These posts are filled with stories of unwary contractors and engineers getting trapped by contract pitfalls. In the interest of equal opportunity for all, we thought our readers might enjoy a story of a lawyer in Iowa who got hoodwinked out of significant amounts of money and suspended by his bar association to boot.
A few months ago, the Tennessee Bar Association sent out an email blast detailing a sophisticated online scheme that targeted local attorneys and law firms. The scheme works as follows: the target law firm receives a “referral from someone posing as an out-of-state attorney to enforce a simple contract disputed or collect a debt from a local corporation owed to a foreign company.” After the firm believed it has performed the necessary due diligence determining that the prospective client is, in fact, a real company, the client and the firm enter into a fee agreement. The law firm sends a demand letter to the debtor and receives a cashier’s check on behalf of the client. The lawyer is then instructed to wire the funds, less its fees and costs, to the client. The firm deposits the money into the firm’s trust account, and while waiting for the check to clear, 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 trust account is now out the proceeds.
This scheme worked so well as to snag one of Nashville’s largest law firms which lost $400,000 to scammers’ bank accounts, even after performing due diligence on their part and contacting a supposed “third party” to verify the funds. Money was wired by the firm to the foreign bank account before it had realized it had been a victim of fraud.
In another instance of this scam, an Iowa lawyer was contacted by email. The “client” asserted that he was due to inherit $18.8 million from a long-lost Nigerian cousin (spoiler alert). The lawyer believed his lucky client had to pay $177,660 in Nigerian inheritance taxes and additional cash for “anti-terrorism certificate” before receiving the money. He charged a 10% contingent fee, which would have amounted to $1.8 million if he was successful in helping his client obtain that Nigerian inheritance (a big fee – greed may have influenced this counselor’s judgment). He then solicited more than $200,000 in loans from five former and current clients, assuring them that they would receive as much as quadruple their investment when the inheritance was obtained. One of the clients provided $7,000 and three others provided $20,000-$25,000 each.
Then the hapless lawyer transferred all of the loan proceeds to the scammers in Nigeria. His client’s supposed Nigerian inheritance was predictably not forthcoming. During the course of performing this work, the lawyer spoke with people he believed to be lawyers, bankers, and even the President of Nigeria. His client is reported to have traveled to Spain in hopes of securing the inheritance (for an additional fee) said to be stashed in two suitcases in Madrid (no warning flags went up yet).
The Iowa Disciplinary Board concluded that the attorney appeared to have honestly believed and continued to believe “that one day a trunk full of … $100 bills is going to appear upon his office doorstep.” The Iowa Disciplinary Board said the lawyer should have investigated further. A cursory internet search of the words “anti-terrorism certificate” would have revealed the likely scam. The Court held that the lawyer failed to verify the identity of the people he spoke with and failed to confirm the authenticity of the documents he received, including a Will and Death Certificate. Finally, Court’s decided that the lawyer’s interest in obtaining the contingency was adverse to the interests of the clients who made the loans. As a result, the lawyer was suspended.