Don't Fall for the Trust Account Scam

Don't Fall for the Trust Account Scam

The idea of the Nigerian e-mail scam in which the rich Prince finds himself needing a few thousand dollars from you so that he can obtain his rightful kingdom and then reward you richly for your help has been around so long it qualifies as Internet lore.  

The scam involves some version of a very well-off individual with liquidity problems in need of assistance for which in turn they will pay you handsomely.  It’s the kind of scheme you can’t imagine somebody would fall for, but that e-mail wouldn’t exist and persist if someone somewhere didn’t fall victim. 

The lawyer version comes in various forms but commonly presents as a perspective client who reaches out seeking assistance in collecting a debt of some sort.  It includes an offer of a modest percentage fee, but given the dollars at play, it’s usually a very attractive fee. Once engaged, lo and behold, your efforts to attach and execute upon the anticipated collateral becomes unnecessary as either the reticent debtor reaches out to you on his own or promptly responds to your initial overture offering payment in full. You relay the great news to your would-be client who shares they are very pleased and impressed and looks forward to receiving their funds minus, of course, your fee. A fee which is probably several if not tens of thousands for very little to almost no work. As many of you reading this article will know, the received payment is rubbish. After you remit payment, the bank informs you the funds you received were fraudulent however the funds that were transmitted from your trust account were all too real. Too late. The money is gone with your ‘client.’

Lawyers handle large amounts of money in numerous transactions in a given week or month. This makes us attractive targets for scammers. Some version of this scenario has occurred every year I’ve been with ALPS including thrice so far in 2021. This is separate from the issues presented from hackers breaching system integrity and misdirecting funds through electronic deception. Mark Bassingthwaighte and others have more knowledge than I have writing articles with tips to help protect from those attacks. This is a simple reminder to be weary of the snake oil salesmen who uses only guile to abscond with your money. Losses such as these are typically not covered under a malpractice policy and the impacts can be devastating. 

I hate articles that point out problems and don’t even attempt to suggest solutions.  I have written some of those myself.  So what can be done to reduce the risk?  Something as simple as a Google search of the client could do it.  I’ve done them after the fact and up popped a laundry list of variations of the scam.  The scam employed didn’t even alter the client’s identity or the collateral of a construction crane. If only the attorney had done such a search. You can try reaching out to the issuing bank to see if the account is legitimate and has adequate funds to cover the payment. You can also hold the funds well past when the bank says they have cleared. I recently settled a matter with a plaintiff’s attorney that has ALPS as her carrier.  If our checks aren’t good, she has issues beyond fraudsters. Despite knowing ALPS and trusting ALPS with her coverage she sat on the funds for two weeks after the wire cleared. This is her practice with all wires or checks deposited into her firm trust account. A minor delay to make sure all parties, and the attorney, are protected. Easy money is hard to come by and if something seems too good to be true, chances are you should double down on your due diligence. 

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Michael Flaherty is a claims attorney for ALPS. He received his undergraduate degree from James Madison University and his law degree from George Mason School of Law. Mike began handling claims for ALPS in 2002 and works in the company’s Richmond, Virginia office. Prior to joining ALPS, Mike spent four years as staff counsel for a national labor union. Mike also spent a year as staff counsel to the Virginia General Assembly.