Lawyer Sues Citibank For Not Stopping Him From Losing Money In Nigerian Scam
from the blame-goes-around dept
A lawyer in Houston is suing Citibank after he got scammed in a variation on the classic Nigerian email scam. There are a few interesting tidbits here that are worth discussing. First, the details: the lawyer, who does collections work, was contacted via email by a company that claimed to be a Japanese company that was trying to collect money from four clients in the US -- offering a contingency fee to the lawyer for help in getting the customers to pay up. Soon after that, the "Japanese company" claimed that one client had agreed to pay some of what it owed -- and it sent the law firm a check for $367,500. Citibank said the check cleared, and the law firm wired $182,500 to the company. Of course, it later turned out that the check was fraudulent, and the law firm was out the $182,500.This is a variation on a popular version of the Nigerian email scam. The way it usually works is that the scammer buys something that's for sale... and then sends a check that's for significantly more than the purchase price using some sort of excuse. Once the check "clears," the seller is asked to wire back the excess money. This version is interesting in that it's slightly more sophisticated -- carefully going after law firms that do collections. Rather than being a totally "out of the blue" situation, they worked hard to make it seem like business as usual until the scam is done. Sneaky.
While it's easy to mock the lawyer for getting tricked, the basic version of the scam and this more sophisticated version both rely on a very unclear part concerning check processing. Most people assume that once a check "clears" it's confirmed as valid. That's not true. Banks clear the check before it's actually validated, and the scammers exploit both the time between these two events and the fact that most people assume (or are told) that once a check clears, the money is definitely theirs. There are a few ways to solve this that banks could take. They could not clear the check until it's absolutely declared valid. Or, they could make it much clearer that, while the money is available, the check has not been validated and the money could be pulled. Since most banks do neither, the guy's lawsuit against Citibank is at least somewhat understandable -- though, it's unlikely a court will agree with him.
Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.
While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.
–The Techdirt Team
Filed Under: 419, advance fee, law firm, nigeria, scams
Companies: citibank
Reader Comments
Subscribe: RSS
View by: Time | Thread
The last check...
How hard is it to just put in a little waiting time?
[ link to this | view in chronology ]
Re: The last check...
[ link to this | view in chronology ]
Re: The last check...
[ link to this | view in chronology ]
Re: The last check...
[ link to this | view in chronology ]
prevention
[ link to this | view in chronology ]
Re: prevention
[ link to this | view in chronology ]
I think the law firm called the bank
[ link to this | view in chronology ]
What I am getting from this article is that it would be considered part of the "posted balance" even before the bank has recived the funds?
[ link to this | view in chronology ]
Maybe if they loose this case, banks in general will do a better job of providing up to date and accurate information to customers.
[ link to this | view in chronology ]
Re:
Agreed, the lawyer did everything right and by the book, and he was still screwed by relying on the bank's assertion that the check was good.
[ link to this | view in chronology ]
Re: Re:
I get an email, a couple of exchanges later (and me sending my bank routing number) I get a check in my bank account.
I send some money back.
For absolutely no effort on the lawyer's side, he is supposed to get $200k.
Old adage, when it is too good to be true, it must be.
[ link to this | view in chronology ]
Re: Re:
[ link to this | view in chronology ]
Re: Re:
No...he was screwed by being greedy and STUPID!
[ link to this | view in chronology ]
Re:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/12/20/BUGK2N2M051.DTL
[ link to this | view in chronology ]
Re: MODERATION
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re: What?
[ link to this | view in chronology ]
Re: Re: What?
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
Re:
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Re: Analyst
Ambiguities make for lawsuits, eg. this suit, and lawsuits make for more precise language in the future.
There is no reason to say the money is there if the money is not in your account and available to withdraw. I'm ignoring/assuming the bank has the cash funds to give you a reasonable withdrawal, but for business purposes the logic still fits.
If it takes two additional days, or an additional 2-3 weeks for a large transfer, so be it, but please don't sugarcoat and bullshit me.
[ link to this | view in chronology ]
Another unintended consequence of a well meaning law.
[ link to this | view in chronology ]
Re:
1. Customers and Businesses don't want to have to wait 5-7 Business days to get paid or access to their money.
2. Because of Laws and regulations.
But you do have to wonder with everything electronic why can't money be truly cleared in two days?
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Anytime you make a deposit, you have a certain amount available to you right away or the next day. The rest can be held for 2-3 days for a local check or 5-7 days for out of state. It may actually take over 10 business days (not including weekends & holidays) for it to clear the other bank & be OK for you. That is how scammers are able to do what they do, they know how to work the system to their advantage.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
[ link to this | view in chronology ]
It's good to be a lawyer
And who said it cleared? A $7.00/hr teller?
[ link to this | view in chronology ]
$182,500
Seriously, it really depends on the exact words used in the exchange between the victim or his staff and the bank.
[ link to this | view in chronology ]
Are you that seriously deluded Analyst? The bank is going to cough up $180,000 + dollars, simply out of good will?
HAHAHAHAHAHAHAHAHAH....AHAHAHAHAHAHA...HOLD ON..AHAHAHAHAHAHA..DONE. FAT CHANCE!
[ link to this | view in chronology ]
Yeah right
[ link to this | view in chronology ]
Re: Yeah right
[ link to this | view in chronology ]
Check to clear
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Read The Article
lawyer deposited it in a different bank
lawyer called citibank to verify that the check was legit
Citibank confirmed it
check actually was fraudulent
The lawyer was decieved by the scammer, and by Citibank
lawyer sues Citibank to cover losses
IANAL but it looks like Citibank is at least partially to blame here. Sure the laywer was a bit of a dumbass but would you do any differently if you had actually called the bank that supposedly issued the check and they confirmed it was theirs?
[ link to this | view in chronology ]
The attorney wasn't honest either!
[ link to this | view in chronology ]
Shame on the banks!
This bank check thing also happens in New Zealand (although its had quite a bit of publicity here over the years).
I still blame the banks as they clear the cheque and make the funds available for use.
Surely if they can't gareentee the funds then they should not make them available.
[ link to this | view in chronology ]
Re: Shame on the banks!
[ link to this | view in chronology ]
Gotta side with the schmuck
[ link to this | view in chronology ]
Re: Gotta side with the schmuck
[ link to this | view in chronology ]
Should have known.
He definitely should have known how the banking system works.
I don't think he'll win, banking law being what it is, but if the lawsuit can cause changes in how banks report things, then I'm all for him suing.
Right now, as far as I know, there's simply no way for me to find out if a check is 'good' or not. It can bounce off the other bank at any time.
I'd personally prefer to not be given the money until the check is really good, but if I at least had some way to know when the check was 'final', that would be great. Right now I just wait 10 days then assume it's good. Partial refund scams are, of course, ignored.
Of course, 'final' in this instance still isn't 'final' because the check could be repudiated by the account owner when he gets his next statement. But I'd like to be able to at least know that the bank it was issued on has said 'yea it's good'.
[ link to this | view in chronology ]
Another stupid person
[ link to this | view in chronology ]
Lawyer not in touch with reality
Bank Employee: Yes, that is the account number for Big Scammer's Biotch's account, but we have no record of the checks they may have issued.
Lawyer: Thanks for confirming that this is a valid check.
Bank Employee: Wait, I only said the name and account are valid, not that the check was valid.
Lawyer: Ok the bank said it was valid, lets run it thru and sue the daylights out of them when it gets bounced back as a fraudulent check.... I can smell the $$$ already, confirm my 1:00 tee time, I need to relax a little after all this hard work today.
With very few exceptions (positive pay users mainly) the banks have no clue what checks a company may or may not have issued (especially foreign banks/companies), and generally all they can confirm is that the name matches the account number (checks are sooo easy to forge these days), they can't confirm that the company actually issued a check for that dollar amount unless the company is using positive pay reporting (this is where they send a list of the checks they have written to the bank on a daily basis, and the bank will only clear checks that are on that list, but most companies don't utilize this level of control on their expenditure accounts).
[ link to this | view in chronology ]
Typically
Nigerians seem to learn quick, you would think that we could stay ahead of them but some of these tricks almost seem to crafty.
[ link to this | view in chronology ]
Re: Typically
Joe admitted:
Something to be kept in mind the next time you need one...
[ link to this | view in chronology ]
It would not surprise me if someone overseas could dress up their operation to look legitimate. I wonder if he asked for a retainer. It has been my experience that the retainer request usually drives away prospective "clients" looking for free legal work or scams.
[ link to this | view in chronology ]
The laws concerning holding checks were written when all transactions were done on paper and it may actually have taken a week to "clear" a check. These days, there is no excuse for a bank to hold a check or not confirm it within 24 hours.
Instead, the banks "hold" the money for you, "just in case" but meanwhile are using that money to earn interest for themselves by lending it out.
When banks stop holding out of state checks for 7 days or longer, and stop charging up to $50 for NSF, then it can complain. I hope this guy DOES win.
[ link to this | view in chronology ]
I don't know
I do have some sympathy for the story the lawyer is telling, though. My rental tenant paid her October rent by check on October 3. I deposited it on October 6 and it cleared quickly. On October 21, the bank pulled back the money (she didn't have cash in her account to cover the check). That caused me to bounce quite a few checks. I'd presumed once the check cleared it was mine to spend.
[ link to this | view in chronology ]
Malpractice
[ link to this | view in chronology ]
...
A few points: 1. Many people don't understand the UCC provisions re: checks clearing. Ignorance? Perhaps, but totally understandable in my opinion. 2. My policy has been that any incoming checks must wait 10 business days to clear before leaving my IOLTA account. 3. It's very perverse for a lawyer because he may SUSPECT he's being scammed, but the client confidentiality provisions restrict him from contacting the FBI &/or local police departments. 4. I'm glad the lawyer made the other clients whole, but I can certainly empathize with him.
Man, there but for the grace of God go I... I hope the rest of the sanctimonious folks out there appreciate that.
[ link to this | view in chronology ]
Scamming
[ link to this | view in chronology ]
????
[ link to this | view in chronology ]
How did he pass the bar?
[ link to this | view in chronology ]
Re: How did he pass the bar?
[ link to this | view in chronology ]
[ link to this | view in chronology ]
We could go on until we bleed over who is at fault over this.
[ link to this | view in chronology ]
CHECK WITH NO FUNDS
[ link to this | view in chronology ]
Fraud
[ link to this | view in chronology ]
[ link to this | view in chronology ]
The banks suck
[ link to this | view in chronology ]
The banks suck
[ link to this | view in chronology ]
Happened to me today!!
Once the bank labels the money "available" that means its available to use.
Whenever we overwithdraw, the bank tells us.. check your available balance. It is always correct.
To make it worse, my bank charged me money for the check.
A world without banks, sounds like a perfect solution.
[ link to this | view in chronology ]
The trouble is you can't have it both ways - if one account holder can stop payment for 60 days, both can. My guess is if this were to go to a jury, the bank would get shredded, including possible punitive damages. If the bank told him the check was good, they assumed the risk.
[ link to this | view in chronology ]
Banks CAN'T know when individual checks clear under the current system - even a phone call to the issuing bank isn't useful, as there is a lot of liability involved if something goes wrong. While such a system may exist in the future, doing such a thing now would require 1000 times more information going back and forth between banks and the Fed as does now - it would be a logistical nightmare.
[ link to this | view in chronology ]
[ link to this | view in chronology ]
Check Fraud from a realtor
I was scammed in a real Estate Fraud in Baja Mexico. The realtor also Fraud Checks from my San Diego Wells Fargo Bank account. The Land was in Baja but the Realtors were Mexican Americans in Baja Mexico. Even though they Fraud Checks one Filed a False Police report on me. I presented all evidence to the San Diego District Attorney and They did NOTHING said the Crime happened in Baja but yet checks were fraud out of my Wells Fargo Bank account. Stole my Whole retirement in a real estate scam.
[ link to this | view in chronology ]