The Federal Circuit Court of Appeals has breathed new life into a decade old legal malpractice and fraud action against Morgan Lewis. The action involves an incorrectly filed patent application for a type of electronic billboard. A Federal District Judge in California had granted a motion for summary judgment on statute of limitations grounds, but that has been overturned by the three judge Circuit Court of Appeals panel. The panel found that the statute of limitations for legal malpractice had expired, but the fraud claim (for covering-up the malpractice) was tolled under California’s equitable tolling law during a period the case had been pursued in state court and had not expired.
Archive for April, 2012
We have previously written about the particular dangers law firms face from e-mail scams. Two interesting items have recently cometo our attention. In Minnesota, a law firm is suing Wells Fargo Bank on the basis that the Bank should have noticed the multipleinaccuracies on the check, and protected the firm from being bamboozled (the law firm in question is not a stranger tocontroversy).
As well, the United States Postal Inspection Service has sent out a new warning about these schemes (we could not find a link to the warning, so we have copied it here:
UNITED STATES POSTAL INSPECTION SERVICE
April 9, 2012
Subject: Investigation into attorney-client advance fee scheme
Since 2008, a task force composed of the United States Postal Inspection Service, the United States Secret Service and the FederalBureau of Investigation have been investigating organized groups that are targeting law firms in the United States and Canada. The members of these groups are located in Canada, Nigeria, and Asia.
The scheme begins when a suspect posing as a potential client contacts the attorney, usually via e-mail, and requests representation in collecting an outstanding debt or settlement, in filing a suit, or in assisting in a real estate transaction. The reason for the underling legal matter varies; the back stories so far have included divorce settlements, business debts, tort matters, intellectual property disputes and real estate purchases. The “client” almost always states they are overseas, usually in Asia. Communications betweenthe attorney and the “client” sometimes go on for some period. However, eventually the attorney receives word that the opposing party wants to settle. This information sometimes comes from the “client” or from a phone call, e-mail or letter from the “opposing party,” which in reality is usually the same suspect posing as the client.
A check is then delivered to the attorney via mail or private courier. The checks look legitimate to the naked eye. In some cases even financial institutions fail to identify the counterfeit check. The information on the checks is stolen from actual banks. If the attorneycalls the phone number on the check, a person or an automated system will verify that it is legitimate. The law firm deposits the check into its IOLTA account and then is instructed by the “client” to wire the proceeds to a bank account. It is not until the check is returned as counterfeit that the fraud is detected, which can sometimes take up to a month.
To date there have been over $70 million in losses, and over 100 actual victims. The most recent attempt occurred last week inRhode Island; however the wire sent by the firm was recovered prior to the suspects picking it up. The most recent attempt in Pennsylvania occurred approximately 2 weeks ago, where a firm wired approximately $300,000.00. This wire was recovered aswell. The most recent victim in Pennsylvania occurred approximately three weeks ago, where a firm lost approximately$160,000.00.
The case is being prosecuted by the United States Attorneys office in the Middle District of Pennsylvania, which has extensive experience in prosecuting these types of frauds, with assistance from the fraud division and office of international affairs at the Department of Justice in Washington, DC. There have been a number of indictments in this case and one individual, Emmanuel Ekhator, has been extradited from Nigeria. Other extraditions and indictments are forthcoming. However, suspects identified as being involved in these groups continue to target attorneys.
The suspects in this case have adapted and modified the scheme multiple times, however the following are warning signs that mayindicate that an attorney is being targeted:
1. The client contacts the firm via the internet.
2. The client is not located in the United States.
3. The client requests help in obtaining funds already promised.
4. The client request help in a law suit, then quickly informs the firm that the opposing party has agreed to settle.
5. The opposing party initiates contact with the firm.
6. The check is sent from a location other than where the opposing party is supposed to be located.
7. The client tells the firm they can take their fees out of the settlement check.
8. The client wants the money wired, usually overseas.
Inspector Louis J, Di Rienzo
U.S. Postal Inspection Service
As always, be careful of any deal that sounds too good to be true.
After the recommendations of four months suspension from the New Jersey Disciplinary Review board and even disbarment from the state Office of Attorney Ethics, the New Jersey Supreme Court decided to simply censure New Jersey lawyer Kevin Wigenton for unethical conduct. Mr. Wigenton was accused of negligently misappropriating trust and escrow funds. In 2002, a random audit was conducted by the Office of Attorney Ethics (OAE). Following a second audit, the OAE brought charges against Mr. Wigenton of multiple instances of knowing misappropriation of client trust and escrow funds and with acting with a conflict of interest in a real estate transaction.
After review of the record, the court found that Mr. Wigenton did not knowingly misappropriate the funds, but did so negligently due to “terrible” record keeping practices. In its order, the court noted that though Mr. Wigenton had “grossly deficient” accounting methods and had violated professional conduct rules of safekeeping property and conflicts of interest, no client or third party was harmed.
-Josh J.T. Byrne, Esquire and Shilpa Kadoo
Matthew Francis Henry, a former Cozen O’Connor associate, has been suspended from practicing for 30 months by the Pennsylvania Supreme Court for extravagant false billings to clients and practicing law without holding an active license.
The court order described five examples of situations in which Henry falsely submitted bills. In one case, Henry billed Cozen client Lititz Mutual Insurance Company for 18 months after the litigation had ended, and included times spent on nonexistent motions and false travel to hearings. In the end, Henry submitted $77,000 in false bills, of which Lititz had paid approximately $19,000. Cozen O’Connor discovered the false billing in May 2009, rescinded the client’s unpaid bills and refunded what they had already paid.
Henry was found to have violated seven rules of professional conduct, including RPC 1.1, RPC 1.3, RPC 1.4, RPC 1.5, RPC 4.1, and RPC 8.4 (rules dealing with competence, diligence, communication, fees, truthfulness in statements, and misconduct).
Four months after failing to renew his license, Henry, while continuing to practice at Cozen, turned himself into the disciplinary board and notified them of the false billing. He agreed to a 30 month suspension. A letter from a psychologist who treated Henry was included in the disciplinary order. The letter, written in September 2011, describes problems with alcohol and marijuana abuse. As we have previously noted, up to 60% of all legal malpractice cases involve alcohol abuse. Legal malpractice avoidance best practices include careful attitudes about billing, and a careful watch over personal habits.
-Josh J.T. Byrne, Esquire, Shilpa Kadoo
It is no secret that our population is aging. According to the Department of Health and Human Services, persons 65 years or older numbered 39.6 million in 2009 (the latest year for which data is available). They represented 12.9% of the U.S. population, about one in every eight Americans. By 2030, there will be about 72.1 million older persons, more than twice their number in 2000. People 65+ represented 12.4% of the population in the year 2000 but are expected to grow to be 19% of the population by 2030. Along with the aging population, and a struggling economy, is an aging workforce in all sectors.
The aging population of lawyers presents a particular set of issues. Older lawyers have years of experience that make them among the best in the business, but also can face disabilities that can be sudden and dramatic, or slow and hidden. These disabilities create a real legal malpractice and professional liability risk. In 2005, the National Organization of Bar Counsel and the Association of Professional Responsibility Lawyers appointed a Joint Committee on Aging Lawyers to study the challenges raised by aging lawyers and propose solutions and best practices for attorney grievance committees, bar associations, courts and the Bar. Among the important suggestions by the joint committee is that solo practitioners designate “successor” attorneys, to step in to their practices and protect clients in the event of their death or incapacity.
We have previously discussed the frequent involvement of lawyers in Ponzi schemes. A 77-year-old Pennsylvania lawyer is now facing federal counts for allegations of a Ponzi scheme. Anthony J. Lupas, Jr. was arrested on Thursday, March 29, 2012, and was charged for mail fraud in an alleged Ponzi scheme, involving approximately $4 to $5 million.
Mr. Lupas was immediately taken for an arraignment at the U.S. District Court. Though he was released without requiring to post bond, he was forced to wear an electronic monitoring bracelet and must remain under house arrest unless an activity is approved by federal probation officers.
Lupas now faces 20 years in prison and a $250,000 fine. Mr. Lupas’s son is Luzerne County Judge David W. Lupas, and the Judges in Luzerne are seeking to recuse themselves from the matter and a separate civil action where Mr. Lupas has been sued by more than twenty investors.
-Josh J.T. Byrne, Esquire and Shilpa Kadoo