"AvoidAClaim" Blog

The following is the text of a Fraud Alert sent by LAWPRO to Ontario lawyers on June 29, 2010. Due to the response we received from our previous alert on June 17 we felt it was important to make lawyers aware of new details we’ve learned about this scam.

Last week’s fraud warning e-blast on the collaborative family law agreement fraud prompted dozens of calls and emails to LAWPRO. At least 30 Ontario lawyers indicated they had been recently targeted or were in the middle of dealing with a matter involving this exact fraud. These calls and emails have helped us better understand how this fraud works, and how the fraudsters are taking steps to appear ever more convincing and legitimate.

With this follow-up e-blast, we are sharing this information to help you avoid being duped. It is critical that all lawyers be alert to this and similar bad cheque frauds. Lawyers in Ontario and several other provinces are being targeted on a daily basis.

The essence of these bad cheque frauds is an otherwise legitimate-looking client file that creates circumstances that trick you into quickly disbursing funds from your trust account. The following points will help you appreciate that you must be wary of some of the circumstances that might otherwise make a fraud appear to be a legitimate client matter:

• Don’t be fooled by e-mails personally addressed to you: Some of the initial contact messages we have seen are personalized with the lawyer’s first and last names appearing at the start of the body of the message. (See this post on the Avoid A Claim blog for an example of an initial contact message.)
• Don’t be fooled by a follow-up to the initial contact message: Many lawyers who ignored the initial contact message received an email follow-up message asking if they received the initial contact message. See below for an example of one of these follow-up messages.
• Don’t let you guard down because it is a referral from another Ontario lawyer: Two Ontario lawyers that don’t practice family law indicated that they forwarded the initial contact message to lawyers they knew practised family law.
• Don’t be fooled by a referral from a foreign lawyer: In two instances the initial email was drafted to appear that it was coming as a referral from a UK lawyer.
• Don’t be fooled by a British or European name: In earlier versions of this fraud the clients had an Asian name. In most of the more recent attempts the client has a British or European name.
• Don’t be fooled by legitimate looking identification: The fraudsters are providing identification without hesitation. We have seen colour scans of the identification pages of a Chinese passport and US driver’s licences from various states including Michigan, Illinois, and Alabama.
• Don’t be fooled by a “collaborative family law agreement”: We have seen seven different versions of the same collaborative agreement. See one version of it here. The only differences are the amounts owing and the names of the client, the ex-spouse and their respective lawyers.
• Don’t be fooled by detailed background information: We have encouraged lawyers to ask for further background information when there are suspicions as to whether the matter is a fraud. This remains one of the best ways to determine if the matter is a legitimate one. However, the information provided by the client must be carefully reviewed for reasonableness and consistency as the replies to requests for further information are becoming more detailed and convincing. They now include information that ties the client to Ontario. See an example of a very detailed reply below.
• Don’t be fooled by phone calls that appear to be from local numbers: A few lawyers have received phone calls from these fraudsters which caller-ID indicated were local calls (i.e. from the same area code). Note that it is very easy to fake or “spoof” an Ontario area code and phone number with calling cards or VOIP phones.
• Don’t be fooled by local addresses and phone numbers: In some cases the fraudsters are providing background details that have a local nature; for example, an address where the couple lived, local home or work address for ex-spouse.

Trust your instincts

No doubt, some of you will say that all or most of the above points match many of your legitimate files. These bad cheque frauds are becoming far more sophisticated and spotting them is becoming much more difficult. In most cases there won’t be a single obvious factor that clearly indicates the matter is a fraud. It will be a number of smaller things that just don’t quite add up.

Trust your instincts. If things don’t add up, ask more questions and dig deeper. Get the client on the phone and ask them to provide further background and explanation for anything that is inconsistent or that doesn’t make sense. Have them confirm details in the information they already provided to you and be especially wary if the client is hesitant or unclear on background facts. Don’t be naïve. In reply to our blast last week one lawyer said, “I’m relieved to hear you say that because I’m feeling sheepish for not having recognized that this was a scam from the get-go.”

If you have suspicions, carefully check and verify any background details provided to you. Ask for documentation from the client that will confirm details of any information provided to you. You can do a reverse lookup of phone numbers provided to you or that appear on call display; Google any addresses provided to you. Get the names of lawyers that previously acted for the client or ex-spouse, check online databases to verify they are real lawyers and ask for permission to contact them.

Ultimately, getting the retainer funds or payments from the ex-spouse irrevocably wired to your bank account is the only way to really protect yourself from this type of fraud. If these wires are coming from another Canadian financial institution they should come via the Large Value Transaction System (“LVTS”). If they are coming from a financial entity outside of Canada, the client or ex-spouse’s bank should make arrangements with your bank to wire the funds to your account.

As an alternative to getting funds wired into your account, tell your client that your firm’s policy is that all funds deposited by cheque or bank draft will be held for 30 days or until your firm is able to get confirmation that the funds have cleared.

Finally, you should terminate the retainer if you remain suspicious that the matter is a fraud.

Beware of losses due to exchange rate fluctuations

Three lawyers indicated to us that their banks asked them to make up losses due to exchange rate fluctuations on US dollar cashier’s cheques they deposited that turned out to be counterfeit. These losses ranged from $3000-$5000. In one case the lawyer was successful in having the bank reverse these charges after he elevated a complaint above the branch level indicating that he had been told at the time of deposit that the instrument was valid.

Example of a follow-up message

We have seen several cases where lawyers reported that they received a second message that was a follow-up to the initial email contact. This is the text from one of those follow-up messages:

Dear Counsel

Regards
[Client first and last name]

Example of a very detailed reply to a request for further information

As stated above, the fraudsters are now providing more detailed background information. This is a reply that one lawyer received when they asked for more information:

Dear Counsel,

[Client first and last name].

Cross posted on Slaw.ca

The following is the text of a Fraud Alert sent by LAWPRO to Ontario Lawyers today June 17, 2010. Lawyers in Saskatchewan were the targets of this same fraud in May, and I expect lawyers in other provinces are being targeted as well.

Several lawyers have contacted LAWPRO over the last few weeks to advise us they have been the targets of a spousal support collection scam involving a collaborative family law agreement. One Ontario lawyer was successfully duped by this fraud.

We decided to send a warning to the profession as this fraud appears to be targeting many lawyers and the people behind it are very persistent and convincing.

The email communications from these fraudsters have reasonably good spelling and grammar in them. The background details provided appear to be legitimate, including information about residing in Ontario in the past, the ex-husband’s current and past employment etc. The fraudster will provide what appears to be legitimate identification (e.g. a U.S. state driver’s licence) and say he/she is residing overseas at present. The fraudster will readily sign and return a retainer agreement and promise to pay for required work at regular hourly rates. Note, on these frauds there is no promise of a huge contingency – one of the usual red flags of a fraud.

It appears likely that the same people are behind these fraud attempts as the text of the email messages and the collaborative family law agreement sent to each lawyer are more or less identical, save and except for the amount of arrears and the names of the husband, wife and their respective lawyers.

Typical fraudulent email

In several cases, the text of the initial email was as follows:

Subject: Request for Legal Representation.

Body:
Attn: [lawyer’s first and last name]

Hi Counsel,

Yours truly
Wife’s first and last name

Fraudsters follow through
Sending a reply to the initial email triggers a quick reply from the fraudster that includes more background on the couple’s relationship and a copy of a collaborative family law agreement. Most of the terms of the agreement look reasonable and it is drafted to appear that two lawyers assisted in its preparation. A copy of one of those agreements is available here.

Within a day or two of getting the agreement there is another message indicating the ex-husband is willing to make payment, and one or more cheques arrive shortly thereafter. The lawyer is then pressed to wire the monies offshore.

Please proceed with caution if you receive an email message asking you to assist with the collection of spousal support arrears.

Many lawyers are not replying or acknowledging these messages when they are clearly attempted frauds. In cases where it is unclear, lawyers are replying with requests for identification and more details about the client’s current whereabouts and past circumstances of the relationship. They are also explicitly indicating that they will not proceed with work unless they have a signed retainer agreement and have received payment of a retainer.

The information and identification provided by the fraudster can look legitimate, but there likely will be minor inconsistencies or things that don’t add up. The fraudsters’ reply will include a promise to pay the requested retainer. However, when the payment from the ex-husband shows up, usually a day or two later, the fraudster then says take the retainer from money the husband sent.

If there are things that don’t add up, ask further questions and have the client explain any inconsistencies. Do the terms of the agreement look proper and complete? If the agreement provided to you has the names of lawyers in it, check whether they are called to the bar in the appropriate jurisdiction. This recent post on the AvoidAClaim blog has links to provincial, territorial and U.S. state lawyer licensing databases.

If you receive what appears to be a certified cheque or bank draft, contact the issuing bank to confirm that they in fact issued the cheque before you deposit it in your trust account. Even if the issuing bank confirms the cheque is legitimate, do not immediately release or wire funds to the client. Cheques sent to a U.S bank can take a week and sometimes significantly longer to clear.

If you have been targeted by one of these frauds please advise Dan Pinnington (dan.pinnington@lawpro.ca) or call 416-598-5863.

Be on guard as holiday approaches
In the past fraudsters have been particularly active in the days before long weekends and other holidays. Presumably this is to take advantage of circumstances when lawyers and law firms staff will be busy or more distracted with other things. Please be cautious as in light of any interruptions to banking services that may occur due to the G20 Summit and as we approach the Canada Day Holiday.

Please see further information in the Keep your guard up! More sophisticated cheque scams targeting lawyers article from the most recent issue of LAWPRO Magazine. Further fraud prevention information and resources are available on the practicePRO Fraud page (www.practicepro.ca/fraud) , including the Fraud Fact Sheet, a handy reference for lawyers and law firm staff that describes the common frauds and the red flags that can help identify them.

Cross posted on Slaw.ca

Taran Virtual Associates has updated its SABS chart for the changes which take effect September 1, 2010. This handy practice tool lists the important time periods relevant to the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996. Lawyers and law clerks can refer to this chart to determine at a glance how much time the regulations provide for the next step in their accident benefits case. The chart is available at http://www.virtualassociates.ca/links/home4.html

Thanks to Kerri at the CBA for bring this May 2010 Law Society of Saskatchewan fraud alert to my attention.

It provides details (including copies of the correspondence and the collaborative family law agreement) about an attempted spousal support collection fraud that targeted a Saskatchewan lawyer in May. It really jumped out at me because the collaborative family law agreement provided by the fraudster was almost exactly identical to one used for a fraud attempt against an Ontario lawyer in April this year. The fraudster, who claimed to be Karen L Clarke in Saskatchewan, used a different name in Ontario – Tanaka Sadasuke. The name of the ex-husbands and amount of support to be paid were different as well. Otherwise, everything else in the two agreements was identical, including the date it was signed and names of the two lawyers allegedly involved in negotiating the agreement – Jennifer Harper and Andrew Rosenberg.

In both cases, a reply to the fraudster’s initial email prompted further communications with the fraudster, and in the Saskatchewan fraud, a counterfeit cheque from the ex-husband. You can see the correspondence, the agreement and the bogus cheque from the Saskatchewan fraud in the Law Society of Saskatchewan bulletin.

Be alert and vigilant –fraudsters continue to target family law lawyers.

Cross posted at Slaw.ca

Prudent lawyers should be considering what impact the G20 Summit may have on their ability to access banks, the courts and other downtown Toronto services in the week leading up to and during the Summit – June 21-27.

I have heard from a few sources that several of the banks will be closing their downtown Toronto core branches during part of the week of the G20 Summit. This is unfortunate timing as this is one of the busiest times of the year for real estate transactions. If you are handling real estate transactions or other matters involving banks in the downtown core, you would be well advised to call the bank now to determine if you need to make alternate arrangements, particularly for Thursday and Friday, June 24 and 25. It is our understanding that the Toronto Land Registry Office will be open during regular business hours.

While there has been no official communications from the courts, litigators would be well advised to consider what alternative arrangements can be made with respect to matters that are scheduled to be before the courts during the week leading up to the G20 summit. They should also consider whether pleadings and other court documents that must be filed during the same week can be filed early.

From an eblast sent by the Law Society this morning, the Law Society offices and the Great Library will be closed on Friday June 25. Online services from the Great Library will continue to be available.

Like other businesses located in downtown Toronto, LawPRO expects to be affected by traffic restrictions and other preparations for the G20 Summit from June 21 to 27. We are planning to be fully operational from Monday, June 21 to Thursday, June 24, but suggest that you avoid any visits to our offices that week. If you have cheques or forms to drop off, or need to meet with a member of our staff, please do so by June 18 or after June 28.

Note that on June 25 our reception service will be limited. We will have only skeleton staff at 250 Yonge. However, the TitlePLUS department will be operational on June 25, from 8:30 a.m. to 7:00 p.m.

We expect all electronic resources, such as our websites, to be fully operational.

Updates on LAWPRO operations during the Summit will be posted on our website www.lawpro.ca

Sharon Davis at Hull & Hull has a new blog entry reminding lawyers that while they often remind clients of the importance of good estate succession planning, they should also give thought to succession planning for their own practices.

Will your clients be looked after in the event of your sudden death or incapacity? You’ll find some good practical tips here, including: making arrangements in advance with another lawyer, having your critical information stored in an easily accessible (to the assisting lawyer, at least) location, and having appropriate Powers of Attorney in place. You’ll also find links to guidelines and toolkits offered by the Law Societies in Ontario and British Columbia as well as from the Solo & Small Firm Conference held in Toronto recently (this material can be purchased online).

Cross posted at Slaw.ca

This post comes from the Practice Tip column in the most recent issue of LAWPRO Magazine (which will hit the desks of Ontario lawyers in a few weeks). A hat tip to LAWPRO claims counsel Pauline Sheps for suggesting this great tip – unfortunately it is a malpractice claim scenario she sees all too often.

Many wills include one or more bequests to charitable or religious institutions. In spite of the testator’s good intentions, these bequests often lead to claims when there is confusion over which institution was to receive the bequest. These mistakes often come to light only when the estate is being distributed – and they can lead to costly and time-consuming litigation when charities fight over the bequest.

Many of the claims reported in this area could be avoided if lawyers took steps to confirm that the information given by the testator is correct when the will is being drafted.

Often testators will give the lawyer a name for the charity that is outright wrong or doesn’t include an indication of its corporate status. For example, the client says “Niagara Cat Shelter” but the real name is “Niagara Falls Cat Shelter Inc.”

In other situations there is ambiguity about which institution was to receive the bequest. For example, a legacy to “the ALS Society” is unclear. Does the testator intend that the bequest go to the provincial association or the national body?

Similarly, a bequest to St. John’s Church can be quite confusing if there is more than one church with the same name in the region. There can also be confusion if the church or charity no longer exists. For this reason, including an address and phone number in the will can be helpful.

It is imperative that lawyers taking instructions for a will ensure that the beneficiary of the bequest exists and that the beneficiary is referred to by its full legal name in the will. Go beyond the name of the charity and ask for an address and phone number. Cross-check the information provided to make sure the charity the testator intends the bequest to go to is properly named. There are a multitude of resources available to confirm the names and addresses of charitable entities. Many charities have websites, and most are referenced in various government and non-government directories.

Taking the time to check the proper name of an entity and confirming that information with the testator can avoid a potential negligence claim in the future.

A copy of this Practice Tip column is available here.

Cross posted on Slaw.ca