Oregon lawyers are reporting new, more aggressive twists to the ongoing check scam epidemic.  If you follow this blog, you know I have addressed this subject many times.  Here are the latest variations:

Phake Phone Calls

Taking a cue from overseas e-mail scammers, local thieves and ne’er-do-wells have decided they want to get in on the action.  These folks will call your office posing as potential clients or perhaps bar staff.  While the story may vary, the goal is always the same:  con the lawyer out of money.  The “client” or “opposing party” presents a counterfeit check or money order.  Once you deposit the funds, the “client” begins leaning on you to wire proceeds.  NEVER WIRE MONEY under these circumstances.  Follow the advice of the FTC!  Wiring money is like handing someone cash. 

How Can You Spot a Phake Client Caller?

Take the time to probe potential new clients.  Be wary of inconsistencies and the failure to provide specifics.  Consider verifying the client’s story, at least in part.  I know this involves precious time, but you may thank yourself later.  Consider this scam reported by a Texas lawyer:

“Several months ago, I had a gentleman call me about an accident he was in. He referred to me by a good friend who says this was a referral from a former client. He claimed to have been in an recent accident before going to pick up a relative from the airport. His niece was reported to have been seriously injured and he was her legal guardian and he had probate info with judges and court personnel info that was accurate. He wanted to meet with me at LBJ hospital and get signed up and requested I bring a camera for him so he could photograph his niece whose foot was broken at the hospital. He represented the car was hers and she had $5000 in PIP and the other vehicle was a commercial delivery truck (he told me it was a Dr. Pepper truck over the phone then changed it to another corporate company later). I agreed to meet him that afternoon at LBJ…. After a few minutes, I called the office to run his information through a database* to insure he was who he said he was and we received no hits.  He is a scammer that goes by the name “Johnny” and I have heard he has done this to several other firms….”  (*Databases like Accurint and Merlin Information Services help detect fraud and verify identities.)

Be Wary of Giving Personal Information Over the Phone to “Bar Staff”

No bar association I know of calls bar members to collect dues over the phone.  But several scammers have tried this tack:

• Caller poses as an investigator with the state bar and threatens to arrest his victim if she does not immediately pay $250 toward an overdue loan
• Caller telephones law firm saying she is “from the bar association” and “the attorney’s bar card is expiring or membership dues must be paid immediately.”

Remember, you can always take down information, hang up, then initiate your own call to the bar association (or any other business a suspicious caller purports to represent).

Phake Letters

The only difference between an e-mail scam and a scam by mail is the method used to contact the lawyer/potential fraud victim.  Watch out for this type of scenario:

A “client” out of the area writes a letter asking for help collecting a debt from an Oregon-based company.  The debtor company is real.  The “client” may even represent that he or she was referred to you by a legitimate referral source.  You bite and send out a retainer agreement sight unseen.  (Yes, there have been instances where Oregon lawyers agreed to represent clients they never met.)  Now the scam is afoot.  Soon you receive a check from the alleged debtor.  Your “client” instructs you to deposit the check and to wire the funds, minus all fees, to an overseas bank account. Weeks later you learn the check is counterfeit.

Phake Trust Accounts

Lawyers have long been worried about exposing or providing their IOLTA routing and bank account numbers to untrusted, unknown individuals.  Here is a scenario recently reported to us:

Lawyer meets with new “client” who presents a retainer check.  Lawyer waits for check to clear before beginning work on the “client’s” case, but soon after presentation, “client’s” check bounces.  Lawyer thinks: no harm, no foul since I did no work on the matter.

The following month, lawyer discovers fake checks written on his trust account and cashed out-of-state.  Lawyer surmises the scammer was his new “client” whose retainer check bounced the month before.

What Went Wrong

When the lawyer deposited the “client’s” retainer he used an endorsement stamp:

with the name of his bank and his IOLTA account number.  Using this information, the scammer created counterfeit checks.  (Check images from banks are easy to find on the Internet, as are bank routing numbers.  The scammer acquired the name of the bank and the lawyer’s account number from the endorsement stamp on the reverse side of his NSF check.)

What You Should Do Now

The lawyer who reported this scam recommends the following:

• Ditch your endorsement stamp if it contains your account number
• Order a new endorsement stamp which reads simply “DEPOSIT TO ACCOUNT OF PAYEE.”

If you endorse checks by hand, follow the same advice:

• Know your rights (or lack thereof).  The lawyer who fell victim to this scam succeeded in getting his bank to reverse the charges, but only because his account agreement was ambiguous.  Subsequently he received a change in terms informing him that the bank is not responsible for fraudulent check charges drawn on commercial accounts.  (However, fraudulent electronic charges are covered by federal law and can be objected to by commercial account holders.)
• Consider alternative payment methods.  The lawyer who was scammed no longer issues trust account checks to unknown or untrusted individuals or entities.  He has chosen to use electronic bank payments to send retainer refunds or settlement checks.  [Author’s note:  If you decide to issue a refund via electronic payment under the circumstances described, the proceeds must be drawn from the lawyer trust account.  Do not transfer funds belonging to a client from your trust account into the general account in order to issue a refund.  Funds belonging to a client must be held in trust and distributed from the trust account.  Similarly, settlement proceeds belong in the lawyer trust account.  Settlements generally arrive in the form of a check or draft made payable to lawyer and client.  Because the check or draft belongs in part to the client, the funds are properly deposited into trust account, then distributed.  Do not transfer the client’s share of the settlement from your trust account into your general account to issue a settlement distribution to the client.]If you are not comfortable using BillPay and are leery about issuing a check on your IOLTA account, purchase a cashier’s check payable to the client.  Simply write a check from the trust account payable to your bank for the net amount due the client.  Cover the cost of obtaining the cashier’s check with proceeds from your general account.  Because the check the client receives is drawn on the bank, not on your IOLTA account, no identifying information is provided.  (This may be a better alternative than BillPay since not all individuals or entities can receive electronic payments.  If the bank must issue a check through BillPay it likely will contain your IOLTA account number.)
• Be especially wary of cashier’s checks drawn on banks from outside the United States.  Some banks recommend that businesses reject such checks, and require instead that overseas clients or payors wire funds.

All Rights Reserved 2012 Beverly Michaelis