October 2015

Fraudsters 1, Code of Ethics 0


Thieves Targeting Lawyers on the Rise
It starts innocently enough. An email arrives asking if you handle a certain type of case. The prospective client already has a judgment (what happened to the attorney who obtained the judgment?) or simply hasn’t been paid for a shipment of goods. The goods are often described with a great degree of specificity, but not always.

The client urges you to send an immediate demand letter and asks if you will accept the case on a contingency basis. The defendant is identified by the client so you can run a conflicts check. There will be no conflict.

You agree to accept the case. The client eagerly agrees to pay 10% if the matter is settled with a demand letter and 25% if the matter goes to suit. Extras cost extra. You ask the client to sign a retainer and he cheerfully does, but when you ask for an advance for costs there are excuses.

“Just write the letter, I’m sure he will settle.” Since you feel you can front the client the cost of a stamp (or an email) you go ahead. You prefer a physical letter because of the imposing nature of your letterhead.

You send the demand letter threatening all types of woe and calamity if the debt isn’t paid. Surprisingly, the debtor gets back in touch almost immediately, begging you not to file suit, because certain unspecified “modalities” with credit facilities’ covenants that could be affected.

He promises to forward a cashier’s check in full payment of the debt plus 10% for your fee. You share the good news with your client, who immediately agrees to the terms. A few days later, a cashier’s check arrives. You deposit it in your trust account, or worse, your operating account if you are in the Middle East--attorneys in the Middle East don’t have trust accounts--and the bank gives immediate credit. 

Now the Code of Ethics comes into play. Commingling funds is violation of ethical rules and must be avoided. Only 10% of that check is yours, and those funds cannot mix with the 90% belonging to the client, even for a day.

Never mind that those funds mixed happily while frozen within that negotiable instrument; the minute the item is deposited, you must segregate them. The way this is normally done is by cutting two trust account checks: one to yourself for the 10%, the other to the client for the remaining 90%.

The client asks you if you wouldn’t mind sending a wire instead, there are certain cash flow problems that must be addressed. You agree, send the wire, and pat yourself on the back for a job well done and for following all the ethical rules. 

Your smug feeling of self-satisfaction lasts for no more than a month. That is when the bank calls you--or posts a message somewhere you wouldn’t normally look--to tell you that the cashier’s check has not been honored by the issuing bank and so the funds have been taken out of the trust account. The cashier’s check was a counterfeit. 

You contact the company that issued the check but they do not respond. You contact your client but he doesn’t respond either. At this point you might start to worry. The money taken out of the trust account does not belong to you. It belongs to your clients. The bank may have made itself whole, but now you have to make your clients whole. 

What happened? The fraudsters know the Code of Professional Ethics at least as well as you do. They know that you will not commingle funds and will wire them out immediately. To settle a case, they know you will take the path of least resistance and send a demand letter before initiating suit. The debtor, of course, does not exist, as debtor and client are the same person. If you had done a little more due diligence, you would not have found any corporate listing for the debtor. 

This type of fraud commonly targets victim attorneys in the United States and is making its way around the world. One variation is to create a fictitious divorce decree with a child support obligation. In the U.S. at least, child support judgments are the only types of self-enforcing judgments carrying a risk of incarceration. A person threatened with incarceration will pay, if he can, to avoid jail. So a post-demand offer of immediate payment raises no suspicion. 

How can you protect yourself? My somewhat radical suggestion is to commingle funds for thirty days until the authenticity of the cashier’s check is determined. Get E & O insurance if you have a trust account, because guess what? You are a financial institution.

Insisting on reviewing a copy of the fictitious judgment may or may not raise any red flags. In the U.S., judgments can be forged by a fifteen year old with a pirated copy of Photoshop and a color printer. Court judgments in the U.S. are printed on plain, 20# white letter size bond paper with no security features. I mention the weight because U.S. currency uses a different weight and that in and of itself is a security feature.

Why have attorneys who practice overseas not been targeted like American attorneys? American attorneys are favorite targets because of trust account rules and their vigorous enforcement by bar regulators. The fraudsters rely on the victims to follow the rules. 

That is how they get paid.    
The image is from an actual forged cashier's check (thanks, Google! ) (Creative Commons license). The routing numbers are bogus. No, this did not happen to me, but it has happened to more than one Florida Bar member. Consider this article a heads-up.

If you want to read about more scams, look at scamwarners.com or for even more amusement, 419eater.com.

I have had more than one client who victimized by such scams, in the Middle East and elsewhere. For more information contact me at m o k at m u 7 a m i  dotcom, with spaces removed and @ added. 

What Notaries Don't Want You to Know


Notaries don’t want you to know that you don’t need a notary--at least in the United States.

Once upon a time I needed an affidavit from an incarcerated witness in a civil case. You might think that you would make an application in federal court asking a judge to order the U.S. Marshal’s Service or the Bureau of Prisons to permit a notary to enter the prison. So I filed that motion.

When the motion came up for hearing, the judge looked at it and said,

--You don’t need a notary.
I disagreed.

--Judge, we need him to sign an affidavit. There are no notaries at the facility.

--Take a look at 28 U.S.C. 1746. Like I said, you don’t need a notary. Motion denied.

The judge, of course, was right. This little-known provision of federal law substitutes for notarization in the broadest terms:

“Wherever, under any law of the United States or under any rule, regulation, order, or requirement made pursuant to law, any matter is required or permitted to be supported, evidenced, established, or proved by the sworn declaration, verification, certificate, statement, oath, or affidavit, in writing of the person making the same (other than a deposition, or an oath of office, or an oath required to be taken before a specified official other than a notary public), such matter may, with like force and effect, be supported, evidenced, established, or proved by the unsworn declaration, certificate, verification, or statement, in writing of such person which is subscribed by him, as true under penalty of perjury, and dated, in substantially the following form:

(1) If executed without the United States: “I declare (or certify, verify, or state) under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on (date).

(2) If executed within the United States, its territories, possessions, or commonwealths: “I declare (or certify, verify, or state) under penalty of perjury that the foregoing is true and correct. Executed on (date).
(Signature)”. ”

At least a few states have analagous provisions, but query whether any of these are necessary, given the supremacy clause. On its face this section provides that it may be used when required “pursuant to law,” not pursuant to federal law. Note that this section has extraterritorial application: there is no need to run to an American Embassy overseas if notarization is required. Just use 28 U.S.C. 1746.

Lawyers know that notarization of a document is essentially a formality. The notary’s judgment that the documents presented by an affiant are authentic or even that the affiant’s identity is correctly stated is not binding on a subsequent finder of fact.

A notarized lie is still a lie.

In a criminal case, the disability of a notary due to essentially any reason, whether lapse of license, insurance, or other failure to renew is not a defense to a charge of perjury.

When it comes to the recordation of interests in land many states insist that a notary be involved. It would be interesting to see a mandamus action based on the authority of 28 U.S.C. 1746.

So what notaries don’t want you to know is: you don’t need a notary.

Spread the word.
The image is a public domain stock photo of a French civil law notarial document (thanks Google Images). The word “affiant” refers to a person who signs an affidavit.

Saudi Arabia: Time for a Safety Stand-Down?


The F-22 "Raptor" interceptor is one of the world's most advanced fighter planes.  Yet after a crash in late 2004, the U.S. Air Force ordered a general safety stand-down grounding all of them.  At the time, an Air Force spokesman said that safety stand downs are appropriate following an accident so that the authorities have an opportunity to investigate and study further in order to avoid similar accidents in the future. While not a precise comparison, it is unquestionable that Saudi Arabia has suffered a series of incidents which suggest that a nationwide safety stand-down is appropriate. In the recent past:

Hajj (Pilgrimage) Stampede

The most unfortunate, but not the sole incident this year was the stampede during the hajj (pilgrimage) that led to the deaths of over 1000 pilgrims. Blame was initially placed on African pilgrims' failure to follow instructions.

The closing off of access roads as a security measure to protect the Deputy Crown Prince was cited as the real cause, as if the Deputy Crown Prince could be blamed for the tragedy. There is nothing wrong--indeed, it is laudable--for a high government official to personally visit the scene at an annual event of such importance to the Kingdom.

The Deputy Crown Prince cannot be blamed for those measures undertaken by the security services. Blaming pilgrims is counterproductive. Some in Saudi Arabia even blame Iranian agitators, though there were many Iranian victims in the stampede.

Raytheon Building Fire

Saudi Arabia has comprehensive building and fire codes. Ignoring these codes is an invitation to tragedy. That is what happened on August 30 when a fire broke out in a six story building leased by Saudi Aramco. Ten people died and eighty-three were injured.

The dead victims include three Canadians and a Nigerian. Both Aramco employees and family members are among the dead and injured. Nearly two months after the tragedy Saudi Aramco has failed to release the names of the victims, much less the results of the promised full investigation.

The reason is because the reasons for this tragedy are already well understood.

The building is six stories high. There is a parking lot in the basement. I do not know how many sub-basements there are; I have heard that there were 70 cars in the basement but I don’t know if this is accurate.

At 0545 a fire started in a transformer in the basement; as a consequence of the fire, the transformer started “spewing oil.” Automobiles parked nearby ignited. The word “explosion” was used with respect to the gas tanks in the burning cars but I don’t know if this is accurate.

At 0645 municipal fire trucks were seen headed to the site. There are stories of fights between Aramco and the municipality over who had responsibility for fire fighting. The municipality does not have, or could not field, any ladder trucks.

Sprinklers in the basement did not exist or were not functioning. Exit doors were blocked off or marked “Employees Only.” Apparently the elevators did stop working so no one was trapped in an elevator.

With no ladder trucks or nets, fire department personnel encouraged residents to jump from the second third and fourth stories. Some did so, breaking their legs.  The National Guard responded with helicopters to take people off the roof.

The fire was put out or burned out later that day. There are no municipal mains or fire hydrants, so it is unclear how the municipal fire department fought the fire.

Aramco has ladder trucks and modern fire fighting equipment. But no ladder trucks took residents out of the burning building--a nearby construction crane was pressed into service for rescue until the helicopters arrived to evacuate victims from the roof of the building.
The burnt building that housed employees and their families is owned by [NAME DELETED] who had a no-bid “sweetheart deal” with Saudi Aramco to house employees.

Employers must provide housing for their employees in the Kingdom; either in kind or through an allowance. Aramco was the landlord. Employees do not sign apartment rental contracts, they are assigned housing. Eight similar buildings were constructed on a plot of land that should have allowed the construction of only four.

Apparently this building did not meet either code. I point this out because some might say no code exists. It does. 

Residents were given 6000 SAR (about $1600 USD) in compensation and if their vehicle was destroyed, a new car.

Apparently there was no fire insurance taken out on the building. 

Aramco has an office in Houston and business interests in Texas, where they own a refinery. North American employees are recruited out of the Houston office and usually travel to Houston for interviews before being sent on to Saudi Arabia.

Al-Othman Building's Blocked Exits

Perhaps mindful of the recent fire, Aramco's own loss prevention team has refused to attend meetings at the Al Othman Building, an Aramco-leased building that allegedly fails to meet safety requirements. This is like a physician refusing to permit his family to be treated at the hospital where he works, or a chef not allowing his family to eat at his restaurant because of health concerns. In one recent incident, the team was ordered to attend on pain of termination.

The contract to lease the Al-Othman building was another no-bid contract which the Aramco loss prevention team did not approve. In case of a fire, elevators are inoperable, but the staircases at Al-Othman are too narrow to handle all the tenants on the upper floors trying to get downstairs.

Staircase access doors open inwards, blocking the flow of people trying to get downstairs. Concrete was improperly poured and instead of being level, the steps slope downwards. During an evacuation, a trip and fall on the unconventional staircase almost guarantees a stampede and casualties.

Mecca Crane Collapse

The received wisdom says the September 11 collapse of a crane at the Great Mosque in Mecca was due to a freak storm. The collapse killed 111 and injured 394.

The received wisdom is wrong. There were dozens of cranes in use that day and all weathered the storm with reported 35 km/hr winds. Cranes are engineered to withstand such winds: this storm was not a Hurricane Katrina. But the cranes have to be secured and the crane that toppled was the only crane that was not.

On September 15 the Kingdom suspended Saudi Binladin, the prime contractor on the project. Saudi Oger, Rafik Hariri's construction firm, was similarly suspended, though there is no link between Saudi Oger and the crane collapse.

The BinLadin Group is known for their professionalism and adherence to world-class standards. So what really happened? [FN1 The late Rafik Hariri was the former prime minister of Lebanon. An engineer by training, he operated a construction company in Saudi Arabia.]

Politics may be involved. These two contractors are said to be favorites of the late king, King Abdullah. At this point, Saudi Binladin's failing demonstrates at the very least a severe and serious lack of judgment. Saudi street rumors point to Iran, claiming that the real reason BinLadin was suspended is because they had employees on the payroll who owed allegiance to Iran, Hezbollah, or both.

Yemen War

Just as there is no such thing as minor surgery, there is no such thing as a small war. As to the first, ask Joan Rivers' family. In 1914, German and Allied troops were promised at the start of the five year war that they would be "home by Christmas." The Yemen war was supposed to be a police action to restore the legitimate government of Yemen.

Instead, the war broke open the fissures that once separated Yemen into two separate republics. Now Iran and ISIS have joined in. The use of Saudi military force was initially restricted to air forces but now ground troops have been deployed. There is no end in sight to the conflict. [FN2 To be fair, the invasions of Panama and Grenada were limited in scope. But twenty-five years later, the world is still harvesting the seeds of Iraq's 1990 invasion of Kuwait.]

Wars cost a great deal of money. The United States economy suffered and went off the gold standard in the 1970's as the 1960's bill for Vietnam came due. The dramatic drop in the price of oil has left Saudi Arabia with less available cash to pay for the Yemen war.

What's more, for a government war is a great distraction. The mouths of the war effort must be fed over all other considerations because soldiers' lives are at risk. Focusing  so much effort on the war means that other matters must necessarily be given less consideration. Matters like fires, stampedes and crane collapses.

Time for a Stand-Down?

There is no plaintiff's bar in Saudi Arabia. It is fair to question whether in countries like the United States the fear of defending tort cases has led to over-regulation and increased and useless costs for society as a whole. While this is an arguable point, the total absence of a plaintiff's bar and a regulatory system imposing real consequences on otherwise well-managed companies may have led to an environment where a repeat of tragedies like these becomes increasing likely. Perhaps it is time for a nationwide safety stand-down.

Opinions discussed in this article are my own and those of no other person or entity. A copy of the Saudi Fire Code is available at: http://bit.ly/1G8YkfP Photo credit: Al-Arabiya News.