clear and at least five banking days for checks outside your local area but within the state. Wait at least 10 banking days for out-of-state checks to clear. Remember, your bank may say the funds are clear sooner, but wait the recommended time, and then verify that the funds are clear with the issuing bank.

Ask the bank for help. Check with your bank about what fraud prevention services are available. For example, Positive Pay enables a bank to compare a check presented for payment with an electronic file of the check sent by the bank customer. If there is a discrepancy, the bank customer is notified. Positive Pay can also be used to compare and verify the payee against a list of approved payee names. For more details, see “Stop Scams with Fraud Protection Services,” http://oregon lawpracticemanagement.com/2013/02/05/stop-scams-with-fraud-protection-services by Beverly Michaelis on her Oregon Law Practice Management blog.

Speak up. If you have concerns about a check or other instrument, bring it to your banker’s attention before you deposit it. Many banks will place a hold on your account, or even close it, if they suspect fraud. This could compromise your ability to access legitimate funds on behalf of your other clients, even if the fake check is not honored. Also, if you come across a scam, report it to the proper authorities. Fraud can be reported to various agencies, including the National Fraud Information Center (www.fraud.org ), the Federal Trade Commission (www.ftc.gov ) and also to your bank and local authorities as appropriate.

 

ABOUT THE AUTHORS
Jennifer L. Meisberger is an attorney and a practice management adviser with the OSB Professional Liability Fund. She thanks Darcia Krause and Tanya Hanson for their assistance with this article. Krause, a Portland-area attorney, graciously shared her experience in hopes of raising awareness with other Oregon lawyers.

© 2015 Jennifer L. Meisberger

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