LawPro Warning to lawyers re equipment loan fraud

LawPro tells the profession:

Our LAWPRO E-News mailing last week prompted several calls from
Ontario lawyers. From information we have gathered, it seems
clear to us that there is an organized scheme underway to
defraud Ontario lawyers using matters involving small business
equipment loans. These matters all share the same basic timeline
and circumstances, and in some cases, the same purported
individuals or entities (a lender from Halifax).

In all cases, about one month ago a previously unknown client
retained the lawyer to do an incorporation. The client presented
realistic looking photo ID (a newer Ontario driver licence). The
client paid in full for the incorporation.

In the last week the client returned to the firm asking the
lawyer to act on an equipment purchase loan matter. Loan amounts
are approximately $350,000 and the loan is to come from a
Halifax-based lender (there is someone answering the phone for
the lender - we suspect the fraudster or an accomplice). The
client is pushing to have the loan completed as quickly as
possible. The loan proceeds are to go to a third-party
corporation (not the client's new corporation).

There are clear badges of fraud in the above scenario. The
lawyers' suspicions were also raised for one or more of the
following reasons: the client and corporate addresses were the
same; it is unusual for a brand new corporation with no apparent
purpose to get a loan in this amount; the only security for the
loan was a promissory note or GSA; the client had only a cell
number or the home phone number given was not working, and the
address on the driver's licence is not a real one.

Over the past year, almost twenty of these types of fraud
schemes were reported to LAWPRO during the various holiday/long
weekend times. Please be wary if you are handling a matter that
appears the same or is similar to the ones described above.
Clearly there appears to be an organized fraud scheme targeting
Ontario lawyers. We encourage lawyers and their staff to be
extra careful in the next few weeks. Remember that these are
very sophisticated frauds. The letters and other documents
provided by the client and the certified cheques or money orders
received from the lender will look legitimate - but turn out to
be counterfeit. Cross-checks and searches on the names,
addresses, serial numbers or other information in the
documentation provided will prove to be false.

Please read LAWPRO's new Fraud Fact Sheet at
http://www.practicepro.ca/practice/pdf/FraudInfoSheet.pdf to
learn more about the red flags to look out for. Or see the
practicePRO Fraud page http://www.practicepro.ca/fraud for
information on fraud and how to avoid it.