June 15, 2009

TO:       All Active South Carolina Bar Members

FROM:  Bob Wells, Executive Director

 

An internet scam targeting attorneys is prompting warnings from bar associations so we are putting SC Bar members on notice to exercise extra diligence when presented with circumstances similar to those noted below.

The scam works like this: a law firm receives a referral from someone posing as an out-of-state attorney to enforce a simple contract dispute or collect a debt from a local corporation owed to a foreign company. The firm, believing it is exercising due diligence, confirms that the prospective client is a real company, then enters into a fee agreement. It sends a demand letter, and later receives a cashier's check made payable to the law firm. The client directs the law firm to wire the money, after deducting its fees and costs. The law firm deposits the money in its client trust account, waits for the check to clear the local bank, and wires the money to the client. Things fall apart when the bank on which the check is drawn notifies everyone that the check is a counterfeit fraud - by which time it is too late to stop the wire transfer, and the law firm's client trust account is now out the proceeds, which the firm has to replace. The scam works because the law firm erroneously believes that the check is good when it clears the law firm's bank. That is not the case. The first clearance is only provisional. The bank on which the check is drawn has additional time under law to verify the check.

Beware of similar circumstances. Those engaged in these schemes will use the names of actual companies, client contacts, and referring attorneys in an effort to sell the scam.

 

To report a scam, contact your local FBI office.