Law in the Marketplace: Beware the “bad check” scam

For the Monitor
Published: 6/25/2022 8:06:37 PM
Modified: 6/25/2022 8:06:07 PM

If you’re a lawyer or accountant, a client may request you to deposit in your bank account a check from a customer of your client from which the client wants you to make a payment to the client herself when a client deal closes. Your client tells you that the client’s customer will be using you as an informal escrow agent funds for money to go to the client herself in due time.

However, these requests sometimes turn out to be scams, and there are cases in which they have caused unsuspecting New Hampshire lawyers and accountants to suffer losses of hundreds of thousands of dollars. So I urge readers, if they receive these client requests, to exercise great care in handling them.

Here’s a hypothetical illustration of the above “bad check” scams:

New client John Jones says he found out about you from your website, and he identifies himself to you as the CEO of Jones Company, Inc. Jones asks you to do some legal work for him that will require only a little work. Documentation he provides you about his company and the requested work and a quick Google check persuade you that he is reliable, so you don’t require him to pay you a retainer.

A couple of weeks after you e-mail him your work product, Jones tells you that his company will soon be closing a major sale to a customer, and he says his client would like you, in preparation for the closing, to deposit in your account a $55,000 check from his customer that his customer will deliver to you by FedEx for eventual payment to your client. You agree, since, in your practice, clients’ customers sometimes want these informal escrow arrangements, and they trust you as reliable escrow agents because of your profession.

The “customer check” reaches you by FedEx on Sept. 1 of the relevant year, you deposit it, and, in keeping with bank practice it’s immediately reflected online in the balance in your account. The next day, Jones tells you that in connection with his closing, he needs you to wire transfer $50,000 to him on the basis of the above check. He tells you to keep the remaining $5,000 in payment of your fee to him for work you’ve already performed for his company and for future work. Needless to say, you like the idea of a $5,000 payment to yourself.

However, after you’ve accommodated Jones’s request, you learn to your horror that the above $55,000 was not covered by the check from your client’s customer; it was a bad check. As a result, your $50,000 wire transfer to your client has come out of funds in your account that you got from legitimate sources. And your client has disappeared. Effectively, your client has robbed you of $50,000.

Here are some lessons from the above hypothetical:

Never trust a new client, however substantial he may seem, unless you’re absolutely certain he deserves your trust.

Except in the rarest circumstances, never accept a new client unless he pays you a retainer.

Until your bank tells you, never assume that that funds from a check you’ve deposited from anyone are clear until your bank says so. The fact that a check is posted in your account doesn’t mean it’s a good check.

Never agree to make a wire transfer to anyone unless the check from which you’ll make the transfer has cleared.

John Cunningham is a lawyer licensed to practice law in New Hampshire and Massachusetts. He is of counsel to the law firm of McLane Middleton, P.A. Contact him at 856-7172 or lawjmc@comcast.net. His website is llc199a.com. For access to all of his Law in the Marketplace columns, visit concordmonitor.com.

Law in the Marketplace is a legal advice column. It runs every week in the Sunday Business section. The author is a lawyer in Concord and not a member of the Monitor’s staff.




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