Internet scams against lawyers are showing up in the news lately. Just a few days ago, the ABA Journal reported on a man who admitted to scamming $2.5 million from 38 law firm bank accounts. In a new ethics opinion, the Professional Ethics Committee of the New York City Bar Association explains how these scams work, offers tips on how to identify and avoid these scams, and explains the ethical obligations that arise when a law firm either suspects or learns it has been the victim of a scam.
Here is the digest of the opinion:
An attorney who discovers that he is the target of an Internet-based trust account scam does not have a duty of confidentiality towards the individual attempting to defraud him, and is free to report the individual to law enforcement authorities, because that person does not qualify as a prospective or actual client of the attorney. However, before concluding that an individual is attempting to defraud the attorney and is not owed the duties normally owed to a prospective or actual client, the attorney must exercise reasonable diligence to investigate whether the person is engaged in fraud. In addition, because Internet-based trust account scams may harm other firm clients, a lawyer who receives a request for representation via the Internet has a duty to conduct a reasonable investigation to ascertain whether the person is a legitimate prospective client before accepting the representation. A lawyer who discovers he has been defrauded in a manner that results in harm to other clients of the law firm, such as the loss of client funds due to an escrow account scam, must promptly notify the harmed clients.
Disclosure: I am the Chair of the NYCBA Professional Ethics Committee, which issued the opinion.