Lawyers – Be Aware of the Retainer Scam

As attorneys who run law firms, we try really hard to land new clients. With every potential lead, we try our best to please the potential client and serve them well. Now it appears that scammers are using our professionalism against us in a new scam.

The Retainer

I received an inquiry from a person claiming to be the CEO of a company in Hong Kong, looking for an IP attorney to help complete an IP purchase transaction between his company and an US company. The US company is located near Philadelphia, the potential client is Chinese, it appears that I am the perfect firm to handle this for them.

We discussed my rates and a retainer. They signed an engagement letter. The negotiation between the parties has come far enough that the US company was sending a partial payment to be held by my firm while the terms are finalized. I received a draft IP purchase agreement. A check was on the way. So far so good?

The Issues

There are a number of issues with this transaction:

  • I could not locate the patent in foreign databases based on the information they provided
  • The company had a Gmail account
  • I don’t think a company selling millions worth of IP would have the CEO contact me directly, at least initially

I already knew this was most likely a scam. However, I was curious to see how this play out. I had worked on and dealt with many Internet scams before, this seemed new and sophisticated.

Then came the core of the scam. The HK company informed me that instead of wiring me a retainer, I could deduct my fees from the partial payment. This sounded like the Nigerian prince scam. So fun!

A couple of days later, I received, by overnight delivery, a shiny check for $350,000. Then quickly came emails from the HK company asking if I received the check and how long it would take to clear.

At this point, more issues with the check were apparent:

  • It was sent from Canada, but it was supposed to be from the US company near me
  • The check was obviously fake because
    • The Micro Printing shows up as a blurred line (security feature on the check). You could use the iPhone’s camera to checkmicroprinting
    • The amount and the background is printed together, instead of printed on black check paper. You can see the artifacts/blurring around where the amount is printed.blur

So we called the issuing bank to verify the check. The bank in Canada informed us that the account was real, but had just been closed due to fraudulent checks being drawn on it. We described the scam, and were told that it was different than the others.

They Wanted the Money

Then I received another email from the HK company asking whether the check had cleared, complete with wiring instructions so I could wire them the funds minus my retainer. After I informed them that the check was fake, silence. Of course.

Brilliant Scam

The scam is brilliant. We as attorneys handle client funds all the time. It is not abnormal to receive large sums and disburse to the client. Had I actually deposited the check, it would have cleared because it was drawn on a real, funded account (before they closed it). I would have then disbursed the funds from my trust account once the check cleared. Money would be gone, and we would be left to sort out who is liable for the loss.

Be careful out there with new clients!

Dafan Zhang

Dafan Zhang is the managing principal of Zhang Law PC. Known as the High Tech Counsel, Dafan’s practice focuses on technology, intellectual property, startups, and litigation. Please visit www.hightechcounsel.com for details about his practice.