Banks usually avoid having to deal with the consequences of advance fee fraud, since they make the depositor responsible for coming up with the missing money when a check turns out to be fake. But a lawyer who just got scammed is taking Citibank to court, because he says their “unconditional” guarantee that the check was legit led directly to his loss of $182,500.

On Oct. 7, 2008, the firm alleges, it received a “Citibank Official Check” for $367,000, and the firm deposited it into its Interest on Lawyers Trust Account at Sterling Bank in Houston.

A Buckley, White, Castaneda & Howell “employee telephoned Citibank and verified that check number 310096829 in the amount of $367,500 was paid. The firm relied upon this unconditional representation in allowing a wire transfer of $182,500 to a supplier of [the Japanese company] in Hong Kong,” the firm alleges in the petition.

On Oct. 10, despite Citibank’s “unconditional representation,” Sterling Bank informed the firm that the check had been returned as “counterfeit,” the firm alleges in the petition. The firm alleges Sterling Bank drained the firm’s IOLTA account — taking more than $100,000 — and took $77,000 from the firm’s operating account to cover the wire transfer.

…

The firm seeks $182,500 in actual damages for Citibank’s alleged negligence and negligent misrepresentation, and it also seeks a minimum of $367,000 in punitive damages.

One of the most frustrating things about advance fee fraud is that banks treat is as a problem for the banking customer and refuse to take any responsibility in it. If they did, they’d probably work harder to prevent it, by doing things like warning customers not to access “available” funds unless they really trust the writer of the check, and speeding up their verification process to identify fraudulent checks faster.

This lawsuit won’t address all of those issues, obviously, but we’ll be interested to see whether or not Citibank is held responsible for its role in the scam.

“Lawyers Warned to Be Wary of Client E-Mail Scams” [Law.com]
(Photo: stan)

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