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December 15, 2009
Swindlers hit lawyers with sophisticated schemes

By Gary Blankenship
Senior Editor

The bad guys are getting better.

Con artists trying to rip off lawyers are turning to new schemes and using more sophisticated deceptions — including ways to make it more difficult to discover in time that a check sent to a lawyer is bogus.

Scammers are also shifting from a business-debt collection scenario to divorce and family law setups to lure lawyers.

Bill Gwaltney Tallahassee attorney Bill Gwaltney had a recent example, although he was savvy enough to pick up that it was a con.

Gwaltney said he was contacted via e-mail November 12 by a woman who claimed to be a Florida resident but was vacationing in England. The woman said she and her husband had agreed to a divorce and how their $20 to $30 million of assets would be split. (Gwaltney once practiced in Broward and Palm Beach counties, so the value of the assets didn’t seem out of line.)

The woman said a U.S. company owed the couple money, and would forward a check to Gwaltney, who could deposit the $28,700 check in his trust account. The “client” instructed that $2,500 was to be sent to her via Western Union, and $20,000 wire trans-ferred to her travel agent in Chicago, with the remainder being his retainer.

“These are all plausible things in a high-end situation,” Gwaltney said. “What these people actually did was send me a check from a legitimate company and a legitimate account.”

It also arrived via UPS when promised. The client continued to follow up with e-mails and eventually phone calls.

Gwaltney said he had seen other Internet scams, but none quite as polished as this one. His suspicions were raised, though, by a number of issues.

“Really the thing that tipped me off significantly was the reluctance to answer questions,” he said, including such things as where the divorce was to be filed and other information. He conceded, though, that many people have an understandable reluctance to put too much personal information in e-mails.

Gwaltney checked the address from which the check was mailed and found it was real, as was the “client’s” address in England. But the address of the travel agent didn’t check out.

The scheme collapsed when he contacted both Wachovia Bank, where the account in question was, and the company, located in New Jersey. This investigation verified that while the company and the account were real, the check wasn’t.

Furthermore, Gwaltney said the company was actively investigating several other cases where, in effect, its identity had been stolen as part of similar Internet scams. He said the company hadn’t lost any money but was concerned that scammers were using its name, and had spent $1 million in the past year running down various schemes.

Ironically, after Gwaltney had confirmed the scam, the “client” phoned to inquire about the money transfers. (Gwaltney has caller ID, but the phone number showed as private. From the quality of the call, he suspects the scammer was using a voice over an Internet protocol phone system, routed through a regular telephone, which makes the call all but untraceable.) He did not let on that he knew of the fraud, as the bank and company were still working to identify the scammers.

“If they had taken five minutes to do some fact-checking and put some facts in their e-mail, I would have never been suspicious,” Gwaltney said. “It’s something other Bar members need to know about. . . . If they’re doing it to me, they’re doing it to someone else.”

That opinion seems a safe bet. The Clallum County (Washington) Bar Association recently warned its members about a similar scam. Lawyers received an e-mail, supposedly from a woman claiming to be currently working in Japan and asking for help in collecting a $300,000 out-of-court divorce settlement. The association noted that one lawyer had apparently lost hundreds of thousands of dollars in the scams.

Earlier this year, the California Bar Journal reported that lawyers in that state had lost between $75,000 and $2 million in various scams, according to bankers. The Journal also reported on several interesting wrinkles in the scam.

One involves scammers sometimes pretending to be a real lawyer by sending out an e-mail using a real attorney’s name. This scam usually is done in the context of referring a “client” to the recipient attorney, typically for a debt collection matter. The Journal recounted how one woman, whose identity had been used in such a scam, was able to track down the sender and get a Web site used in the con taken down, but only after dozens of lawyers in other states had been sent e-mails using her name.

Another refinement involves cashier’s checks, apparently from well-known banks. Scammers obtain the special magnetic inks used on such checks and alter the nine-digit number identifying the bank. The check is printed under one bank’s name, but the number will identify another bank. The alteration holds up the processing of the check for several days.

That scam, in turn, can take advantage of the way some banks handle clearing checks. Banks typically know the time it takes such a check to clear and may advise a lawyer that the funds are “available” without specifically verifying that the check has or has not cleared and, in fact, while the check is being processed and hasn’t been identified as fraudulent because of the altered numbers.

Banks also have a habit of making funds from a check available for good customers before the checks have actually cleared. Also, a check clearing isn’t a one-step process. Often a check will clear the lawyer’s bank, but the bank on which it was drawn has additional time, and the fraud won’t be detected for several days. Experts advise lawyers to absolutely make sure that the check has cleared before funds are disbursed from a trust account.

The State Bar of Michigan, in warning its members about the scams, gave this advice:

“If you suspect you have encountered a similar situation, two steps that may be helpful are: a) independently verifying the names and contact information provided to you, making contact with appropriate persons to verify the representation; and b) not disbursing the deposited funds until the bank on which the cashier’s check is drawn clears the check; in some cases it is possible that could take up to a week or more, but if you keep a copy of the check, you could call the bank on which it is drawn to see if they will advise you when it will be or was paid.”

Lawyers who think they might be the target of a scam can also make a report to the Internet Crime Complaint Center at www.ic3.gov. The agency is a partnership between the Federal Bureau of Investigation, the National White Collar Crime Center, and the Bureau of Justice Assistance.

[Revised: 09-25-2014]