Advance Fee Scam Aimed at Franchisor Attorneys

Email scams are nothing new. As long as people have been using the Internet, clever scammers have been using it as a tool to perpetrate fraud on unsuspecting victims. Over the past several years, fraudsters have become more sophisticated and have begun targeting attorneys with their scams.

The most common type of attorney scam is the "check fraud" scam, which is described in this article by the Journal of the American Bar Association. The exact method of the scam varies, but always involves the perpetrator (who often purports to be from overseas) sending a bad check to the attorney, who then deposits it into his or her trust account. Days later, the perpetrator asks for some portion of these funds to be returned. The lawyer complies before the original bad check bounces, only later learning that the funds that were "refunded" or paid out to the fraudster never cleared in the first place.

As lawyers become more savvy, so do the fraudsters. As aware as I am of potential scams, one clever new scam -- this one targeting franchise attorneys specifically -- caused me to waste entirely too much of my own time researching the facts before I concluded that it, too, was a fraud. As a result, I write this post in the hopes of preventing others from wasting their valuable time, or worse, getting taken by this particular scam.  

The Scenario

I received a number of emails purporting to be from a number of different high-ranking individuals based in an overseas company. The company itself is a legitimate one, and is very well-capitalized. A simple Google search confirms that the people who have supposedly sent me the emails are high-ranking individuals at the company. The multiple emails I received are from several different "officers" of the company. Each of the emails looks basically the same, and each one of them originates from a gmail address from one of the supposed officers.

The initial solicitation that I received from every one of these alleged officers says something along these lines:

We had a franchise agreement with a company in your area and we would like to retain you to resolve this matter.

if you are interested please advise us on your initial retainer fee we shall forward you the agreement for you review.

I responded to the first such email and asked for additional information about the specifics of the "matter" which the company would supposedly be "retaining me to resolve." I received back a rudimentary franchise agreement purporting to be with a company in my home city. In this poorly-drafted agreement, my would-be client supposedly paid a significant initial franchise fee (over $500k), but it was difficult to tell what the money was paid for (i.e., what marks were being licensed, and where would the so-called franchise be operated?). Also, I was unable to find any evidence that the alleged franchisor ever actually existed.

Upon my further follow-up -- where I asked a number of questions about the purported franchisor, about the business being licensed, etc. -- the would-be client replied by simply asking me to provide my initial retainer fee, refusing to answer any of my substantive questions about the supposed dispute.

After reaching out to my network, I learned that a large number of franchise attorneys also received similar solicitations. Each one of the emails says to the recipient that the company needs an attorney "in the area" to help resolve a dispute relating to a franchise agreement, and asks the attorney to forward his / her initial retainer requirement. In each case, a poorly-drafted franchise agreement is provided where a significant initial fee (around $500,000 - $600,000) was supposedly paid by the "client."

The scam here is this: the attorney / intended victim would quote a substantial retainer (given that the client is from overseas), and then shortly after she or he receives a check for the funds, the client would then say that it "reached a settlement" with the other side, and ask the attorney to refund the retainer. The fraudster hopes that the attorney would then cut a check for the refund. Then, several weeks later (and after the refund check is cashed), the attorney would learn that the original check was fraudulent.

This is the first scam I have seen that appears to specifically target franchise practitioners. I hope that, based on the experience of attorneys who were the intended victims of this scam, others can avoid being defrauded.