August 7, 2012 -- Lawyers scammed? Now there's a switch. In a variation of the classic "Nigerian" scam perpetrated against consumers, a pair of foreign nationals stand accused of having duped 70 U.S. lawyers and law firms out of $29 million--and of having tried to make off with another $100 million from 300 additional lawyer-victims.
The charges against the two are contained in an indictment filed in U.S. district court for the middle district of Pennsylvania by the U.S. Attorney's office.
Attorney John A. Abom of Carlisle, Pa., represents one of the two: Emmanuel Ekhator of Nigeria, now extradited to the U.S.. Abom tells ABC News he cannot comment on the case, "other than to say we will put forward our defense in court."
In the consumer version of the scam, the victim gets a letter or an email from Nigeria or Sierra Leone or somewhere else, telling him he can earn a generous fee if he will help a wealthy foreign national move millions of dollars around. All the victim has to do to set the wheels in motion is to remove a few small impediments. This will cost him, say, a few thousand dollars--chicken feed compared to the fee he is guaranteed to get. The victim sends the money, and he never sees it again.
The attorney variation works like this, according to the government's indictment:
A foreign fraudster contacts a U.S. law firm or attorney, requesting help collecting a debt or a judgment owed in the U.S. The lawyer's fee is to be a generous percentage of the amount collected. The lawyer takes the case, contacts the debtor, and receives payment. The lawyer deposits the debtor's check in a trust account. After deducting his fee, he remits the difference to the client, paying out of the firm's funds. Too late he discovers that the "debtor' is a co-conspirator of the "client," that the check was fake, and that the firm's funds are gone.
Minnesota law firm Milavetz, Gallop & Milavetz (MGM) fell victim to such a fraud three years ago. Founding partner Robert Milavetz says that when MGM got an email from a 40-year old Korean woman seeking to collect a $400,000 judgment owed her for an accident, the firm thought nothing of it: "We do this kind of thing every day," he says. "We help people get settlements. That's what lawyers do."
MGM, he says, agreed to represent her, and was later sent a settlement check, which the firm deposited in trust. MGM took a portion as its fee, and, after confirming with Wells Fargo that the check was legit, remitted the difference to the Korean client. "It's not a simple case or our getting scammed," says Milavetz. "We relied on a bank we'd done business with for 30 years." He has replaced the stolen money, he says, out of his own pocket. MGM is suing Wells Fargo for (among other things) negligence and breach of fiduciary duty.
Wells Fargo, in a statement issued in April, says MGM's allegations are without merit, that the bank intends to defend itself, and that it will prevail.
Asked if the Department of Justice has enlisted his help with its case against the alleged scamsters, Milavetz says no, that he has not been asked to testify. The DOJ, he says, has plenty of other scammed attorneys to choose from.
Rhode Island attorney William J. Delaney, former head of his state's bar association, says he knows of at least 20 local firms (and at least 100 solo practitioners) who've been scammed. Two of the victims, he says, sustained losses of more than six figures each. He routinely sends out email blasts to colleagues, warning them about being fooled.
Asked if there might not be members of the public amused at the prospect of lawyers being tricked, he allows as how there probably are. But, he says, such people fail to take into account the countless hours of pro-bono work that lawyers do for members of the military, for prisoners and for the indigent. Every dollar stolen from a lawyer, he says, reduces the amount of time he has to donate to the public good.