Wednesday, December 11, 2013

Beware of Scams

Robert Wright is (sorry, "was") an attorney in Iowa. The Iowa Supreme Court published a suspension order on December 6, 2013 (Case no. 13-0780). Mr. Wright will not be practicing law for at least twelve months. That is to commence upon the termination of a temporary license suspension that was imposed in August 2012. In short, it appears that this attorney will not practice for a significant period of time. 

His violation is based upon one of the classic internet hoaxes that we all are exposed to periodically. The email comes in, and explains that a huge amount of money is due. There are some minor details that require attention to free the money. In this case the hoax was presented to Wright by a client named Madison. Madison had documents showing that his payment of about $180,000 in taxes would allow him to have an $18 million inheritance released from Nigeria. Wright agreed to help Madison obtain the funds, with Wright to receive a contingency fee on the $18 million when received.

The Iowa Court found that Wright truly believed in the facts with which he was presented. He sincerely believe Madison, and thought that there was an imminent windfall coming. That in itself is troubling in today's world. By now, Internet hoaxes should be know to all of us. In the greater context, it is worthy of consideration that things that seem too good to be true are often not true. A certain level of skepticism is healthy in life, and particularly in professional practice. 

Wright began seeking funds from his other clients, for the purpose of loaning the money to Madison. He received $12,000 from one client, Rynearson, and placed them in his trust account. Rynerson was promised $50,000 from the inheritance in return. He later received another $12,500 from Rynerson. So far so good. Wright then wrote himself a $12,500 trust account check for "attorneys fees" and gave that check to Rynearson for security on the funds Rynearson had provided. 

Wright contacted one of his workers' compensation clients, Ms. Putz, and she was convinced to loan Madison her settlement proceeds of $25,000. In exchange, she was to receive $100,000 from Madison when the inheritance was ultimately received from Nigeria. In a letter of August 12, 2011, Wright described to the workers' compensation client that the inheritance was anticipated before August 24, 2011. Twelve days? If someone tells you that you can invest $25,000 and within the month receive $100,000, this goes in the "too good to be true" category. 

Disciplinary proceedings began as a result of these two clients losing their funds. Yes, amazingly it turns out that there was no Nigerian inheritance. Both clients lost the money that they loaned to Madison. On the eve of hearing, Wright came clean with the Iowa investigative body and admitted that he had solicited three other loans for Madison, in the amounts of $7,000 and $160,000 and $20,000. 

So that the funding is clear, Wright collected loans of $24,500 (Rynearson), $25,000 (Putz), $7,000 (White), $160,000 (Stodden) and $20,000 (Nunneman). A total of $236,000 loaned to Madison. Remember he needed $180,000 in taxes to get his inheritance released? There is no explanation of why he would need the additional $56,000. 

Long story short (too late!), there was no inheritance collected. Despite Wright's communications with people he believed were official. He believed he communicated with the President of Nigeria at one point. He followed instructions, despite one correspondence being in curiously questionable English. The loaned money was handed over to person or persons unknown. 

Where did this attorney go wrong? Reiteration here that if it is too good to be true, perhaps more investigation is warranted. More so, though, the commission concluded that "a cursory internet search" (see below) would have resulted in evidence that the inheritance was "probably based on a scam." He also failed to verify the identities of various individuals, including the President of Nigeria. The failure to perform such investigation and verification was found to be a violation of the Iowa rule that requires attorneys to competently represent their clients. 

The Iowa Court concluded that Wright's contingency fee arrangement with Madison was not disclosed to Wright's other clients. The Court describes how that "pecuniary interest" was "adverse to the interests of Rynearson and Putz." That pecuniary interest was not disclosed and was not discussed. The Court declined to address charges that Wright's actions involved a conflict of interest. They ultimately concluded that suspension was the appropriate sanction.

The Iowa investigatory commission concluded in their report that Wright did not act fraudulently, but that that his conduct "might aptly be described as delusional." 

Before pursuing mythical gold, do an internet search or two. Avoid conflicting roles in dealings with clients. Know that the world is full of hoaxes. If you did not know it until now, know that there are people out there who will try to steal from you. If it is too good to be true, it is probably not true. Check it out first. 

Here are some cases that the internet search might reveal: In re Maxwell, 334 B.R. 736, 738–41 (Bankr. M.D. Fla. 2005); Parker v. Williams, 977 So. 2d 476, 477–78 (Ala. 2007); Lappostato v. Terk, 71 A.3d 552, 559–60 (Conn. App. Ct. 2013); In re Reinstatement of Jones, 203 P.3d 909, 912–13 (Okla. 2009); Lucas v. 
BankAtlantic, 944 So. 2d 1031, 1032 (Fla. Dist. Ct. App. 2006).

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