MINNEAPOLIS (CN) - A Minnesota law firm claims in court that it lost $396,500 from its IOLTA account because Wells Fargo Bank assured it that a $400,000 cashier's check had "cleared," but it was a forgery.
Milavetz, Gallop & Milavetz, of Edina, sued Wells Fargo Bank in Federal Court.
Milavetz Gallop (MGM) claims two Wells Fargo service representatives failed to notice obvious red flags and cleared the bogus check.
MGM claims the check was an altered photocopy of a Citibank cashier's check forged by scammers who posed as a client in need of assistance in obtaining a $400,000 personal injury settlement.
The law firm says the criminal organization finds its target firms through legal referral websites. It claims that Wells Fargo knows of numerous scams involving Asian countries, especially wire fraud schemes targeting lawyers. It claims that Wells Fargo employees are trained under Financial Crimes Enforcement Network procedures to monitor suspicious or high-risk transactions.
The network is part of the Treasury Department's effort to combat money laundering, terrorist financing and other financial crimes.
Milavetz Gallop claims that a 40-year-old Korean woman, "Hira Shio," emailed MGM 2009, claiming she had been injured in Minnesota and needed help in obtaining a settlement.
Days later, MGM says, it received a bogus $400,000 Citibank check, which was deposited into its IOLTA account at Wells Fargo's Bloomington, Minnesota branch.
The entire transaction was handled over the Internet, MGM says, which should have been a red flag for Wells Fargo.
"MGM, on multiple occasions, prior to the wire transfer, notified Wells Fargo that its outgoing wire transfer was contingent on the $400,000 check (Exhibit A), clearing MGM's trust account," the complaint states.
"Wells Fargo knew that the $400,000 check MGM had deposited into its trust account was fraudulent at least three days prior to the wire transfer, and MGM did not receive notice of this information until approximately one week after Wells Fargo sent the wire transfer.
"Prior to the wire transfer, Wells Fargo falsely represented to MGM that the fraudulent check (Exhibit A), had 'cleared' and issued the 'outgoing wire transfer,' even though Wells Fargo and their customer service representatives working with MGM knew, or should have known, that the cashier's check was fraudulent."
The law office claims the scheme works like this: "Law firms, such as MGM, would receive forged checks or official checks from criminal conspirators, which they deposited into their trust account. The forged checks appeared to be genuine to a nonbanker. The forged checks contained inaccuracies that an experienced banker should have noticed. These checks were deposited into the law firms' trust accounts for disbursement. The forged checks were to be used for payment of claims after the checks cleared. These checks were drawn as 'cashier's' or 'official' checks. The check would also have a false telephone number for the drawer; when the victim called this number, one of the conspirators would answer and falsely verify the legitimacy of the check and the underlying transaction."
The law office says it wire transfer arrived at a bank in Hong Kong on Nov. 12, 2009, and was promptly withdrawn.
MGM claims the forged check was dishonored by Citibank as early as Nov. 6, 2009, but Wells Fargo waited until Nov. 18 to inform Milavetz Gallop about the forgery.
Milavetz Gallop seeks damages for negligence, negligent misrepresentation, negligent hiring, promissory estoppel, breach of fiduciary duty and breach of customary practices. It is represented by Robert Milavetz.