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Beware of the fraudulent cashier's check scheme.

Fraudsters continue to target attorney trust accounts with variations of the phony cashier's check scheme.

In a recent example, an attorney was contacted by a man who claimed to work for an oil and gas company in Texas. The man sought an attorney to provide various legal services related to the sale of his company's drilling equipment to a company in Florida. The attorney never met the purported client in person, as they communicated by email or phone only. Two weeks later, the "buyer" sent the attorney a cashier's check, drawn on a Canadian bank, for $400,000. The attorney deposited it into his trust account, and then received instructions to wire the funds to an inspection company. The attorney's bank, however, placed a hold on the deposit and dishonored it as uncollectible several days later. The "client" never contacted the attorney again.

In another case, an attorney was hired by someone who claimed she was pursuing a collections matter against her former husband. The "client" stated she resided in Hong Kong, and only communicated with the attorney by email. Shortly after getting involved, the purported former husband mailed the attorney a cashier's check, drawn on a Canadian bank, for $215,000, and the attorney deposited it into his trust account. The "client" then asked the attorney to wire the funds to her in Hong Kong immediately, explaining that her son had a medical emergency. The bank placed a hold on the deposit and soon dishonored it as a counterfeit item. The attorney never heard from the individual(s) claiming to be the ex-wife and ex-husband again.

Attorney trust accounts are attractive targets because they often hold substantial amounts of money. Perpetrators hope the attorney will assume the cashier's check will clear and disburse the funds before the bank dishonors the instrument. If the attorneys in these scenarios had disbursed any funds from the cashier's checks, they would have actually disbursed client funds and caused a shortage in their account.

Rule 5-1.1(j) of the Rules Regulating the Florida Bar permits attorneys to disburse against uncollected cashier's checks in the trust account. However, attorneys make such disbursements at their own risk. If the deposit fails, the attorney is responsible for funding the amount of any disbursements made against that deposit.

Attorneys should be aware of the following red flags in this type of scheme:

Cashier's checks drawn on foreign banks. Fraudsters use these because it takes banks longer to determine that foreign instruments are fake. They hope to persuade the account holder to disburse against the funds before the bank dishonors the check.

Request for funds to be wired to a foreign country. The purported client will claim a medical emergency or some other immediate need, hoping to receive the funds before the bank or the attorney discovers the scheme. Funds wired out of the country are more difficult to recover.

No face-to-face contact. The "client" and other parties to the scheme communicate only by email, phone, or text message. They claim to be out of town or very busy.

Email addresses designed to look legitimate. Scammers create email addresses that appear to be associated with actual companies, but are spelled a little differently. A search of the domain name at Whois (www.Whois. com) will reveal the date the domain was registered. If the "client" created an email address just before using it to hire an attorney, it's suspicious.

The client does not pay upfront. The client instructs the attorney to deduct his or her fee from the proceeds of the cashier's check. The fee may be substantial, for doing little more than writing a letter or drafting a contract.

Attorneys should use extreme caution if encountering these red flags. Often, a simple Google search of the details presented will reveal reports by other people targeted by the scheme. Insisting on accepting wire deposits only or asking to meet the client in person will also cause the perpetrators to abandon the scam. As always, remember that if the offer sounds too good to be true, it usually is.

By Matthew Herdeker

Orlando Branch Auditor, Florida Bar
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Author:Herdeker, Matthew
Publication:Florida Bar News
Date:Jan 15, 2018
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