Scam Warning Revisited:
Awareness Require More Than Ever
By Leonard DuBoff & Christy King
Since our article entitled “Lawyers Beware: Avoiding the Scams” was published in the the Oregon State Bar Bulletin (November 2008), scammers continue to plague both lawyers and their clients.
As people become wise to scams, new ones are developed, and many of those directed at lawyers are so well crafted that it’s difficult, if not impossible, to tell that the person is a scammer rather than a real client in need of your help. They’ll sign your representation agreement and, in some cases, give you a retainer check. They may even be referred to you by someone you know.
For example, one of the newer scams involves someone posing as a real estate buyer and contacting a mortgage broker or real estate agent instead of a lawyer. The broker or agent then refers the buyer to a lawyer, not realizing that the purported buyer is really a scammer. The attorney often knows the mortgage broker or real estate agent and so doesn’t question the legitimacy of the transaction. A variation on the scam occurs where the scammer asks a lawyer in one area of the country to provide a referral to a lawyer in a different region. Some scammers assume the identity of actual attorneys in order to perpetrate the fraud. They claim to be referring a client — often themselves — for claimed legal assistance.
Other relatively recent scams involve a person claiming to need assistance with a divorce settlement or collection activities. Once you “collect” the funds for the client and deposit the check into your trust account, you are instructed to deduct your fees and wire the balance to the client. Even if you wait long enough that you reasonably believe the check has cleared, the sender may have modified the check to delay processing, and by the time you discover the check is no good, it’s too late — the money has already been wired to the swindler. It has been estimated that law firms have lost more than $70 million since 2009 just from this particular type of scam.1
Another scam involves the purported client overpaying the retainer and waiting for the law firm to advise the client that the payment was excessive before requesting a refund of the excess via wire transfer. Naturally, the check the lawyer initially received from the client turns out to be no good.
There is at least one reported instance of a scammer creating fake checks on the lawyer’s trust account.2 The lawyer received a check from a potential client and deposited it into his IOLTA account. When the check bounced, the lawyer wasn’t concerned since he had done no work on the matter, but later discovered that fake checks were written on his trust account. The scammer obtained the bank’s name and the account number from the endorsement stamp.
While many of the scams targeting lawyers involve email, not all do. Letters may be received through the U.S. mail, FedEx or UPS. Some bar associations have reported that people are calling their members, asking for dues payments. Some firms have also been contacted by telephone in variations of the debt collection scam.
There have been instances where the “clients” actually met with attorneys in person. Some scams are even set up over weeks or months, and the purported client may hire you for a simple and legitimate project (e.g., incorporating a business) and actually pay you in order to gain your trust before engaging in the scam.
A few years ago, several New York law firms were victimized by a con man who phoned law firms, claiming in each case to have found a package from New York State Insurance Fund addressed to the firm. He offered to deliver the package if the firm would pay his round-trip cab fare to do so. At least 30 law firms were taken in by the scam, paying more than $1,000 in bogus fares and tips. The heavy package turned out to include multiple copies of a certificate of insurance.
So What Can Lawyers Do to Protect Themselves?
Pay attention to red flags, which include: any unsolicited contact (especially if the alleged potential client is from another country); email that is generically addressed (e.g., “Dear Attorney”) or cc’d to numerous people; situations where the potential client is willing to pay an unusually high fee for the services to be provided; situations where the collection process seems too simple to need a lawyer’s involvement; money is to be wired overseas; or the client is in a big hurry.
Note that just because an email appears to be from a legitimate company you’ve heard of doesn’t mean that it is. For instance, one scam email appears to come from “BP Global Oil” at email@example.com. Always look up the telephone number of the company from a legitimate third-party source, and call that number to contact the person. Also, don’t rely on the quality of the potential client’s website; many scammers have professional looking websites.
Remember that just because the supposed potential client has been referred to you by someone you know and trust does not necessarily mean that client is trustworthy. Contact the person you know to find out whether they actually referred the person and, if so, how well they know the referred party. Naturally, use the contact information you already have or contact information from an independent third party — not any information provided by the potential client.
When you’re considering taking on a new client, you should run the names of all of the people or businesses involved (not just the potential client) through an Internet search engine to see if they turn up in any reports of scams. You can also call the PLF since its staff may have already received reports of a similar scam.3
Consider using a service to run background checks on any potential client you feel uncertain about; you may, of course, need to obtain that party’s consent to do so in accordance with applicable law. Be aware that sometimes scammers provide fake references that are in on the scam as well, so be sure to obtain contact information for a company from an independent source. You may find that the alleged reference does not even work for the company claimed.
Any time you are contacted to collect a debt, verify the debtor company’s contact information and call it to verify that it does, in fact, have a business relationship with your client. Don’t trust the documentation provided to you by the alleged client, and never agree to have your retainer fee paid by the third-party debtor.
If you owe the Oregon State Bar membership dues, this will appear in your online dashboard. Never pay bar dues over the phone; the (real) OSB does not accept membership fee payments via the phone, fax or email. In general, never give your credit card number to anyone who calls you.
Extra care should be taken with checks. Calling the bank to verify “availability of funds” or simply waiting 10 days is no longer good enough. Scammers have become adept at delaying banks’ clearing of checks. Remember that bank holidays will delay clearing even longer. If the money is coming from abroad, consider bank holidays in the country of origin, not just those holidays that your bank observes. The fact that a check “looks” valid is meaningless, as is that the fact that you’ve received a “certified” or “cashier’s” check.
Independently verify that the check is drawn from an actual account at a legitimate financial institution. Do not rely on the telephone number listed on the check. Use the Internet or directory assistance to get the telephone number of the financial institution and call them to verify the check.
Ask your bank to investigate the authenticity of the check if you’re suspicious, and even if all seems well, confirm with your bank that “the account has been funded” or “the funds have been collected” before assuming you actually have the money.4
You can also ask the bank to send the check for “collection,” in which event you receive positive confirmation when the check has been paid. There is a fee for this service, and you may have difficulty finding a teller who knows how to do this.5
Make sure checks are endorsed with only the following language: “Deposit to Account of Payee.” No other information should be included.6
Although most of the scams involve fake checks, beware of money orders and wire transfers as well. The same cautions apply.
Don’t accept a check or wire transfer for more than you’re owed. If you receive an overpayment from someone you’re not sure about, ask for a replacement check written for the correct amount.
You should also add a paragraph to your fee agreement allowing you to hold funds “collected” from a debtor, as well as retainer payments, for a sufficient period of time to verify the validity of the paying instrument.
Advise Clients as Well
While attorneys appear to have become the new target for scammers, their clients have not been totally ignored. You should therefore warn your clients about new scams as they come to your attention. Some of the more common and believable scams include companies sending letters that make it appear as if they are from the state corporation division or from the U.S. Patent & Trademark Office. In fact, the trademark office has received so many complaints that it actually has a warning published on its website identifying some of the more notorious scammers.7
Another scam we should make sure our clients are aware of is the email that comes in many different guises, indicating that you are entitled to a large sum of money. A more subtle scam involves an email indicating that “updating” your company’s information in the World Trade Register is free, but if you read the tiny print on the registration fee, you are agreeing to an exorbitant fee of 995 euros for a first-time registration.
Many people still don’t recognize older, but still frequent scams, such as the one ostensibly from a legitimate foreign domain name registrar indicating that the only way to stop another company from using your trademark in a domain name is to buy that domain name. Victims of this scam not only pay large sums of money, they also compromise the credit card they use.
Some people have been contacted by scammers impersonating law firms or government investigators, demanding payments on nonexistent debts. Other scams are similar to those directed at lawyers and involve the scammer overpaying by check and requesting a refund by wire.
While the economy appears to be on the mend, and therefore the lean times which may have been responsible in part for the proliferation of scams for those who feel they need easy money, the “games” have not receded. There remain a host of immoral individuals who have a great deal of creative skills, which they appear to devote to the development of novel ways to fleece attorneys and their clients. When you intuitively feel skeptical about an opportunity, your intuition is likely correct, and you should be very cautious. If an opportunity sounds too good to be true, it likely is.
1. Smith, Jennifer, “In Email, Scammers Take Aim at Lawyers,” Wall Street Journal, Aug. 5, 2012, http://online.wsj.com/article/SB10000872396390443517104577571453933076304.html.
2. Michaelis, Beverly, “Scam Update: New Ways They Can Get Your Money,”In Brief, January 2013.
3. “Check Scams Become Even More Sophisticated and Generally Have No PLF Coverage,”In Brief, October 2012.
4. The Expedited Funds Availability Act mandates times when deposited funds must be made available to depositors. Funds from a cashier’s check, for instance, must be made available within two business days. However, availability has no relationship to how long it takes the check to actually be paid. A check can be returned after its funds have been made available, in which case the depositor will have to repay any withdrawn funds. “Check Scams That Target Lawyers,” Oklahoma Bar Association,www.okbar.org/news/front/2010/03/12-scams-targeting-lawyers.htm.
6. Michaelis, “Scam Update: New Ways They Can Get Your Money,” supra.
7. “Warning: Non-USPTO Solicitations That May Resemble Official USPTO Communications,” www.uspto.gov/trademarks/solicitation_warnings.jsp
ABOUT THE AUTHOR
Leonard DuBoff is author of more than 20 books on business and intellectual property law. He was a law professor for a quarter of a century. He began his teaching career at the Stanford Law School. He later taught at Lewis & Clark Law School and became a full professor. He is the managing principal of the DuBoff Law Group, which focuses on complex business and intellectual property.
Christy King, also of the DuBoff Law Group, has co-authored numerous books with DuBoff, including the Deskbook of Art Law, Art Law in a Nutshell, The Law (In Plan English) for Restaurants andThe Law (In Plain English) for Photographers.
© 2013 Leonard D. DuBoff and Christy A. King