Law Times

Law Times • November 28, 2011 FOCUS PAGE 13 St. Catharines case shows pitfalls of fake cheques Suspended lawyer among many to face headaches due to fraudsters BY MICHAEL McKIERNAN Law Times O ntario lawyers need to stay vigilant if they're to remain one step ahead of increasingly sophisti- cated fraudsters seeking to suck them into bad-cheque scams. Dan Pinnington, director of practicePRO, LawPRO's risk management arm, has watched the frauds evolve during his years in the job. "In the past, you got these badly worded e-mails with grammar and spelling mistakes talking about massive amounts of money," he says. "There were loads of obvious hints there that it's bogus. More recently, we see very simple, three- or four-sentence inquiries. The spelling is fine, the amount looks reasonable, and it looks like it could be legitimate." Pinnington's dedicated fraud team has seen a spike in reports from lawyers across the continent. As a result, they take hundreds of calls a month from recipients of suspicious messages. In part, he puts the increase down to an increased awareness among lawyers. "I think it's also fair to say that there are simply more fraud attempts out there of this kind than we saw six months or a year ago," Pinnington says. In July alone, LawPRO got more than 200 calls reporting almost 50 different types of bad-cheque fraud, including almost 30 using completely unique scenarios and names. "They're sophisticated, slick, and much more difficult for a lawyer to recognize as a potential scam," Pinnington tells Law Times. "If you've seen hundreds of these like I have, it's pretty easy to spot, but if you haven't, then it looks po- tentially legitimate." A recent case at the Law So- ciety of Upper Canada shows how the scams work in practice and the potential impact they can have on a lawyer's business when they fall for one of them. On Sept. 23, St. Catharines, Ont., sole practitioner Graham Edward Wilson had his licence suspended on an interlocu- tory basis after an investigator found an estimated $500,000 hole in his trust account. According to documents filed with the hearing, Wil- son's problems began with a bad-cheque fraud carried out in 2009. "The lawyer told me that the trust shortage started with the Gerry Schuman matter when he was defrauded and used the money from [another client's] file. He thought he would make up the shortage somewhere, but the hole keeps getting deeper," wrote the law society's forensic auditor Jo- seph DiPietro in a Sept. 12 af- fidavit in the case. According to the documents, www.lawtimesnews.com Wilson, who was called to the bar in 1992, was approached by a "mystery woman" named Gerry Schuman in late 2009. She allegedly explained she was trying to finalize a settle- ment with her ex-husband from outside the country. According to DiPietro, Wilson agreed to receive money from the ex-hus- band. But by the time the fake $125,000 cheque failed to clear, it was too late. Wil- son had already advanced $80,000 to a company named FJ Investments on behalf of Schuman. The law society alleges Wilson misappropriated money held in trust from the sale of an elderly client's property in order to cover the loss. "When he realized he was defrauded, he did not know what to do and decided to cover the $80,000 cheque he gave to FJ Investments from [the elderly client's] money. He thought he would get [her] settled in her new ac- commodation at a nursing home and sort it out later," reads DiPietro's affidavit. Law society investigators are still pursuing complaints from a number of Wil- son's former clients that he couldn't account for money he was supposed to be hold- ing in trust for them. The law society moved for the interlocutory suspension, 'Lawyers have been successfully duped even when afterwards they admitted they had suspicions,' says Dan Pinnington. which will be in force pend- ing a full hearing, when it appeared Wilson had re- neged on an undertaking not to practise law signed in July. None of the allegations have been proven and Wil- son couldn't be reached for comment. Pinnington says it's not just sole practitioners who fall for these schemes. He notes that the quality of some of the fake cheques he has seen is enough to fool tellers and even bank managers. "Lawyers at firms of all siz- es are getting fooled by these. Some lawyers still don't un- derstand how basic and simple this scam is," he says. Wilson didn't notify Law- PRO about his predicament, but Pinnington says some law- yers get lucky even after send- ing money to fraudsters. "We've had a couple of lucky misses where we discovered it after the money left. In one or two cases, we've been able to stop the foreign bank from dis- bursing it. In another case we were very lucky because the for- eign bank where the funds were wired to questioned the ID on the account where the money See Enhanced, page 14 NEW EDITION CONSOLIDATED ONTARIO INSURANCE STATUTES AND REGULATIONS 2011 CONSULTING EDITOR: ALAN L. RACHLIN Get convenient access to the most current insurance law – all in one practical resource. WHAT'S NEW IN THIS EDITION This edition includes updates to the latest legislation and regulations, and additional forms such as: • Statutory Accident Benefit Dispute Resolution Forms • Personal Automobile Forms • Garage Automobile Forms It also includes a Table of Concordance for insurance law across Canada. ORDER # 983545-68363 $96 Softcover 1560 pages September 2011 978-0-7798-3545-4 Annual volumes available on standing order subscription Multiple copy discounts available AVAILABLE RISK-FREE FOR 30 DAYS Order online at www.carswell.com Call Toll-Free: 1-800-387-5164 In Toronto: 416-609-3800 Shipping and handling are extra. Price subject to change without notice and subject to applicable taxes.

• Cover
• Law Bids
• Oklahoma Scams
• Focus On Business of Law