Today’s New York Law Journal had a front page story, “E-Mail Scams That Target Smaller Shops on the Rise.”
The Law Journal article focused on an Albany firm which fell for the “collection case” con game. The firm deposited the phony check for $384,700, and it instructed its bank to wire $374,700 to the client’s bank once the check cleared. The law firm’s fee was $10,000. Its bank made the wire transfer 2 days after the check “cleared.” However, the bank sought to charge-back the entire amount later when it discovered that the initial check was bogus.
The law firm has since settled with its bank which sought a charge-back from its custome, the law firm. However, the law firm sought to have its malpractice insurer cover the law firm’s defense costs in the bank’s charge-back case. The court ruled that the cost of defense was not covered under the firm’s malpractice policy since there was no “attorney-client” relationship with between the law firm and its bank. This has been a big financial headache for this small Albany firm.
Again, we warn our colleagues in the bar that the internet is rife with these schemes. Get involved at great risk.
Lesson # 1: If it appears too good to be true, then it is.
Mark E. Seitelman, 4/20/10, www.seitelman.com.