|Updated: 9/02/2010 12:38 pm
||Published: 9/02/2010 12:37 pm
In the last month, at least two Arkansas attorneys have been the victims of internet fraud by alleged “foreign” clients using bogus checks drawn on Canadian banks. One attorney now has a trust shortage of about $480,000; another about $145,000. A third attorney dodged potential disaster when his bank determined the check mailed to him was a fraud before the check was deposited in his trust account and any funds were wired out of the country to the alleged client.
The general pattern involved in these schemes involves an alleged foreign individual contacting an Arkansas attorney by email for representation in buying Arkansas real property, usually a residence. A large check from a Canadian bank is mailed to the attorney, who deposits it in his IOLTA (client) trust account and waits for it to “clear.” One of the Canadian checks purports to have been issued by a prominent Canadian law firm.
In the meantime, the foreign client notifies the attorney of a change in either business or family circumstances, such as an emergency, and asks the attorney to wire transfer a large part of the funds back to the client at a foreign bank, usually in the Far East. Upon determining from his bank that the check has “cleared” and the client’s funds are available, the attorney then has large wire transfers made to the foreign bank. Within a day or two, the attorney’s bank is notified by the Canadian bank that the check is bogus, and the amount of the check is charged back to the attorney’s trust account.
With good funds having disappeared overseas, the bank and attorney are left to try to determine where the ultimate loss will fall. In at least one instance, the attorney’s trust account was “frozen” by his bank, preventing him from accessing almost $40,000 in other client’s funds held in trust. One attorney had other and personal accounts at the same bank “frozen” by his bank.
These cases indicate that scam artists may be actively looking for unsuspecting attorneys to negotiate fraudulent checks through their IOLTA accounts, using the premise of being an out-of-town or even foreign resident needing a local attorney to represent them in a local transaction.
Anyone with questions about or information on this scam may contact Stark Ligon at the Arkansas Supreme Court’s Office of Professional Conduct, 501-376-0313 or 1-800-506-6631, or the FBI at 501-221-9100 in Little Rock.