The most widely read magazine for Canadian lawyers
Issue link: https://digital.canadianlawyermag.com/i/50806
LAW OFFICE MANAGEMENT Fraudsters are getting more sophisticated and lawyers need to keep ahead of the game. Here are some tips on staying out of trouble. BY K EVIN MARRON Don't be swindled T he bank drafts looked good, but the grammar in the other lawyer's e-mail was bad. That's what made James Morgan suspect he was being targeted for a scam — an attempt to get money out of the small-town Ontario lawyer's trust account on the strength of forged cheques and a phoney loan to one of his clients. But watch out lawyers and law firms everywhere! There's a new breed of fraudster out there who has learned to spell, brushed up on their grammar, and knows enough about the law and legal practices to launch elaborate and credible scams. "They've become more sophisticated and polished," says Dan Pinnington, director of PracticePRO, an initiative of the Lawyers' Professional Indemnity Company that provides risk management, claims prevention, and law practice management information to Ontario lawyers. "They're getting very tough to spot," says John Allen, treasurer and investigator at the Law Society of Saskatchewan. He notes that forged cheques are getting so good that bankers can't always see they're not genuine. Lawyers are easy targets, because the nature of their business requires that they deal with a great many people whom they don't really know, observes Morgan of Mandryk Stewart & Morgan in Tillsonburg, Ont. So what do lawyers and law firms need to know and do in order to avoid becoming victims? "Be aware, be alert, and look out for red flags," says Pinnington, who says he hears about new fraud attempts on lawyers almost every day. The major- ity of these attempts are unsuccessful, but fraudsters sometimes get lucky and everyone is potentially vulnerable, he says. What kinds of fraud do you need to watch out for? Until recently, the key concern was real estate and mort- gage frauds, usually involving flip trans- actions whereby a property is purchased at an inflated price by a non-arm's- length buyer who then applies for a mortgage based on the artificially high purchase price. Lawyers are not directly targeted in such schemes but, if they do the paperwork without enough due diligence, they become vulnerable to negligence claims from the lender who is left holding the bag. A high-profile example of this is the massive lawsuit recently launched by the Bank of Montreal, which has accused 18 Alberta lawyers, including one who is now a Tory MP, of negli- gence in connection with a $69-million mortgage fraud. If proven in court, these allegations would serve as a stark reminder of the fact that real estate www. C ANADIAN Law ye rmag.com A UGUST 2010 19 JEREMY BRUNEEL