You receive an email that offers to assist you in obtaining money that belongs to you, or offers to buy something from you for a price greater than you advertised it for (typically received when you put something for sale on Ebay or Craigslist or similar sites). The hook is that they are offering to pay YOU money. Once you receive the check and cash it, you just have to send them back a portion of it. The trick is that the check is a bad check, even though your bank may let you draw funds on it after three days. These out of state, or out of country bank checks take advantage of a banking loophole that most banks will allow you to draw on a check after three days, but the bank doesn't actually receive the funds on the check for up to ten (10) days. Once the check bounces, the bank will hold you responsible for the money (often just taking it out of your account).
THE TWIST FOR LAWYERS:
A Houston lawyer learned the hard way that lawyers are not immune to these scams. The scam works essentially the same way, but instead of offering unknown riches or an unexpectedly high price, the scammer offers the lawyer something much less unusual, a case. Of course, if the case sounds too good to be true it probably is, but as lawyers and business people we feel obligated to respond to every client inquiry.
I was inspired to write this because not long after our firm posted a website, we received a seemingly typical inquiry regarding a collections case. The redacted inquiry follows:
I have previously sent you an email; please confirm the receipt of this mail due to the urgency of this matter. If you are not in position to represent us at the moment kindly advice immediately. After a careful review, we decided to contact you to represent our company in North America. ---------------- Ltd is a manufacturing company in Asia.
We would require your legal representation for our North American delinquent Customers. We are of the opinion that a reputable attorney is required to represent us in North America in order for us to recover monies due to our organization by overseas customers, and as well follow up with these accounts. In order to achieve these objectives a good and reputable law firm like yours will be required to handle this service.
We understand that a proper Attorney Client agreement must be entered into by both parties.
This will be done immediately we receive your letter of acceptance.
I immediately become suspicious due to how vague the message was, and the fact that they had not previously sent me an email that I was aware of. When I Googled the company, however, they had a real website that looked legitimate on first glance. What seemed odd when I spent some time on their website was that I could not find a phone number to call.
WHY LAWYERS SHOULD BE EXTRA CAREFUL (CLIENT FUNDS)
As lawyers we have to be extra extra careful with the retainer's paid to us by our clients. We are required to keep them in a specifically designated Client Funds account (in Massachusetts called an IOLTA account) and any co-mingling of these funds with non-client funds can mean serious trouble with the Bar.
If a lawyer deposits a scammer's bad check in their Client Funds Account and then pays out on that check, that lawyer is essentially using other clients' money to pay the scammer, a BIG MISTAKE.
HOW DO YOU PROTECT YOURSELF
First and most importantly, never pay out on a check until after ten (10) days has passed, especially if you don't know the bank and/or it is not a local bank (if it is a major or local bank then you can call them directly, and at least confirm that the check is good, never call a number on the check because it could be a fake).
This can be difficult for a lawyer who has a "client" asking them to pay funds out, especially if, for example, the "client" was asking for a return of their retainer check because they wanted to hire another attorney. You can prevent having to deal with this type of misunderstanding by warning a client when they give you a check of the delay, and by notifying them of the ten (10) day waiting period in your Retainer Agreement.
Second, you can try to avoid scams by being diligent about screening clients. Don't let a client hire you by e-mail, talk to them on the phone and meet them in person. Even if it requires traveling to another country, if it's a potentially significant client shouldn't you meet them in person anyway, and if they have a business, visit their operation? Often just sending an adequately inquisitive reply email asking for more information can sniff out a scam. Here's a sample of our reply to the above inquiry:
First off, I would like to note that I have not previously received an email from you. Regardless I am happy to respond to your recent email, copied below.
I am licensed as an attorney in the Commonwealth of Massachusetts only and am therefore only able to practice in Massachusetts. If you have any collection suits from customers in Massachusetts then I would be able to handle those matters for you. Please provide me with a phone number or call our office at (508) 655-5980 to discuss these matters directly.
I would also like to note that your company, -------------------------- Ltd, is not registered with the Secretary of State of the Commonwealth of Massachusetts. Please be aware that if you perform any business activities with customers in the Commonwealth of Massachusetts then you should immediately register as a foreign corporation with the secretary of state. The forms and information relating to said registration are available on the Secretary of State's website at http://www.sec.state.ma.us/COR/coridx.htm .
Please notify us once you have completed this registration or if you have any questions regarding same.
In addition, as I stated above, I would only be able to work with your company if you had business dealings with customers in Massachusetts. Can you please provide me with more information about your potential collection suit(s) so that I can appropriately evaluate whether we are able to take the case on a contingency or hourly rate basis.
In addition, please provide us with the names and addresses of any business or individual customers that you are seeking to initiate action against. This information will be kept confidential but is necessary for us to ensure that we do not have any conflicts (i.e. we may have represented one of your customers in the past and would therefore be precluded from suing them).
Thank you for your attention to these matters and if you should have any questions or concerns. Looking forward to potentially working with you, I remain,
Very truly yours,
Justin L. Kelsey, Esq."
Of course, the reply I received made it clear this was a scam, because for starters they didn't answer any of my questions. For more information about electronic scams or to report a scam check out the FBI's Cyber Investigations website.