Q. Representing a Korean supplier of silicone for electronics, I demanded $90,000 from a U.S. company that failed to pay for these materials and immediately received a $90,000 cashier's check. My client wants me to wire its net recovery from my trust account to its Canadian bank. Any need to wait?
A. If this is a legitimate transaction and the funds have actually cleared your trust account, you wouldn't need to wait.
But this deal smells "phishy."
Lawyers are prime targets of email scams from purportedly foreign companies seeking representation in phony collections cases.
Here's how it generally works:
1. The attorney receives an email from a foreign company seeking assistance in collecting payment from an American firm. Often, this email is addressed to an unspecified "attorney" and lacks any indication of how the sender found the lawyer;
2. The initial inquiry requests a retainer agreement, which the "client" signs and returns right away;
3. A short time later, the "client" informs the lawyer that the debtor has agreed to make a payment to avoid legal action and will be sending a check directly to the attorney;
4. Getting what looks like a valid cashier's check, the lawyer deposits these "funds" into the trust account;
5. Acknowledging the lawyer's one-third contingency fee, the "client" requests that the remainder be wired immediately to a foreign account; and
6. After disbursing these "proceeds," this fraudulent check is returned unpaid to the lawyer's bank. The happy "client" has disappeared with the wired funds and the lawyer has overdrawn the trust account.
Another variation of the scam involves offers to wire funds into your IOLTA account, luring you to divulge sensitive account information which the scammer will use to take funds instead.
If lawyers didn't fall for these tricks, the spammers would stop phishing. Rather than take the bait, you must read all emails with a critical eye.
Can you spot the scam in the following emails?
If you read carefully, you saw the following clues:
- While "silicone" is often used for breast implants, you wouldn't put this synthetic polymer into electronics or solar panels. Electronic chips are made from "silicon." It may seem like a small detail, but a legitimate silicon supplier wouldn't get the spelling wrong in its own company name. And while Korea does manufacture the polymer, it imports silicon from Japan and elsewhere. A little bit of Googling will tell you all you need to know to spot the scam;
- Kim Jung Oy sent his emails on Wednesday, April 1st at 2:08 p.m. and on Friday, April 3rd at 3:21 p.m. Eastern Time. Why is this Korean business executive sending emails at 3:08 a.m. and at 4:21 a.m. Korean Time?
- If Mr. Oy's company really is from Korea, why has he instructed you to wire funds to a Canadian bank?
- How often do you get great cases through unsolicited emails sent to "Undisclosed Recipients"? And why, of all the lawyers receiving this solicitation, did the client pick you?
- How often have you collected $90,000 immediately after sending an email demanding payment? If it's too good to be true, it's probably a scam.
Even if you miss these telltale signs, this scam won't work if you are properly managing your IOLTA account. Rather than wait for checks to clear, many banks will let you draw on an "available balance" which includes the deposit of checks that have yet to clear. But when it comes to trust accounts, you may only disburse funds that have actually been collected by the bank. So no matter how desperate this "client" may be to get its money, you would have caught the scam just in time if you had waited for the funds to clear.
Adding insult to injury, lawyers who have been caught in these phishing scams have been disciplined for IOLTA violations by overdrawing their accounts, by failing to safeguard client funds, and, if they really did take IOLTA funds as their "contingency fee," for commingling and misappropriation. If you manage your IOLTA account in accordance with the rules, you are less likely to get hooked.