The ongoing 'you're famous and we want to hire you' scam

By Richard L. Levine and Paul T. Milligan The Daily Record Newswire Most lawyers regularly receive the email inducements: "You have been recommended by the bar association as one of the leading lawyers in your area. We would like to hire you to collect a debt for us." The emails have a lot in common. They claim to be from Asia, though recently more are purportedly showing up from Africa. They claim to be from officers of familiar-sounding corporations, in some cases corporations that show up legitimately if you Google the name. You are not being asked to send money. They massage your ego. They ask only for your honest services. They are all scams. What would the ads have you believe you will do? Stage 1: You will represent a corporation seeking to collect a large debt -- often in seven figures -- from an actual or putative defendant. You will negotiate a retention letter, sometimes exchanging four or five drafts. You will be promised a 33- or even 40-percent contingency fee. You will be very happy. Stage 2: You will contact the would-be defendant. Miraculously, the defendant will cower at your aggressiveness, and after a couple of conversations will concede the case. You will duly report to your client. The client will express great admiration for your talents and agree to honor your contingency agreement, even though you really didn't do much. Again, you will be very happy, and you won't worry about caselaw in some jurisdictions where courts have ruled that you may not be entitled to your full contingency fee if you didn't do much work. That is, however, a discussion for another day. Stage 3: You will negotiate a settlement with the opposing side. You will receive a check made payable to your client funds account. It will be written on a reputable bank, and may even be a bank check. Your world is still full of happiness, maybe a little hubris. Stage 4: You will deposit the check in your client funds account. Stage 5: Your client advises you that it needs its share of the money right away, and asks that you immediately wire the portion of the settlement left after deducting your fees. Stage 6: You are cautious and smart, so you wait a couple of days to be sure the check clears. The bank confirms that it will honor, or has honored, the check you deposited. You wire the client's share to the client. You and your spouse celebrate over drinks. How does real life intrude? Stage 7: Days later, it turns out that the check you deposited is bogus. Your bank then charges your trust fund account for the money which it wired out at your request. The funds you sent to your "client" (the quotation marks give you an idea of the sad news to come) are long gone, and you have already spent the portion of the original check that represented your fee. The bank not only charges your trust fund account, but it sues you for the shortfall. Stage 8: You will hear from your state disciplinary committee because your trust fund checks will be bouncing all over the state, triggering an automatic notification to the relevant disciplinary committee. Stage 9: You will never again reach your "client." Stage 10: You will owe a ton of money to the bank. You have some defenses, but you will probably lose your dispute. Stage 11: In desperation, you file a claim with your malpractice insurer. Stage 12: Your insurer expresses bemusement, and declines to defend or indemnify, claiming, among other things, that (1) there wasn't a real client, so you aren't covered; and/or (2) you were not performing legal services, you were just laundering money, albeit unknowingly. How did it this happen? Here's a look at the mistakes you made: 1) You didn't read the UCC. Banks have a limited amount of time (the so-called "midnight deadline"-- midnight on the day following the presentation of the check to the bank) to honor checks. But that is only a deadline for a provisional, or initial, honoring of a check. Banks can reverse a transaction weeks or months later. 2) You wired the funds instead of sending a check. At least a check might have increased the odds of stopping payment, as compared with wiring. Wired funds are irretrievable. 3) You didn't immediately report the suspected fraud. At least one jurisdiction has explicitly ruled that there is no duty of confidentiality to a clearly "pretend" client. 4) You didn't do a thorough initial search. You didn't Google the name of the individual at the company, or if you did, you didn't place a telephone call to a number on the real company's website, if indeed the fraudsters used the name of a real company. In some cases, Googling reveals prior victims of the same scam. 5) You believed that you were "recommended" by "the bar association" or the "distinguished law list." You forgot that bar associations don't recommend lawyers. A more detailed description of the "distinguished law list" might have added credibility. 6) You didn't research your alleged opponent, if they even existed. 7) After depositing your "settlement" check, you probably asked your bank if the funds were "available." You would have done better if you had asked if the funds were "collected," which implies that the bank on which the check was written had actually released funds. 8) You didn't ask your bank to examine the check. Maybe they wouldn't have taken the time, but in many cases, they might have noticed anomalies. For example, the micr line (magnetic link character recognition) was probably altered. Those small numbers on the front of the check indicate where the check is from. Altering those numbers will redirect the check to another city, delaying the time it takes to discover the fraud. See, e.g., "Catch Me if You Can." 9) You should have created a separate client funds account in order to avoid intermingling the funds with those of other clients. Under these circumstances -- a big case from an unknown client with payment arriving by bank check -- separation of funds is essential. What have the courts held in such cases? The two most recent cases have said that malpractice insurers have a duty to defend and indemnify, on the grounds that the undertakings by the law firms fall under the definition of "professional services." Other cases, however, have ruled otherwise, finding that a lawyer-client relationship never existed, or that the lawyer's efforts did not constitute legal services. Some of these cases rest on close readings of the insurance contracts. The bottom line is that there is no assurance that insurers will cover this problem. ---------- Richard L. Levine and Paul T. Milligan practice at Nelson, Kinder & Mosseau in Boston. Their practice includes professional liability and business litigation. Levine also specializes in insolvency law. Published: Tue, May 15, 2012