A Word to the Business World

I had my first encounter with a proven, undeniable, thief today, who sought to steal money from our escrow account. Lots of money. Listen up, lawyers, closing agents, and anyone else who deals in bank drafts and checks. This guy could have done no more damage if he had shown up in the lobby with a gun and demanded cash from the trust account.

A week ago I got an email from a person who said he was in California, who had gotten my name from an attorney in his state, whom he named. He gave us his own company name and address, and the name of his attorney in California. We checked his company, and the attorney. Both were listed, and both looked legitimate. The man said in his email that he needed help collecting money from a local business in Okaloosa County. He had had a good history with the business, and he knew they wanted to pay, but they had gotten behind to the tune of about $500,000. He had heard good things about our firm, and he wanted us because he wanted to maintain his prior good relationship with his customer . He had heard our reputation was good enough that the man might pay to avoid court action.

We checked for conflicts, and told him by email that we’d be glad to assist. I sent him a contract to sign, hiring our firm as his attorney, and told him the amount we would require as a retainer. I got the contract back today, by email, signed, but without the retainer. Coincidentally, at almost the same time, I got a letter from the man who owed the money, written on his company stationery, and apologizing for the delay in payment. The address matched a residence address in Shalimar. The letter also included an “OFFICIAL CHECK”, written on the Citibank of New York, in the amount of $198,000, written to my firm. I called the client immediately and relayed the good news. He was very happy, and he told me that he was getting pressure from his own suppliers, that I should deposit the check, take out my retainer, and forward the rest by wire transfer to his supplier.

The matter required some urgency because of his own pressure to make payments, and he implied that it would be helpful if the wire could go out tomorrow. We walked next door to the bank, asked them to call Citibank, and asked when we could expect the check to be good in our account. They made the call. Citibank said the routing numbers on the check did not match anything they had authorized.

My next call was to the local business. The printed stationery listed an 800 telephone number, which I called. No one answered. I found the residential listing for the company president who had ostensibly signed the letter, in Shalimar, and called him. I advised him that I had his check in my office for $198,000. He laughed. He had written no such letter, or check, and owed no amount to someone in California.

Here’s the lesson. The companies were all real. The check is real, and was marked “Official Check”. The people were all real (I even spoke to the “client” on the phone when the check was received), and some of the information is real and can be pretty easily verified. We did all those things.

Do not assume that an “official check” is anything more than a check written on an account at a bank, and even that may, as this one, be a forgery. Do not wire money out on the basis of a check, even if marked “official”, or “cashiers”, or “certified”. Checks and drafts are infinitely capable of being forged, and even genuine checks, drafts, and wire transfers can be reversed. If you’re asked to fund on an instrument without sufficient time to confirm its legitimacy, call the bank on which the check is written. By all means, don’t fund on the instrument unless you are sure the proceeds are successfully and irrevocably in your account (incidentally, you should also assume that wire transfers can be reversed as long as the proceeds of a wire transfer remain in the account into which it was wired.) All these scams will look genuine. The people who put these schemes together are smooth professionals who know what they are doing, but the schemes generally have in common the fact that money must be paid out quickly in order to satisfy some very plausible deadline.

In real estate closings, a careful professional Realtor will advise his clients far ahead of time that large money transfers need to be made at least a week before closing. For closing agents, funding at a closing table is Russian roulette with your escrow account (someone else’s money) unless all deposits can be confirmed prior to closing. That normally requires several days for in-town checks, or more than a week for checks from out of town. Anyone who urges you to do otherwise is asking you to risk your escrow account and your reputation for his convenience.