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Email scams and New Zealand lawyers

by Geoff Adlam 

"Hello

"My company is currently looking for a Law Firm that can assist us with the issue of an overdue loan of $467,000 that I had provided to a former business partner of mine Robert Otermat. If you or your firm can handle this matter, get back to me at your earliest convenience so that I can provide detailed information and related documents on this issue.
Regards,
Kenneth Dean
128 APPLETON STREET,
CHEETAHAM HILL,MANCHESTER
M8 0BT
Tel: +44 7459145807

Email:kennethdean60@gmail.com" 

If you’ve received the above email recently, you’ve received a classic scam which targets lawyers. You’re not alone. Lawyers in Canada and the United States also received the same email.

Email scams aimed at lawyers are common. They begin with an unsolicited email from an apparently genuine new client who has a relatively simple legal matter to clear up. They could end with the lawyer losing a substantial amount of money.

Information on actual losses made by New Zealand lawyers in email scams is unavailable. Perhaps understandably, lawyers who are defrauded are extremely reluctant to publicise the matter. It is clear, however, that New Zealand lawyers and law firms have been caught by email scams. The Law Society’s inspectorate was contacted in 2010 by a number of firms which had transferred (and therefore lost) money in a “matrimonial settlement” scam.

The Department of Internal Affairs’ Electronic Messaging Compliance Unit says 2,670 separate email scams had been reported to it between January and September 2013. This was up on the 1,897 email scams reported in the same time in 2012 and 1,302 reported in the same time in 2011. The increase may partially be due to a greater interest in reporting scams.

How does it work?

The scammers typically use one of about half a dozen well-established scam scripts. While the “client” names used change, the fact scenarios – including the amounts of money “owed” – are usually unaltered.

The scam begins with a short email addressed to a lawyer, asking for assistance to recover a debt. The potential client is always overseas and probably travelling (and therefore hard to get hold of). If the lawyer responds, a much longer email will be received, providing details of what appears to be a relatively simple debt recovery. Attachments may include loan documents, passport pages or a copy of a driver’s licence.

Almost all of the scams sighted in New Zealand locate the “client” somewhere in Asia or in England. The person who owes the money is, however, “in your jurisdiction”. The sum of money involved is always relatively large – like the $467,000 which Robert Otermat owes to his former business partner. The lawyer’s potential fee will, of course, be generous.

After exchange of a couple of emails, the debtor will pop up, acknowledging their debt, apologising, and promising to pay. About this time, the “client” will often suddenly develop a need for quick payment: money required for an operation is a common excuse. The next step is the arrival of a cheque. This is where the scam can be quite sophisticated.

As stated in the indictment in United States of America v Ekhator and Mathurin: “The information on the check (sic) was stolen from legitimate companies, with the amount, payee name, and phone number altered. If a victim law firm contacts the fraudulent phone number printed on the check, a co-conspirator answers the call and fraudulently verifies the amount of the check and its validity.”

The cheque is deposited into the firm trust account. The lawyer retains their fee and then transfers the “client’s” funds into a foreign bank account – known to the scammers as an “aza”. Once the money has gone into this account it is withdrawn quickly and then the account is closed.

The cheque in the lawyer’s trust account is eventually discovered to be a forgery, but it is then too late. Of course, the lawyer’s fee also evaporates along with the cheque.

Who are these people?

Scams from Nigeria are almost a clich√©. However, it appears that many of the lawyer scammers are actually from Nigeria. In 2011 the United States successfully extradited Nigerian Emmanuel Ekhator from Nigeria along with his Canadian-resident accomplice Yvette Mathurin. Ekhator and Mathurin and their (unknown) assistants had apparently obtained over US$32 million from 80 American lawyer victims and attempted to steal another $100 million from 300 lawyers. This indicates a “success rate” of around 25%.

It is clear that the scams are well co-ordinated operations involving a number of thieves who specialise in particular actions. The initial contact with a lawyer comes from “catchers” who also follow up responses as required. “Runners” are responsible for co-ordinating the bank accounts and providing information to the counterfeiters who handle the cheque forgery.

The group involved in the Ekhator scams was estimated to contain up to 40 individuals. Several of them are in custody and awaiting extradition to the United States. Ekhator eventually pleaded guilty. In September 2013 he was sentenced to eight years in prison and ordered to pay over $11 million in restitution. The fact that the same scams continue unabated shows that there are a lot of scammers still out there.

Is it a scam?

While the (sometimes appallingly) bad English is an indicator, that doesn’t necessarily mean that every ungrammatical or strangely-worded email received is a scam. The Law Society has been sent four suspected scam emails in 2013 which have proved to be genuine.

Because the scammers have a relatively narrow range of scam “precedents”, it is possible to classify the most prevalent:

Overdue loan: This is probably the most common. The email at the start of this article is a good example.

House purchase in New Zealand: Typically the would-be buyer is resident in England and plans to move to New Zealand.

Divorce Settlement: The couple have divorced amicably and have an agreement under which the husband will pay a substantial settlement. The problem is he seems to have gone AWOL. He shows up pretty quickly, however, and agrees to pay.

Collaborative Law Agreement: Fake collaborative law agreements are used to document a debt – usually between a now-separated married couple.

Breach of lease: A company has leased equipment to a customer “in your country” who needs to pay for it.

All the scams are littered with tell-tale catch phrases. “In your jurisdiction”, “Dear Counsel”, “at your earliest convenience”, “I am on assignment in”, “top of the day to you” and “a breach of loan agreement case” all shout “Scam!”

Apart from the house-buying scam which uses information on real New Zealand houses, scammers tend to avoid use of “New Zealand”.

Essentially, if you are sent an email by someone outside New Zealand with whom you have never had any connection (no local scams have been detected), you should be extremely wary.

Requests for identification may not help. The scammers appear to have a pool of stolen documents and identities which they use to “prove” their bona fides. One very recent scam uses the name and address of a real woman living in Kentucky. She is not involved in any way. Another scam uses the name and website of a large Japanese printing company – again totally innocent. Other scams use forged passport pages and legal documents and agreements.

Scam-detecting resources

Law Society: The Law Society provides information on scams aimed at New Zealand lawyers.

Ministry of Consumer Affairs: The Scamwatch website contains a lot of information on all sorts of scams which have been reported.

Department of Internal Affairs: The department provides monthly summaries of the scams which are reported.

One quick way of checking is to go to Google and input the name of the email sender, followed by “scam” or the name of the other party – eg, “Kenneth Dean scam” or “Kenneth Dean Robert Otermat”.

A number of foreign lawyer websites provide helpful information: avoidaclaim.com and lawyerscam.blogspot.co.nz (not actually a New Zealand site, but very helpful).

How do I report this?

The New Zealand Police have told LawTalk that a lawyer who actually loses money in an email scam should report it to the Police (by giving a statement and other information to the nearest Police station, rather than to the Financial Intelligence Unit or the Financial Crime Group).

If you are the recipient of an email which attempts to scam you, the Police recommend providing information to the Department of Internal Affairs (forward the email to scam@reportspam.co.nz) or to the Ministry of Consumer Affairs Netsafe website (go to the website and follow the instructions).

The New Zealand Law Society maintains information on scams targeting lawyers, and reports of current scams are welcomed and will be posted to assist other lawyers. Send the information to geoff.adlam@lawsociety.org.nz.

I want to have some fun and lead them on…

In a word, Don’t. Replying to any email lets a scammer know you’re out there and will ensure you get placed on a future list of targets. One relatively recent trend is the development of scams which use the name of genuine lawyers (often in England) and which target non-legal people with a particular last name. Responding to an email could possibly mean your name goes on to the scammers’ lists of names to use.

There is also the delicate issue of client care. If you have sent a letter of engagement or undertaken to represent the scammer, continuing the relationship with a known scammer could take you close to breaching some Conduct and Client Care Rules: assisting in fraud or crime (rule 2.4), respect and courtesy (rule 3.1), independent judgement and advice (rule 5.1) or the possibility of compromising the relationship of confidence and trust between lawyer and client (rule 5.4.3).

Severing your connection with a scammer

Rule 4.1 of the Conduct and Client Care Rules (refusing instructions) lists when a lawyer has “good cause” to refuse instructions. The Law Society’s General Manager Regulatory, Mary Ollivier, says when faced with a potential scam, a lawyer may wish to inquire first about the basis of the introduction given that the approach was unsolicited.

“Lawyers need to adopt a balancing act between being available to act with a healthy amount of scepticism, to avoid becoming a victim,” she says.

“If you think a matter might be a scam, check out the website and if it is confirmed, decline to act. If it should turn out to be a genuine instruction and ends up being a complaint, a standards committee would be more inclined to view the matter in your favour if you have taken some identifiable steps to support your suspicion.”

If you detect a scam after an exchange of emails and supply of a letter of engagement and wish to stop communications, the following wording is suggested:

“Dear recipient

“We have made further inquiries and it appears that you are not the person who you say you are and your request for legal services is not bona fide. We understand that you have been impersonating [name used by scammer] and that you have used her/his name to try and defraud members of the legal profession and possibly others.

“We no longer represent you and the engagement letter we have provided is withdrawn.

“We have reported your activities to New Zealand organisations which maintain details of activities such as those carried out by yourself.”

This article was first published in LawTalk 831, 8 November 2013, page 24.

Last updated on the 11th November 2016