iStock_000020246010XSmallA short time ago I was contacted by an attorney in San Jose, CA. He told me that he received a check from a new client in the amount of $215,000. Part of this money was a retainer. The majority was to be used by the attorney as good faith or interest money toward the purchase of real estate. The real estate market had turned sour and cash was king. A self-described investor was interested in finding distressed properties to be purchased on the cheap, and the attorney agreed to help. A short time later, this same attorney related that he received a communication from this investor who now advised that the market was worse than imagined and he was no longer interested in California real estate. He requested that the attorney keep $15,000 and wire the balance back to him. The attorney was suspicious and asked me what he should do.

I suggested that before wiring $200,000 back to the client he should verify the sender’s identity and the bank that issued the check. He disagreed with my suspicion and my suggestion. He said that the check was from outside the U.S. and when he deposited the money in his trust fund account the bank had placed a hold on the funds due to the origin and amount of the check. “But,” he continued, “the bank has released its hold, indicating that the check is valid.” He said he felt pressured to return the money to his potential client, and he did so.

About a year later he called to advise me that the check in the amount of $215,000 had just been returned by the bank as a counterfeit. He said the bank was holding him responsible for the entire amount and demanding to be repaid $215,000.

What happened to this attorney is not new. Scammers routinely contact law firms, claiming to be overseas business men and asking for the attorney’s legal help in collecting a debt from a U.S. Citizen, purchasing a business in the U.S. or investing in real estate or other misrepresentation. A retainer agreement is signed and a check payable to the law firm is sent. A short time later the attorney is told to keep the retainer fees and wire the remaining funds to a bank in China, Korea, Ireland or Canada, at which time the check is determined to be counterfeit.

There are many variations to this scheme. A scammer may represent himself as an attorney in another state requesting assistance for a client, or may target college students by sending them checks as part of an accounts receivable operation. Still others send counterfeit checks to pay for merchandise offered for sale by private individuals. They have been known to claim that the check was made out in error but it was sent to the victim anyway because, “I trust you”. The victim is told to cash the check take the money due him and wire the balance to a foreign bank.  They tell the victim an associate will come by shortly to pick up the merchandise. In each variation the scam is the same: send a large check to be deposited by the mope (this is what fraudsters call the victim), then have him wire part of the proceeds to the scammer. 

Law firms should be especially alert to this scheme. Use caution when engaging with prospective clients who conduct their business solely via e-mail, cell phones, and request non retrievable wire transfers. A law firm may want to consider incorporating a provision into their retainer agreement that allows the attorney to hold funds received from clients for a sufficient time period to verify the validity of the check.

To avoid these types of scams:

  • Carefully scrutinize unsolicited email/phone calls from unfamiliar individuals and entities requesting your services, particularly if the phone call originates outside the U.S.
  • Take steps to independently verify the information provided by your “Client”. Call Cadfael @ (763) 694-6086 for assistance.
  • Be suspicious of a solicitation that offers a relatively large fee or commission for little or no work or one that appears outside of your usual practice areas.
  • Educate your staff to be alert for the warning signs of such schemes. Cadfael offers training classes to help you and your staff know the warning signs of fraud.
  • Periodically review law enforcement websites for information on current fraud schemes.
  • If you have doubts concerning the validity of a check you receive, contact the institution on which the check is drawn to request confirmation.
  • When undertaking representation of an existing client, be cognizant of unusual facts or circumstances.

If you have been victimized in such a way or have recently received an e-mail that you believe was an attempted fraud, please contact Cadfael Investigative Group, Inc. immediately at (763) 694-6086.