Starting a Law Firm No-Nos | Minnesota Law Firm scammed to tune of $400,000

by JMF on April 11, 2012

As reported by the ABA Journal, the Minnesota law firm of Milavetz, Gallop & Milavetz (MGM) has sued Wells Fargo Bank for cashing a fraudulent check in the amount of nearly $400,000 from MGM’s IOLTA account.  Click here for a copy of the complaint.  Bad news.

According to reports in the Minnesota Star Tribune, MGM was the victim of a scam, three-years-ago, involving someone who said she was a 40-year-old Korean woman who was hurt in Minnesota.  The woman apparently told the firm that she needed help securing a $400,000 legal settlement.  Believing her, the firm received a settlement check for the amount, deposited in the bank, and received assurances it had cleared from Wells Fargo.  The forwarded amount of the check was $396,500 and it went to a Hong Kong bank.

Reading the complaint filed by MGM is not entirely helpful.  As would be expected, the complaint is largely one-sided.  I will report on this more when Wells Fargo files its answer.

This story has been all over the news in Minnesota and is being discussed by bloggers (like me) and has been on multiple listservs which I belong to.  The general reaction?  Disbelief.

No, it isn’t disbelief that this could happen – this has apparently happened to over 70 lawyers in the United States and has cost an estimated $29 million dollars in damages.  The disbelief is related more to the fact that a law firm would fall for this kind of scam.

I don’t have all the facts, so I am not going to speculate on what happened.  My two cents is that I have been contacted on numerous occassions by scammers with very similar stories.  In fact, one of my former bosses came up to me in the halway about a year-ago and was giddy with news that he would be handling a very lucrative settlement.  He told me all about it and that it would be very little work.  He contacted the firm’s bank and they did a little investigation. Guess what, it was a scam.  He was almost duped.  My boss was a judge and lawyer for nearly 40-years.  It can happen to anybody.

Let this case be a warning to anybody out there who is running a law practice or starting a law firm that scammers exist, they are sophisticated, and you better watch your ass.

Luckily, as a small-fry solo practitioner who doesn’t deal in the hundreds-of-thousands of dollars, I don’t have to worry about scams quite as much.  If my bank was asked to clear a $400,000 check from my trust account, they would probably just laugh.  I guess that is one of the advantages of being a solo – less money for scammers to steal.


-This post was written by Joseph M. Flanders, an Apple Valley, MN attorney.

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