The internet is a great tool for all legal professionals, including mediators. Between the information available online and the ease in sharing information, it is almost impossible to imagine a world without the internet.
The bad news, however, is that the internet also increases the ease with which internet scammers can communicate their malice. We all have seen how common internet scams have become. Internet scams cost businesses a great deal of money and frustration; it is essential to know what to look for to avoid these traps.
Mediators are now well enough established in business to become targets of scams.
We recently learned of a scam going around, targeting mediators in particular.
Here is a cautionary tale.
The scam involves two alleged companies (in this particular scam, Barr Holdings and Arrow Electronics) who are alleged to be involved in a commercial dispute and request the help of a mediator. If the mediator agrees to help, a mediation contract is sent to the mediator with the signature of both company presidents. Here are the initial email exchanges, copied verbatim:
How are you today? We would like to thank you for your response to our inquiry for legal services. On behalf of Barr Holdings Limited, we are one of the UK's leading design and construction companies, specializing in the design and construction of sports stadia and arenas as well as large scale leisure, commercial, and retail projects.
However, We wish to inform you that we would be needing your mediation help to assist us with a breach of contract matter and also retrieve funds owed to our company. We ordered goods from Arrow Electronics, Inc. and was asked to make a 50% down payment for goods to be delivered to us and that we did and up till date no goods were delivered. We asked for a refund and they made a part payment and after that no other payment was made. We seek your help to help us collect these funds owed to our company amicably as we do not wish to go any further with the said transaction. We have made several attempts in the past to collect these funds which all ended negatively. We are aware that a conflict search would need to be done.
Here is the name of our supplier for your conflict check of interest-
Arrow Electronics, Inc., 7067 Columbia Gateway Drive, Suite 170 Columbia, MD 21046
Attached to this email you will find attached copy of contract, email correspondence and proof of payment for your perusal. We are prepared to pay a reasonable retainer fee for this service as soon as our board gets to review the terms of your engagement. So please have that sent to my attention via email if this is a case you are willing to handle.
What we require from you is to mediate the dispute and collect the funds peacefully without litigation [emphasis added]. We look forward to your prompt response. We wanted to also inform you that the said funds owed to us has caused a great strain on our company's operational capital and we want this issue to be resolved quickly. We would like to know a few things about your firm and also how you intend to handle this dispute
Then the mediator is sent an email claiming that the two sides have come to an agreement and one party will send a cashier’s check to the mediator to deposit and hold in trust on behalf of the other party.
On behalf of Barr Holdings Limited we have decided to retain your services after our review of your terms and attached herewith is a copy of the signed agreement. Due to your establishment as our mediator in the United States we have been able to yield a positive result.
Furthermore, we had talks with our contact and brought the possibility of mediation to his notice as we informed him of our correspondence with your service. He informed us that some Payment will be effected on or before 8th November 2012.
This is a positive breakthrough for me as this development will eventually reduce time and cost for all parties involved. However I do not intend to introduce any legal pressure unless the deadline of 8th November 2012.
Contract is breached. I do hope you understand my position as i intend to introduce litigation as a last resort.
I instructed that further correspondence including payment be made via our mediator. Please confirm name and mailing address check payments is to be made out on so we can forward it to him at once. It is also my thinking that your engagement fee be deducted as soon as funds are received by you and the balance held in trust pending further instruction.
I await your urgent acknowledgment and requested details as time is of the essence thank you.”
After the mediator receives the check – supposedly to pay a portion of the money owed that was in dispute -- the party sending the check asks the mediator to wire a portion of the funds to a creditor of the party. A wire transfer cannot be undone. Once the money is sent, it is gone.
In the scam, of course, the cashier’s check is fraudulent, and the mediator is now responsible for the money sent to the creditor. Unlike wire transfers, counterfeit cashier checks are not good until the issuing bank actually pays. So a wire transfer irrevocably removes money from the account and the fraudulent cashier’s check is not finally payable – even if the money initially appears in an account -- until after it has cleared by the issuing bank, which can take days, often longer. Thus, in the scam, the mediator is exposed to losing all of the money sent via wire transfer. Here is the email exchange from the scammer trying to close the deal.
How are you doing today??
Please do proceed with the swift wire transfer to our creditors as instructed yesterday. Today is the last date giving to us by our creditor to remit payment to them as promised. I Hope you understand how important this transaction mean to us because we don't want our company to be sued. if they file a law suit against us it will bring a bad reputation to our company and we will also loose our business relationship with our creditor. Due to my daughter condition am leaving the offices to know how she doing so keep me updated once the transfer is made this morning your time. I strongly believe you can handle the transaction ASAP.
Await your acknowledgment of instructions and wire confirmation slip thank you.”
This is an all-too-common situation. Mediators and attorneys must be on the lookout for scams. Fortunately in this case the mediator sensed there was something ‘fishy’ and did not bite.
Here are some signs that you might be the target of a scam
- Does the email have poor grammar, spelling errors or strange vernacular in general? A large majority of scams come from outside the U.S. and generally do not write in English very well and often use translation websites.
- Have you received emails or heard from both sides individually? Most scams are the work of one person who usually speaks for the other side. If you are only hearing from one party, there is a good chance it is part of a scam.
- Has it developed quickly, or have the two sides come to an agreement without your help? This is usually part of scam. Whoever is part of the scam is trying to get the money from you without you even realizing what is happening.
- Did you receive a call from a location that does not correspond with either party? The mediator and target of this scam was receiving calls from Naples, Florida, a home to neither of the parties involved. This should be another sign that something fishy is going on.