CAVEAT CAUSIDICUS (Attorney Beware) of Check Scams!
New Client contacts you with urgent business. New Client gives you a large check for a retainer or to fund a transaction. Great, right? You deposit the check and soon thereafter New Client asks you to disburse funds. You wait for the check to clear, and you disburse the funds. So far so good.
That’s what real estate and immigration lawyer Oliver Zhou thought, when he received a PNC bank check for $297,500 from a new client in 2013. According to his complaint, Zhou deposited the check in his Citibank account, and Citibank gave Zhou a receipt stating that the funds were “Available today.” The next day, Zhou confirmed with Citibank that the funds were available, and as instructed by his new client, wired $287,450 to a third party. Days later the check bounced, a forgery. Suddenly Zhou was on the hook for nearly $300,000.
Zhou sued Citibank and PNC, alleging, inter alia, that the Citibank teller should have seen the incorrect routing number and rejected the deposit, and both banks knew that fake PNC checks were circulating, but failed to warn anyone of the danger.
According to the Southern District of New York, under these facts the banks are still not responsible. (Order dated May 17, 2016 in Law Offices of Oliver Zhou v. Citibank, PNC, 15 Civ 5266 (S.D.N.Y) (https://ecf.nysd.uscourts.gov/doc1/127118188095)
Serious ethical violations may also result. If the funds were disbursed from a multiple-client trust account, a bank may use another client’s funds to cover the disbursement.
IF YOU RECEIVE NEW CLIENTS BY EMAIL, LOOK OUT FOR THESE RED FLAGS:
The email sender is based abroad.
The email sender does not provide a referral source.
The initial email does not identify the law firm or recipient attorney by name, instead using a salutation such as "Dear barrister/solicitor/counselor."
The email uses awkward phrasing or poor grammar, suggesting that is was written by someone with poor English or was converted into English via a translation tool.
The email is sent to "undisclosed recipients," suggesting that it is directed to multiple recipients. (Alternatively, the attorney recipient may be blind copied on the email.)
The email requests assistance on a legal matter in an area of law the recipient attorney does not practice.
The email is vague in other respects, such as stating that the sender has a matter in the attorney's "jurisdiction," rather than specifying the jurisdiction itself.
The email sender suggests that for this particular matter the attorney accept a contingency fee arrangement, even though that might not be customary for the attorney's practice.
The email sender is quick to sign a retainer agreement, without negotiating over the attorney's fee.
The email sender assures the attorney that the matter will resolve quickly.
The counterparty, if there is one, will also likely respond quickly, settling the dispute or closing the deal with little or no negotiation.
The email sender insists that his funds must be wired to a foreign bank account as soon as the check has cleared. (The sender often claims that there is an emergency requiring the immediate release of the funds.)
The email sender or counterparty sends a supposed closing payment or settlement check within a few days. The check is typically a certified check or a cashier's check, often from a bank located outside of the attorney's jurisdiction.
(The Association of the Bar of the City of New York Committee on Professional Ethics, Formal Opinion 2015-3 (http://www.nycbar.org/ethics/ethics-opinions-local/2015opinions/2161-formal-opinion-2015-3-lawyers-who-fall-victim-to-internet-scams#_ftn2))
