Scamsters target lawyers
July 8, 2005
Sole practitioners, small firm lawyers and lawyers in smaller communities may be most at risk
The Law Society continues to hear reports of persons posing as new clients who seek to retain lawyers in circumstances that raise the "red flags" of a potentially fraudulent enterprise. These flags may include:
- Minimal or no legal work is involved and significant amounts of money must be held in trust. Often the money is from private investors or from third parties who are paying fees to the lawyer's client for negotiating a financial agreement on their behalf.
- The client's business involves negotiating loans, letters of credit or promissory notes with a foreign financial institution or a "prime bank" that is supposedly affiliated with a reputable international organization, such as the International Chamber of Commerce of the International Monetary Fund.
- The client makes enquiries about the lawyer's insurance coverage.
- The client offers a significant amount of money in advance to induce the lawyer to accept the retainer.
Other common warning signs of a fraudulent enterprise include deals that promise unrealistically high profits, require little in writing, contain unnecessary confidentiality requirements, are overly complex or involve a pyramid scheme. In most cases, the clients approach sole practitioners, small firms or lawyers in smaller communities.
Red flags such as these are generally found in situations where the client is seeking to use the lawyer's trust account to add credibility to a fraudulent enterprise. The Law Society reminds lawyers that Chapter 4, Rule 6 of the Professional Conduct Handbook states that a lawyer must not engage in any activity the lawyer knows or ought to know assists in or encourages any dishonesty, crime or fraud (see: "Rules require lawyers to guard against fraud" in the April-May 2005 Benchers' Bulletin).
For more information on fraudulent schemes and some of the questions a lawyer should ask to avoid becoming the tool or dupe of a dishonest client, see: "When scamsters target lawyers" in the May-June 2003 Benchers' Bulletin.
This notice is intended to alert lawyers to common elements of scams and fraudulent schemes in which they may be targeted to lend assistance.