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

34 thoughts on “Dewey, Cheatem & Howe: Law Firms Losing Tens of Millions In Nigerian Scams”

  1. TonyC,

    Just to ride on your wagon: Best to consult first the guys who write the terms of service for companies on the internet.
    The ones nobody reads before clicking “accept”.

  2. Raff,

    I wonder if you started depositing checks “without recourse” what the banks would do…… Most people don’t have a clue about the UCC and how you can actually tool a bank over….

  3. AY,
    I agree that there is an ethics problem for any attorney who allows client funds to be misused or lost. It is amazing, but not surprising, that the banks can never be wrong. Even when they are wrong.

  4. The lesson I hear is that the bank has redefined the word “cleared,” so now we will need another word to mean what “cleared” used to mean.

    Or as usual, a whole phrase like, “irrevocably cashed, cleared, transferred and completely available for 100% withdrawal in cash without restriction or any possibility of retraction, revision or rescission.”

  5. “I still fail to see that if a bank said that the check cleared, and paid out, how they are not responsible for the loss.”


    This is what mystifies me also, but given today’s bank situation I can’t say I’m surprised.

    As to the lawyers involved one of the first rules of the “con” is that it is aimed at those who let their greed overcome their reason. In almost all “cons” the person being conned is acting with something far less than expected integrity.

  6. Sadly my anecdotal experience is that lawyers (whom I hired) lived by the credo the least amount of work for the highest payday, the client be damned. Greedy, greedier, greediest. These lawyers should have done more to be assured the funds were real and available. That is supposed to a lawyer’s stock in trade, not just taking someone’s word for something but verifying it.

  7. Malisha,

    “One of the US Attorneys commented drily, “There’s too much mortgage fraud going on and nobody has the time to bust anybody any more.””

    Thanks for the inside views of America’s various cess pools.
    Are you a specialist in them. Can you just write “fraud by bank” into the Google search field and pick these up. Or did you have personal contact with these cause celebre?
    Yee gods, whatever the answer.

    Where is Jimmy Stewart when we need him?

    Sad to say, it’s good I’m not living there anymore. How you folks stand it is beyond me.
    I mean scams are great, who hasn’t ever had a lift and/or laugh at them?

    But when the feds are too overworked, that’s a bit rich. Sounds just like here, only we had about 30 emplyed with all econ crimes. And most of them could not pass company economics 101.

    (I was offered a job as branch manager at WFB in 1970, they were hiring joe blow and co then). So went back to waiting job in Sweden, so it goes.
    Just think how rich I could be now if I had taken that job. The rakeoff on other’s scams alone must be huge for a manager. As dumb as I am, somebody else would have gotten the money and I would have done the time. 🙂

  8. The fact that so many of our supposedly best critical thinkers (it should be a lawyer’s strongest suit, it seems to me) have fallen for this scam is mind blowing. It surely says something about our education system, and maybe law schools in particular. UFB

  9. THere appears to be something really wrong with Wells Fargo, though. I know a woman in California who was getting scammed out of her child support BY THE BANK. The father’s wife was (and is) a well known scam artist who owns a mortgage bank and who sells groups of mortgages to banks and there is always ONE in the group that is a deliberately default and SHE COLLECTS it. So she does business w/WFB quite a bit. So here was the scam: She and hubby would go to the bank. He’d draw a cashier’s check to the name of the MOTHER of his baby. THen he’d hand it over to wifey (NOT the mother of his baby) and she would cash the cashier’s check right there in the bank. She sometimes signed the mom’s name, sometimes didn’t sign anything, sometimes wrote something there, whatever she wanted to do that time around. Then they put copies of all these cashed checks in the file and put copies into court. The wife was also the dad’s employer so nobody could collect anything — also, the bank then put the mom through months of “investigation” before tacitly admitting the fraud and returning $400 to her out of about $12,000 of these checks. She’d have to go through another 4 months of struggle to get another couple of hundred — so she gave up. SHE PROVED THIS FRAUD and nothing was done to either the dad or the bank and of course, the wifey was not even a party to the action so…

    WFB also did three other illegal things to help these folks along in their frauds against elderly homeowners defaulting on big loans, people who had double-mortgaged their homes and never heard about the second mortgage, you NAME it and they always had a willing banking participant/co-defrauder. Weird as hell. Nobody ever touched any of the perps. One of the US Attorneys commented drily, “There’s too much mortgage fraud going on and nobody has the time to bust anybody any more.”

  10. Bukko – my fav is the Lads From Lagos,

    They torment some of the scammers (action they strongly advise others not to do many of these guys are dangerous people have been kidnapped and killed) getting them to send pictures of themselves and in one case even scammed them out of money! There are email logs to keep you laughing for hours.

    I wsa approached with the “Saudi Prince” variation on this game.
    “Hi, I’m a functionary for a Saudi Prince he wants to buy what you are selling & I am charged with making the purchase. We only deal in round numbers so I am going to send you a cheque for $10,000 please send the item plus the overage back to me”

    I laughed all the way to the cop shop – seems nobody(state or federal) there was interested in looking into it.

  11. Raff,

    I know an attorney that was assured that the “cashier’s check ” in the amount of 250,000.00 was valid…. The client waited 2 weeks before disbursing any funds only to be told later that not only was the check the best they have seen, but he owed the bank and additional 1,000.00 in NSF fees……

    Not only does the man have man have personal exposure to owing the money but there are ethical considerations of failure to adequately assure the integretry of other clients money, comingling personal money with trust funds but the embarrassment of explaining to clients and the attorney discipline board how it came to be……

    The banks are in a win, win situation……color me surprised…..

  12. A funny (but scatological and somewhat racist) website that scams back against Nigerian e-mail scammers is “419” “419” is the generic name for such frauds, based on the telephone country code for Nigeria. Myn attitude is that anyone who’s stupid enough to fall for such frauds in this day and age DESERVES to get burned. Especially if they’re in a law office. How else will they learn?

  13. Well my opinion is that regardless of how I think the more shit that can be piled on top of a lawyers grave the better, the truth is that this is a case where the lawyers should grab guns and cut those mother fucking banksters down sending them to a well deserved grave.

    If I was on the jury in such a case, I would use jury nullification to free the lawyers.

  14. This scams are called “Nigerian Scams” for historical reasons. However, it should not be assumed that all of them come from Nigeria, by a long shot. Betting on human stupidity was so successful that the practice became popular in many countries. It is very difficult to trace an email address, as most email providers protect the anonymity of their users.

    In short, it’s not that simple.

  15. I’m having a hard time feeling sorry for any lawyer who fell for this scam. It’s been around for years. I used to receive written letters sent to my snail mail long before I owned a computer offering me thousands, if not millions, if I would accept a huge check, deposit it and return a portion to the sender. The first time I received one I knew it sounded too good to be true and proceeded to check it out. It blows my mind that any lawyer would not know about Nigerian scams.

  16. I still fail to see that if a bank said that the check cleared, and paid out, how they are not responsible for the loss.

  17. raff, we just need to wait until they manage to scam one of the mob bosses. It will happen sooner or later and the problem will be taken care of.

  18. Wow! Have these guys been living in a cave th last ten years? I also agree that these con men should be able to be found. No matter where it comes from.

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