Dewey, Cheatem & Howe: Law Firms Losing Tens of Millions In Nigerian Scams

We have previously discussed how it is remarkable that people still fall for Nigerian Internet scams and fork over much of their life savings — allowing these criminals to thrive on the one percent of gullible people. Now it appears that these gullible parties include law firms which have forked over millions to Nigerian con men. The most common involves a con where a man asks a firm for help in a settlement negotiation or real estate deal. He offers the law firm a hefty cashier’s check to put in its escrow account. It is only after the firm pays out on part of the check that they discovered it is bogus. At least 600 attorneys and firms have fallen victim to the scam with losses exceeding $31 million.

One such firm is Minnesota-based law firm, Milavetz Gallop & Milavetz, says in a lawsuit which has sued Wells Fargo for alleging assuring them that the check was valid. The firm lost nearly $400,000.

Other firms have sued other banks for the same reason, though one such lawsuit by Greenberg Trager & Herbst was dismissed last year by the New York Court of Appeals. The court put the primary blame on the law firm for not doing due diligence on the identity and veracity of its clients. In that case, $197,750 was collected by Greenberg, Trager and Herbst from the client. After it was told by HSBC that the check had “cleared,” it took a $10,000 fee and wired the rest to the client. While I can see the point of the firm in accusing the bank of the responsibility, the Court found that the reliance on the notice of the check “clearing” was negligent. The notice, it held, is merely

an ambiguous remark that may have been intended to mean only that the amount of the check was available (as indeed it was) in GTH’s account. Reliance on this statement as assurance that final settlement had occurred was, under the circumstances here, unreasonable as a matter of law.

While I am surprised that the law firms do not do more to establish the identity of the client, many lawyers would take an assurance that a cashier’s check had cleared as sufficient confirmation. After all, that would suggest that the money had been transferred.

As I have stated before, I fail to understand why we cannot use our expanded abilities at computer forensics to arrest these con artists. I realize that Nigeria remains a hopelessly corrupt country, but it is dependent on Western aid and financial institutions.

In the meantime, one Texas attorney is being accused of being the con man in a multi-million dollar fraud.. Anthony Chiofalo is accused by his company of using his position as in-house general counsel to create a series of fake legal representation contracts replete with fake lawyers (with fake bios) and fake firm addresses. Tadano America Corp. says that he was able to siphon off millions that were sent to an account under Chiofalo’s control.

Source: Courthouse News