Internet scammers continue to target attorneys and financial institutions

Issue January 2014 By Jayne Tyrrell

It can come as an email, a letter, a fax or even a phone call. It appears to be a legitimate request for legal assistance from a prospective client who is seeking representation in a debt collection matter. The attorney and client negotiate the terms of the relationship, including a fee agreement. The client presents what appears to be a valid cashier's check, drawn on a reputable bank, supposedly a settlement check from the debtor. After the check is deposited in the attorney's client trust account, the client asks that the funds, less the attorney's fees, be wired to a foreign bank.

Then it all collapses. The cashier's check was fraudulent and doesn't clear. The IOLTA account has been looted, and the attorney can seldom recover the transferred funds.

Sometimes the scheme involves other facts. For example, it could be a request to seek collection on an unpaid property settlement from an ex-spouse pursuant to a divorce decree. The papers all look in order. But, in almost all cases, the attorney is being asked to transfer funds to a foreign bank before the deposited funds have been collected by the IOLTA account bank and become available to cover the transferred amount.

This can never happen to you if you insist on a critical safeguard: always wait for bank verification that the deposited funds have been collected from the check issuer's account before transferring any of the funds from your IOLTA account.

Sometimes there are other warning signs that may help you identify that you are being scammed:

Is the email addressed to you personally or is it a generic salutation? Generic salutations (like "Dear Attorney") are a good reason to not respond.

Has the prospective client used the name of a prominent attorney in the state as someone who recommended you? Check with the referring party to see if it is legitimate.

Is the request outside your area of expertise? Do not refer a solicitation to someone in your firm or with the proper expertise if you haven't checked it out. Don't enable the scam.

Does the request lack specifics? That may indicate that it was sent to multiple people?

Does the request contain odd legal terminology, spelling or grammatical errors?

Does the communication use round numbers such as $400,000 exactly? Round numbers can signal a scam.

Does the email detail a transaction where money is already owed and you are merely being asked to handle funds for payment? This is an important part of the scam.

There are affirmative practices that may chase a scammer away. Require a retainer for your anticipated legal services. A check to your office from the client is not necessarily proof that their activity is not fraudulent, but most scammers won't bother responding to your request.

Or request tax ID numbers and make representation contingent on their agreement that a separate, segregated attorney-client account be established for depositing only their funds.

According to the cyber experts, Internet scams are not going to stop anytime soon. Not only do the scammers need the money more in a down economy, but they know also that you, their target, may be more vulnerable to "earn money now" solicitations.

What can you do if you think you might be the target of a scam? Make a report immediately to the Internet Crime Complaint Center on the website. If money has been lost, notify local police or the FBI, as well as the Internet Crime Complaint Center.

For more information, please contact the IOLTA Committee at (617) 723-9093.

Jayne Tyrrell is the director of the Massachusetts Interest on Lawyers' Trust Accounts.