By Mark D. Killian
Managing Editor and
Listen up. There are fraudsters trolling the Internet looking to separate lawyers from their — or their clients’ — money.
Clem Johnson, the auditor for the Bar’s lawyer regulation office in Tampa, said he is now investigating a case in which a Sarasota firm was bilked for more than a quarter of a million dollars when it deposited a bogus bank check into its trust account and wired the money overseas before it was determined the check was bad. (See It could happen to you: One lawyer's tale of fraud and his fight to clean up the mess.)
A variation of the old “Nigerian 4-1-9” scam, Johnson said the firm was retained through an unsolicited e-mail to represent a “Japanese woman on assignment in South Korea” trying to collect $648,450 owed by the woman’s “ex-husband.” As the firm prepared to go after the alleged deadbeat husband, the woman reported just two hours later that her “ex” was ready to pay up and a bank check for $289,500 drawn on Chase Manhattan arrived via UPS at the firm. The woman told the firm to take its fee and wire the rest to her.
“And they did the very next day,” Johnson said. “They kept $6,000, sent her $283,000, and it is gone. It’s gone.”
Johnson, a CPA, said this is the fourth instance in the past few years where he has investigated a “cashier’s check” scheme perpetrated against Florida lawyers, but the first time the firm ended up on the hook for a great deal of money. In the others, disaster was averted.
In one, a Tampa lawyer last year deposited a bad check into his trust account but waited sufficiently long enough to allow the bank upon which the check was drawn (Wachovia) to scrutinize and verify the non-authenticity of the item and thereby avoided disbursing any funds against the then recognized bogus check. A similar situation ensued when SunTrust determined $269,000 in cashier’s checks deposited to a Bradenton attorney’s trust account had been forged and were returned by Chase before the lawyer made any disbursements against them.
In yet another, an Englewood lawyer deposited two official-looking Citibank checks — one for $97,350 and another for $78,789.
“Both were soon found to have been stolen and/or counterfeit, but not until after they had been deposited into his trust account and then transferred by him to the ‘new client’s’ account at the Bank of Yokohama,” Johnson said. “They had been deposited to his account since they were for his new client, but had been made payable to his firm. Wachovia would not let him simply endorse them over to his client, and since it was not his money, and since they were official Citibank checks, he felt comfortable the appropriate thing to do would be to pass the funds through his trust account.”
Johnson said the lawyer handled the transactions in person at the bank branch and received assurances several times from Wachovia employees that the checks were good.
“The luck and good fortune in this situation came about when almost simultaneously, the Yokohama bank returned the funds saying they could not find the account into which they were to have been deposited, and Wachovia received notice the checks were fraudulent,” Johnson said.
In all these cases, Johnson said the lawyers involved told him they were convinced the transactions were legitimate, and “it was the most wonderful thing that has ever happened to them that a client would recognize the superiority of their firm and would hire them based on the information they had – yada, yada, yada – what a wonderful day it was, and then the sky fell in.”
In the current Sarasota case, Johnson said the lawyer did go to his bank and was told, “Oh, yeah, that is a nice check — Chase Manhattan. They are good for it. Let’s deposit that and take care of it.”
But it turned out not to be.
Official bank checks are among the exceptions to Bar Rule 5-1.1(j), and are allowed to be drawn upon prior to normal clearance times.
“Unfortunately, this guy took advantage of those laxities — if that’s what you want to call it — saying this is an official bank check,” Johnson said. “I can draw against it right away, and the bank allowed him to draw against it right away and sent the wire out.”
Johnson’s advice? Ignore unsolicited e-mail missives that sound too good to be true and never disburse any money until you are positive the checks have cleared.
“Give it a week, give it 10 days, or give it two weeks. What’s the big rush?” Johnson said.
That’s exactly what prevented Ft. Myers family practitioner Renee Binns from getting burned.
Binns didn’t think much of it when she got an e-mail in August, supposedly from a woman in South Korea wanting Binns to help collect an unpaid settlement from her divorce.
After all, Binns has clients with contacts in China, and she has out-of-state clients she’s never met face to face.
Binns sent a retainer agreement to the potential client and a letter to the “husband” relating the “wife’s” demands.
Then two weeks later, a check for $289,000 arrived from the “husband.” The cashier’s check arrived from Canada and was drawn on a Citibank branch in Delaware.
“Everything happened too quickly and too easily, before I had even documentation on who she was,” Binns said. “Nothing individually sent up red flags. It just moved too quickly and too smoothly. . . . I don’t get $300,000 checks.”
Binns had requested both the marriage settlement agreement and the final judgment, but had been provided only with the settlement. A retainer agreement, along with instructions that Binns should take her fee from the settlement, had been e-mailed only the day before the check arrived. The “client” also said to let her know when the check was cashed and she would send instructions on transferring the money.
That’s when Binns replied that no money would be transferred until she was certain the check had cleared. That also was the last she heard from the “client.”
When Binns went to her bank and asked them to look into the check while it was still clearing, the word came back that verified her suspicions: The check was counterfeit.
Interestingly, within hours of receiving the check, another e-mail solicitation came from another Asian source, she said. Binns ignored that one.
She had some words of caution for attorneys. One is that if they expect their e-mail spam filters to weed out scam solicitations, they might be surprised. Her filter failed to pick up the first e-mail, although it did intercept the second.
And the second thing is to use good sense.
“This could be anybody in a family law setting,” she said. “The only difference is the money doesn’t leave my trust account until the check clears.”
John D. Boykin of West Palm Beach represents Citibank in a pending case in Dade County involving a law firm that wired funds overseas from its trust account, based on a counterfeit cashier’s check, within one business day of deposit, “and, of course, the counterfeit cashier’s check for $173,015 then bounced.”
Boykin said the firm is now trying to pass the blame on to Citibank.
“The lesson . . . is never, ever, wire monies out of an account based on a cashier’s check,” Boykin said. “Remarkably, a lot of lawyers still do not know that cashier’s checks are no longer as good as cash because the Uniform Commercial Code (UCC) provisions on this changed about 10 years ago. Also, the UCC squarely places the risk on the depositor, not the bank.”
In the Sarasota case, the lawyer had $69,000 belonging to other clients in his trust account. After it was determined the bank check was a fake, the trust account was frozen.
“The bank, of course, is out $200,000 and they are going to be looking to him for that $200,000,” Johnson said. “They are going to be suing him. They are going to take whatever other funds he has on deposit in other accounts. They are going to be placing liens on every other asset they can find. So he is in trouble with the Bar for losing his clients’ $69,000. He is certainly going to be in big trouble with the bank, and I suspect the bank’s employees are going to be in big trouble, too. The brass is going to come down hard on the branch people who allowed this to go on.”
Historically, Johnson said, the Supreme Court of Florida has not looked kindly on attorneys who lose their clients’ money.
Johnson said a good rule of thumb is to make personal acquaintances with any client with whom you are going to be conducting substantial financial transactions and then give it time.
“The banking system will process these checks, and any problems with these items will come to light,” Johnson said. “If you try to do things right away, you could be left holding the bag for a substantial amount of money.”
The delete key is your friend
The scammers fishing expeditions often begin with mass e-mails sent to thousands of lawyers with opening lines, verbatim, such as:
• “My name is Jennifer Wong. I am contacting your firm in regards to a divorce settlement with my ex husband (Richard L. Wong) who resides in your jurisdiction. I am currently on assignment in Japan. We had an out of court agreement for him to pay $550,450.00 plus legal fees.”
• “After a careful review, we decided to contact you to represent our company in North America. Walex Electronic Ltd. with its head office in Hong Kong , We got your contact detail from our online search for attorney.”
• “My name is Jessica David. I am a contacting your firm in regards to a divorce settlement with my ex Husband (David Morgan) who resides in your jurisdiction. I am currently on assignment in Japan.”
• “I am an attorney licensed to practice in the state of Maine. I am writing on behalf of a client of mine who is requesting possible representation on a dispute resolution//mediation case in your state. I will not be able to represent my client Mr Xiaogang Zhang of Angang Steel Company Limited on this particular case because it is out of my legal jurisdiction.”
• “My name is Michel Mahillon, founder of Michel Mahillon Law Firm in Brussels Belgium. I got your contact details from your local attorney listing. I am sending this email as a mutual introduction (potential representation) of an old client. My old client Mr Toshikazu Nishimoto is the President of Tokyo Steel Manufacturing Co., Ltd.”
• “The United Metal Products has been manufacturing metal building products for over thirty years since its inception in the State of California, with a vast range of products and wide clientele base. We have an urgent case of over delayed payment in your county, of which we require an urgent legal service, your service. Please avail to us your firm’s availability for new client intake at this time, so that I may furnish you in details, the matter at hand, with the relevant contract[s].”