|Oregon State Bar Bulletin NOVEMBER 2008|
Avoiding the Scams
By Leonard D. DuBoff and Christy O. King
The technology boom has provided opportunities for practitioners to work more efficiently by making available a host of time-saving, as well as cost-effective, tools. Sadly, modern technology has also provided the less scrupulous segments of society with opportunities to take advantage of others.
We are all familiar with the Nigerian money scams that arrive in our e-mail boxes on a regular basis, but new versions of that scam are continuously being developed. In fact, on Sept. 9, 2008, our office received an e-mail from a purported U.S. Army sergeant stationed in Iraq who claims to have secreted $25 million belonging to Saddam Hussein’s family.
Regrettably, some lawyers have recently become victims of con artists who have begun targeting our profession. In these cases, the alleged client, often based in a third-world country, retains the attorney to assist with collecting a debt in the United States, then advises the attorney that the case has just been settled. The company that supposedly owes money to the lawyer’s new client sends the attorney a cashier’s check in settlement. The client authorizes the lawyer to pay his or her fee from that check and to wire the balance to it. Unfortunately, the check is counterfeit.
At least one lawyer wound up sending the phony client $192,530 from his trust account before the fake check cleared, and, as a result, this attorney now finds himself with a host of problems. Georgia lawyer Gregory Bartko, who received a "settlement check" in the amount of $197,530, deposited the SunTrust cashier’s check in his account at Wachovia Bank on April 8, 2008. Wachovia advised him that he could not draw on those funds until April 10 to allow the bank time to determine that the funds were available and that SunTrust would honor the check. On April 11, the attorney arranged to wire $192,530 to his purported client’s bank. Three days later, he discovered that the cashier’s check had been returned as counterfeit.
Wachovia notified the State Bar of Georgia, as it is required
to do, that the lawyer’s trust account was overdrawn by more than $190,000
and, additionally, filed suit against the attorney to recover the overdraft.
The lawyer claims that the bank was negligent in not timely notifying him of
the specious nature of the
deposited check. The situation is clearly a mess, and the attorney involved candidly admits that he has been victimized by this scam.1
At least some of the other attorneys taken in by this scam were more fortunate, and their banks were able to recall the wire transfers before the crooks made off with the money.2 Sylvia Stevens, general counsel of the Oregon State Bar, has alerted Oregon lawyers to this problem3 and reminded us to be careful with our trust accounts.4 No disbursal should be made until we have received assurance from the depositing bank that the check, even a certified or cashier’s check, has actually cleared, though, as illustrated by the Bartko case, even that may not be enough protection.
Note that the same scam comes in various forms. On Sept. 24, 2008, our office received an email from someone claiming to be a London artist needing assistance cashing checks from galleries in the U.S. and Canada. The representative is asked to deposit the certified checks, retain a ten percent fee, and wire the balance to the "artist."
Another game is afoot that has not directly targeted lawyers, but attorneys are potential victims. In this situation, an individual or business receives an e-mail from a company that represents that it is a domain name registrar.5 Early versions were purportedly from Chinese registrars, but e-mails have recently been received from alleged registrars in other countries, including the Slovak Republic.
The communication advises the recipient that a company has requested registration of a URL that is similar to that of the party contacted, but with one or more different extensions. That is, the owner of purple.com might receive an e-mail advising that another company desires to register purple.cn, purple.hk, purple.tw and purple.in. The URL may even be a registered trademark of the party contacted. The communication goes on to say that before permitting the registration of the virtually identical URL, the registrar wishes to obtain confirmation that the registration would not be a problem.
A party who objects to the registration is advised that the only way to prevent it is to purchase the URL. Those who refuse to do so are threatened and advised that the interloper will be sold the domain name. In other words, the offshore registration company is presenting individuals and businesses with the choice of either purchasing an unwanted URL or having an offshore company obtain it for the purpose of causing market confusion.
Several of our clients have been plagued with these communications, and when challenged, the offshore registration company becomes belligerent. In one situation, the offshore registration company represented that "Goolge paied (sic) 1 million dollars to get the domain names (google.com.cn and google.cn) back,"6 despite the fact that there is an online arbitration procedure that is both cost effective and efficient.7
It is clear from the several situations with which we have assisted that the alleged offshore registration companies will ultimately back off if ignored or challenged. Sadly, many clients have been cheated by fake offshore registration companies, such as the one described above, and the problem has been compounded by the fact that the credit card number of the card used to purchase the URL has also been compromised.
Lawyers should be diligent in determining whether they or their clients are dealing with companies that are actually authorized to register domain names,8 and, if so, whether a legitimate company would be aggressive in forcing the acquisition of domain names that clearly interfere with existing rights.
Another scam that has recently resurfaced involves trademark owners. In this situation, the scammers check the U.S. Patent and Trademark Office’s website for the names and contact information of trademark owners. These bunco artists are careful to avoid contacting attorneys who are the registered agents for the trademark owners but, rather, contact the trademark owners themselves. Letters advising trademark owners of the fact that they must do something in order to protect their registrations and prevent them from being canceled are sent directly to the trademark owners.
The amount requested for the service, which is often unnecessary or premature, is significantly higher than the amount customarily charged by trademark lawyers for legitimate work. Regrettably, many recipients of these letters do not check with their attorneys before paying these exorbitant amounts, and, as a result, the improper practice continues.
Lawyers should be diligent in advising their clients about new gimmicks intended to fleece them out of their hard-earned money, though unfortunately, even the most diligent attorneys may not be aware of the latest scams. This being said, clients should be advised to contact their attorneys before retaining any services related to their businesses, intellectual property or online activity. When in doubt, due diligence through the bar association or list serves would be appropriate in order to determine whether the requested service or opportunity has any merit whatsoever. In addition, attorneys should be diligent in assisting clients and engaging in self-protection whenever unusual communications are received.
It is clear that hard economic times cause desperate people to do desperate things. It is also clear that there is a host of amoral individuals who continuously invent new schemes for the purpose of separating you or your clients from hard-earned money. Caution, diligence and research may be the only tools you have to combat the prospect of being the next victim.
1. McDonald, "Lawyer Falls Prey to Pricey Internet Scam," Law.com, Aug. 26, 2008.
2. Id; Curtis, "Embarrassed Lawyers Fall Victim to Internet Scams," California Bar Journal, July 2008, available online at http://tinyurl.com/5c3sxz; and Stevens, "Trust Account Lessons: Cautionary Notes," Oregon State Bar Bulletin, July 2008, available online at www.osbar.org/publications/bulletin/08jul/barcounsel.html.
3. The New York State Bar has also advised its members to be aware of this scam, sending an e-mail entitled "Scam targets solo and small law firms," on Sept. 12, 2008.
4. Stevens, supra.
5. The e-mails often identify legitimate registrars as their source, making it even more difficult to detect the scam.
6. E-mail to Leonard DuBoff from "Wes at ‘SK Net Service Company’ dated July 2, 2008.
7. See the World Intellectual Property Organization’s website at www.wipo.int/amc/en/domains for more information on domain name dispute resolution. See also, DuBoff and King, "Cyber Troubles: Resolving domain name disputes," Oregon State Bar Bulletin, May 2005, available online at www.osbar.org/publications/bulletin/05may/tips.html. Note that many countries (including China and India) do not use the WIPO arbitration process for disputes over ccTLDs (country code top level domains). More information on resolving a domain dispute over such ccTLDs can be obtained at www.wipo.int/amc/en/domains/cctld_db/index.html.
8. Often the company mentioned in the e-mail is legitimate, but this does not mean that the e-mail is actually from that company.
ABOUT THE AUTHOR
Leonard DuBoff is author of more than 20 books on business and intellectual property law. He was a law professor for almost a quarter of a century, teaching at the Stanford and Lewis & Clark law schools. He is the managing principal of the DuBoff Law Group, which focuses on complex business and intellectual property. Christy King is a member of the DuBoff Law Group and editor-in-chief of the firm’s newsletter Critical Issues, and co-author with DuBoff of the Deskbook of Art Law, Art Law in a Nutshell, The Law (In Plain English) for Restaurants and The Law (In Plain English) for Doctors, Dentists, and Other Health Care Professionals
© 2008 Leonard D. DuBoff and Christy O. King