June 21, 2011

How Not to Get Stung by Promises of Easy Offshore Work

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July/August 2008 Issue | Volume 34 Number 5| Page 58


How Not to Get Stung by Promises of Easy Offshore Work

Everyone has heard the admonition “A fool and his money are soon parted,” as well as “If it sounds too good to be true, it probably is.” Oh, the temptation when it seems you’ve stumbled upon a great opportunity! But the lessons we learn from our own and others’ missteps—and the healthy skepticism developed in paying the price—can serve us well in life, particularly in our legal careers.

With that in mind, and especially because in our previous column we encouraged you to consider the possibility of working for foreign clients, we would like to provide you with some information that should help protect you from some of the scams that can be a part of that territory.


How Easy Money Beckons

By this time everyone should be familiar with what has commonly been dubbed the “Nigerian” scam. That’s the one in which you receive an e-mail from somebody who has been able to secure the funds of some deceased individual, defunct company or nonfunctioning government agency in a war-torn region. The message sender is more than willing to split this fortune with you if you will only help get the funds out of the country by allowing them to be wired into your bank account. Only the most greedy among us would be blinded to such a brazen attempt to obtain our bank account number.

But there is a more subtle version of this same scam that specifically targets members of the legal profession. And it has left more than one lawyer on the hook for the funds represented by a forged check that was deposited to the lawyer’s trust account. Here’s how it works.

John Q. Lawyer has a Web site that lets the world know that he has a general practice of law, which includes collection matters. One day he receives an e-mail in which a foreign individual or company seeks to retain him to handle a large and urgent collection matter. This party explains that it is owed a large sum of money by another individual or company—let’s say $300,000—and is willing to pay the lawyer as much as half of that sum if he will only write a collection letter to the debtor immediately. There are several variations of the story, but the common thread is that the “client” needs the money urgently and is fairly certain that the debtor will pay promptly once the lawyer sends a strongly worded collection letter on the party’s behalf.

The client’s situation elicits some sympathy, and the work required seems easy and well within the scope of the lawyer’s usual practice. What lawyer, particularly one who’s interested in building an international practice, wouldn’t be tempted to accept the matter under these circumstances? If things work out as the client has described, this will be some pretty easy money. If they don’t work out, all the lawyer stands to lose is the time and trouble of drafting and mailing the letter.

Sounds too good, yes? Well, here’s what happens next.


How the Hawks Close In

The lawyer writes the letter and, lo and behold, upon receiving it the debtor promptly contacts the lawyer and agrees to make payment. As the debtor explains, the failure to pay was a result of an errant office procedure that has now been corrected, and he or his company is profuse in apologizing to both the lawyer and the client. Shortly thereafter, the lawyer receives—by overnight delivery, no less—a check paying the sum demanded in full. It’s now that the “sting” takes place.

The check that the lawyer receives, though not drawn on a local bank, appears to be in perfect order. It has security features and in all respects appears to be valid. Sometimes it’s the check of the debtor company; other times it looks like a bank-issued certified or cashier’s check. Often lawyers will deposit these checks in their trust account without further inquiry. Even if the lawyer or a staffer contacts the out-of-town bank regarding the check—typically using either the phone number on the face of the check or information conveniently provided about the bank by the “debtor” in the cover letter—-everything seems fine. The phone is answered professionally and, after being “transferred” to the right department, the lawyer hears the “bank’s” assurance that the check is good, with more than sufficient funds to back it up.

With such assurances, the lawyer, who has never before earned such a large fee so quickly or with so little work, is usually easily persuaded to forward to the client the firm’s trust check for the client’s portion of the proceeds, without waiting for the check to clear the bank on which it’s drawn. After all, as you may recall, the client urgently needs the infusion of cash for whatever reason. Only days later, when the lawyer’s bank returns the check as being drawn on a bank that doesn’t exist, does the lawyer realize that he has been swindled out of $150,000—money in the trust account belonging to other clients—money that he must now repay under the applicable rules of professional conduct.


How to Safeguard Against the Cons

While we don’t want to discourage you from accepting, or even ethically seeking out, offshore clients, we also want to make sure you never fall victim to scams like the one just described. Fortunately, there are several things you can do to ensure that an exotic new client is really a client and not a con artist looking for an easy score.

▪ First, take steps to confirm the true existence of the client. Demand physical addresses, multiple phone numbers and identification from all parties whose matters you agree to take.

▪ Second, verify that information before getting involved in the matter. Many scammers go to great lengths to create a “real” presence for themselves, particularly as corporate identities. But a lack of information on the Internet—such as a Web site, listings in online phone directories or any mention of the party when you use a search engine such as Google News—may be a tip-off that the person or corporation is a sham. Use Google Earth to check out pictures of the streetscape at the address you are given. If it’s supposed to be an operating business but it looks more like a vacant lot or a bus terminal, you may need to do a little more digging.

▪ Third, don’t allow yourself to be rushed into representing anyone. If potential clients don’t have time for you to go through your usual verification process, let them go down the street to someone else.

▪ Fourth, make your staff aware of the possibility of fraud, create policies and procedures to ferret it out, and make sure that they are observed. Often staffers are the first to “smell a rat,” but they may be reluctant to approach you with their suspicions.

▪ Finally, always observe your bank’s requirements for allowing checks to clear as well as the requirements of your rules of professional conduct. Even if your rules allow you to disburse funds that you are “reasonably certain” will be collected, don’t do it. These rules are there to protect you and, while you want to do the best possible job to protect your clients’ interests, there is no ethical requirement whatsoever that you disregard your own interests when it comes to collecting and disbursing funds.

We’ll leave you with an old Jewish proverb we heard recently: “Experience is learning from your own mistakes, but true wisdom is learning from someone else’s.” So be wise when a client brings you a matter that’s just too good to be true.

About the Authors

David J. Bilinsky is a practice management consultant who focuses on enhancing law firm strategy, finance and technology initiatives, as well as Editor-in-Chief of Law Practice magazine. He blogs at ThoughtfulLaw.com.

Laura A. Calloway is Director of the Alabama State Bar’s Law Office Management Assistance Program.