Ride the Lightning

Law Firm Caught in $312,000 Scam Can’t Hold Bank Liable

May 28, 2020

Bob Ambrogi's LawSites blog reported on May 21 that Boston law firm Sarrouf Law LLP got scammed in 2015, depositing a counterfeit check to its trust account with First Republic Bank and then instructing the bank to disperse the funds by wire transfer to banks in Cambodia and Hong Kong.

It's a garden variety scam. The lawyer gets an email from a foreign company, usually something pretty easy, debt collection or sale of equipment. The attorney is retained and a check comes from the purported debtor or buyer. The attorney puts it in his/her trust account and disburses the funds to the client's overseas bank account. By the time the check is known to be fraudulent, the funds are gone.

In a second blow, the law firm lost again, when the Massachusetts Appeals Court dismissed the firm's lawsuit seeking to recover the lost funds from the bank.

The Appeals Court affirmed summary judgment by the Massachusetts Superior Court dismissing the firm's claims against the bank for negligence and breach of the California Uniform Commercial Code.

"Sarrouf attempts to impose on First Republic an obligation to detect the counterfeit nature of a check drawn on another bank, deposited by Sarrouf," the court said. "This obligation does not appear in the code or the parties' agreements."

It was the law firm that was in the best position to guard against the risk of a counterfeit check, the court said, by knowing its "client," its client's purported debtor and the recipient of the wire transfer.

The full details can be found in Bob's post – classic fact pattern supposedly involving retaining an attorney to draft an agreement to sell a crawler crane (seller in The Netherlands) to a buyer in Massachusetts.

The amazing part, to me, is that the lawyer's bank returned his retainer check as unpayable. Despite that, the lawyer ordered the monies wired to two foreign banks. By the time the bank was notified that the check had been returned (and later learned it was counterfeit), it was too late to recall the transfers.

It is remarkable that these scams seem to succeed as often as they do. By this point, all law firms should have strict wire transfers procedures in place to keep these scams from succeeding.

Sharon D. Nelson, Esq., President, Sensei Enterprises, Inc.
3975 University Drive, Suite 225|Fairfax, VA 22030
Email: Phone: 703-359-0700
Digital Forensics/Cybersecurity/Information Technology
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