The scheme was similar to one described in 2010, notes the LSBC.
“The ‘client’ requested help in collecting money owed by her former spouse pursuant to a collaborative law settlement. She provided a copy of a collaborative law agreement and eventually agreed to a 25 per cent contingency fee. Even before the firm sent a demand, a bank draft in favour of the firm was received from the ex-husband. Assuming the draft was legitimate, the firm wired the funds (less its fee) to a payee identified by the ‘client,’ only to discover later that the draft was counterfeit. The names used by the ‘client’ and ‘former spouse’ were Tammi Mazur and Brian Denman.
“We have also learned of an intellectual property twist that has just surfaced in relation to the phony debt collection scam. In this scam, a purported Dan Nagasakii of CCP Group International asks for help enforcing intellectual property rights in relation to the unauthorized distribution of language software by someone ‘in your locale,’” said the web site.
On the heels of that latest bit of bad news, the LSBC announced its benchers have approved a plan to offer insurance coverage as of Jan. 1 for these cheque scams that are popping up across the province.
The law society says coverage by the Lawyers Insurance Fund, specifically tailored for this risk, “will provide some protection against shortages of client funds as a result of a fake or forged certified cheque, bank draft, money order, or solicitor’s trust cheque, provided the client ID and verification rules are met.”
“Although B.C. lawyers were not clamouring for coverage, a loss to a firm, especially a small one, could be significant. As a result, the benchers took a proactive approach to insurance and decided that some insurance be provided for client trust fund losses,” Su Forbes, the LSBC’s director of insurance, tells Legal Feeds. “Coverage is contingent upon the lawyer meeting the client identification and verification rules, and will not extend to the firm’s own losses by way of overdraft to its bank.
Forbes says the insurer doesn’t know what claims might arise, “but to date there have been very few incidents of B.C. firms being caught in the scam. With shortfall losses partly covered by insurance, the financial consequences of the scam will be directly influenced by the level of due diligence exercised by lawyers.”
The LSBC maintains that awareness and vigilance are lawyers’ most important tools in combatting fraud but benchers realized there are times when practitioners get unwittingly embroiled in these scams and that some insurance coverage is “appropriate.”
“Lawyers can directly influence the cost of the insurance in future through their vigilance and care,” says Forbes. “There is no increase to the insurance fee for 2012 to cover off the risk.”
Wording of the new policies will be posted soon to the LSBC’s web site and a full description of the coverage will be in the Spring 2012 Insurance Issues: Program Report.
Details on cheque and other frauds are also available at the LSBC’s web site.