Monday, July 02, 2012

Scams Targeting Lawyers

I get quite a few emails asking for assistance to collect payments from someone in my “jurisdiction” from someone outside of B.C. who claims to be owed the money. The emails are not addressed to me personally, but rather to “Dear Counsel.” The emails give no indication as to how the sender got my name. These emails are of course scams, and I delete them.

Lawyers are targeted for scams like any one else. Most such scams are easy to spot, but some scams are cleverer than others, and lawyers do occasionally fall victim.

There are a number of different types of scams, but most involve a phony cheque or money order sent to the lawyer. The lawyer, believing the funds genuine, deposits the funds in a trust account, and then transfers funds to his or her “client,” before discovering that the cheque or money order was fraudulent.

The Law Society of British Columbia has published a number of examples on its website under Fraud Alerts. I will quote a few below.

Debt Collection Scam:

Although the specifics may change, a lawyer is contacted (usually by email) by a potential new client from a foreign jurisdiction to collect the balance of money owed by a former spouse in relation to settlement of a family law matter. The lawyer asks for information including court documents and says she will do a conflicts check. The lawyer then quickly receives a large cheque or bank draft in the name of the ex-spouse (either before or after issuing a demand for payment). The client contacts the lawyer again by email and says she understands that the lawyer received the money that she is owed and asks for her money. The financial instruments look real but are either well-made fakes or a cheque has been stolen and the signature forged.  If someone is pressuring you to pay out funds quickly, be cautious. 

Business Loan Scam:

To date, the lawyers in Ontario who have been targeted have been sole practitioners and lawyers in small firms. These new scams involve commercial loan transactions such as small business equipment or inventory purchases. The lawyer is retained to act for both the lender and borrower to obtain appropriate security for the loan.
The deals look legitimate, and typically the client is in a hurry and is new to the firm. Typically the lawyer receives and deposits the certified cheque that funds the transaction. He or she then draws certified cheques as the borrower has directed. Several days later the lawyer is advised that the certified cheque from the lender is bogus and there is a shortfall in his trust account.

Real Estate Scam:

A residential property is for sale by the registered owner and a realtor is involved. A Canadian lawyer is contacted by telephone to act for a purchaser from outside of Canada. The lawyer meets in person with an individual acting on the purchaser’s behalf (e.g. a relative with a power of attorney), and receives a certified cheque for the purchase amount. The lawyer deposits the cheque into trust. The relative advises the lawyer that the purchaser has passed away and the relative requests that lawyer to quickly return the funds (e.g. by wire transfer). The lawyer transfers the funds to the relative before learning that the certified cheque is fraudulent.

The email solicitations appear pretty transparent to me, but some of the frauds are more sophisticated. Here is a recent one as described on the Law Society website:

Three BC lawyers in three different locations were requested to act on separate BC real estate purchases for Kin Hang Cheung, a new client outside of Canada. Giving an air of credibility, the three properties were listed with different BC realtors, who each made the lawyer referrals. 
In each instance, Cheung provided a bad cheque for an amount much larger than required for deposit into the lawyer's trust account (e.g. $350,000 US). The scam appears to be that Cheung signs a contract of purchase and sale with a subject to inspection clause or that he has another avenue to back out of the deal. He will then ask for his deposit back, presumably by electronic transfer, less the lawyer's fees and disbursements. If the lawyer wires the funds from his or her pooled trust account, the lawyer's account will be short and perhaps overdrawn. 
Cheung appears to have also been targeting lawyers and realtors in the United States.

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