Lawyer Sues Citibank For Not Stopping Him From Losing Money In Nigerian Scam

from the blame-goes-around dept

A lawyer in Houston is suing Citibank after he got scammed in a variation on the classic Nigerian email scam. There are a few interesting tidbits here that are worth discussing. First, the details: the lawyer, who does collections work, was contacted via email by a company that claimed to be a Japanese company that was trying to collect money from four clients in the US — offering a contingency fee to the lawyer for help in getting the customers to pay up. Soon after that, the “Japanese company” claimed that one client had agreed to pay some of what it owed — and it sent the law firm a check for $367,500. Citibank said the check cleared, and the law firm wired $182,500 to the company. Of course, it later turned out that the check was fraudulent, and the law firm was out the $182,500.

This is a variation on a popular version of the Nigerian email scam. The way it usually works is that the scammer buys something that’s for sale… and then sends a check that’s for significantly more than the purchase price using some sort of excuse. Once the check “clears,” the seller is asked to wire back the excess money. This version is interesting in that it’s slightly more sophisticated — carefully going after law firms that do collections. Rather than being a totally “out of the blue” situation, they worked hard to make it seem like business as usual until the scam is done. Sneaky.

While it’s easy to mock the lawyer for getting tricked, the basic version of the scam and this more sophisticated version both rely on a very unclear part concerning check processing. Most people assume that once a check “clears” it’s confirmed as valid. That’s not true. Banks clear the check before it’s actually validated, and the scammers exploit both the time between these two events and the fact that most people assume (or are told) that once a check clears, the money is definitely theirs. There are a few ways to solve this that banks could take. They could not clear the check until it’s absolutely declared valid. Or, they could make it much clearer that, while the money is available, the check has not been validated and the money could be pulled. Since most banks do neither, the guy’s lawsuit against Citibank is at least somewhat understandable — though, it’s unlikely a court will agree with him.

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Comments on “Lawyer Sues Citibank For Not Stopping Him From Losing Money In Nigerian Scam”

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Chronno S. Trigger says:


My current bank prevents any money transfer of 6 (maybe 5) digits or more to “clear” without confirming that the money is actually at the other bank. So larger checks could be held for as much as 20 days before the funds are available. My old bank did this for anything over $1,000. I figured all banks did this to prevent this exact kind of thing. I also figured that business accounts did this as well since it takes forever for larger payments to get anywhere.

Anonymous Coward says:

My bank account online shows both an “available balance” and a “posted balance”. I don’t understand why it just doesn’t stay in the “available balance” column until it is totally cleared (meaning my bank was paid by the issuing bank) and then they could move it to the “posted balance” column to show it is a done deal.

What I am getting from this article is that it would be considered part of the “posted balance” even before the bank has recived the funds?

Moderation (profile) says:

I hope this guy wins. Normally I’d side with the “he should have been more careful” crowd, but if the bank said it was a go, he has to be able to rely on that. The bank should at least eat his loss, if not the full check amount…

Maybe if they loose this case, banks in general will do a better job of providing up to date and accurate information to customers.

Anonymous Coward says:

Re: What?

If you were running a business and somebody owed you money, who would be the scumbag? You for trying to collect or the customer for running out on your tab?

I highly recommend you work retail as a living for at least a year and get some real world experience under your belt.

If you stop paying on your credit card and try to skimp out on what you owe, I would say you are the scumbag, not the agency for trying to collect.

I’m glad the IRS is now imposing a $500 limit to the write offs on collection agencies. If they write off more than that, it’s claimed as income on your return.

Knock yourself out. Write of $60,000 of $80,000 and let’s see that $60,000 boost on your income return, because you earned that money.

Phil D. says:


Banks need to be more stringent in their check clearing.

Ambiguities make for lawsuits, eg. this suit, and lawsuits make for more precise language in the future.

There is no reason to say the money is there if the money is not in your account and available to withdraw. I’m ignoring/assuming the bank has the cash funds to give you a reasonable withdrawal, but for business purposes the logic still fits.

If it takes two additional days, or an additional 2-3 weeks for a large transfer, so be it, but please don’t sugarcoat and bullshit me.

Skeptical Cynic (profile) says:

Re: Re:

Although I think that he should have been more cautious. People are missing one issue with this. Banks “clear” checks fast because;
1. Customers and Businesses don’t want to have to wait 5-7 Business days to get paid or access to their money.
2. Because of Laws and regulations.

But you do have to wonder with everything electronic why can’t money be truly cleared in two days?

Educated doesn't mean smart says:

The check is not really ‘clear’, but rather made ‘available’. This is due to a response by Congress to allow faster access to funds for all of us. But by no means does a cleared check mean it’s a good check.
Anytime you make a deposit, you have a certain amount available to you right away or the next day. The rest can be held for 2-3 days for a local check or 5-7 days for out of state. It may actually take over 10 business days (not including weekends & holidays) for it to clear the other bank & be OK for you. That is how scammers are able to do what they do, they know how to work the system to their advantage.

Vidiot (profile) says:

It's good to be a lawyer

The lawyer’s natural reaction is to sue someone; not everyone has that option. Most often, this exact scenario plays out for some desperate, unemployed schlump… bank says it’s cleared, so they write a check for the rent; then the counterfeit bounces, and the police arrest the poor sucker. Both the police and the courts are unsympathetic, and the victim/scamee spends years in jail, quite literally. When it happens to the lawyer, he not only ducks prosecution, but sues the bank as well.

And who said it cleared? A $7.00/hr teller?

Anonymous Coward says:

Moderation, I hope he doesn’t win. The bank has a fraud procedure in place. This event will fall into the hands of that group, who will probably refund the money quickly in light of the glaring evidence..

Are you that seriously deluded Analyst? The bank is going to cough up $180,000 + dollars, simply out of good will?

Chris says:

Check to clear

I read a while ago about a person who cashed a fake check he received from some junk mail. His account was credited the funds. He knew the check was fake and didn’t spend any of the money. After a month the bank found out the check was fake and tried to get their money back. He fought the the bank stating that the bank only has a certain amount of time before they can legally get their money back. Anyone know the laws or if there is a law stating the banks only have a certain amount of time before they they can claim their money back?

Anonymous Coward says:

Read The Article

the check was from Citibank
lawyer deposited it in a different bank
lawyer called citibank to verify that the check was legit
Citibank confirmed it
check actually was fraudulent
The lawyer was decieved by the scammer, and by Citibank
lawyer sues Citibank to cover losses

IANAL but it looks like Citibank is at least partially to blame here. Sure the laywer was a bit of a dumbass but would you do any differently if you had actually called the bank that supposedly issued the check and they confirmed it was theirs?

porkster says:

Shame on the banks!

When I first saw the heading I thought just another dumb bunny trying to blame someone else for their mistake. As I read the article I changed my mind.

This bank check thing also happens in New Zealand (although its had quite a bit of publicity here over the years).
I still blame the banks as they clear the cheque and make the funds available for use.

Surely if they can’t gareentee the funds then they should not make them available.

Michael Kohne says:

Should have known.

He probably should have known this was a scam.
He definitely should have known how the banking system works.

I don’t think he’ll win, banking law being what it is, but if the lawsuit can cause changes in how banks report things, then I’m all for him suing.

Right now, as far as I know, there’s simply no way for me to find out if a check is ‘good’ or not. It can bounce off the other bank at any time.

I’d personally prefer to not be given the money until the check is really good, but if I at least had some way to know when the check was ‘final’, that would be great. Right now I just wait 10 days then assume it’s good. Partial refund scams are, of course, ignored.

Of course, ‘final’ in this instance still isn’t ‘final’ because the check could be repudiated by the account owner when he gets his next statement. But I’d like to be able to at least know that the bank it was issued on has said ‘yea it’s good’.

anymouse says:

Lawyer not in touch with reality

Lawyer: Hi, I have a check from Big Scammer’s Biotch in the amount of $350,000, account #1234-56789, is this a valid check?

Bank Employee: Yes, that is the account number for Big Scammer’s Biotch’s account, but we have no record of the checks they may have issued.

Lawyer: Thanks for confirming that this is a valid check.

Bank Employee: Wait, I only said the name and account are valid, not that the check was valid.

Lawyer: Ok the bank said it was valid, lets run it thru and sue the daylights out of them when it gets bounced back as a fraudulent check…. I can smell the $$$ already, confirm my 1:00 tee time, I need to relax a little after all this hard work today.

With very few exceptions (positive pay users mainly) the banks have no clue what checks a company may or may not have issued (especially foreign banks/companies), and generally all they can confirm is that the name matches the account number (checks are sooo easy to forge these days), they can’t confirm that the company actually issued a check for that dollar amount unless the company is using positive pay reporting (this is where they send a list of the checks they have written to the bank on a daily basis, and the bank will only clear checks that are on that list, but most companies don’t utilize this level of control on their expenditure accounts).

Joe (profile) says:


I always side against a lawyer, but given the full story i guess i can see where they are coming from. If nothing else maybe this will spur banks to change their policies and be more clear about what has cleared and what is final.

Nigerians seem to learn quick, you would think that we could stay ahead of them but some of these tricks almost seem to crafty.

ddbb (profile) says:

As a lawyer who has received those emails, it seemed obvious that they were fraud. However, I’m a corporate lawyer. I do not know if plaintiffs’ lawyers get random clients over the Internet this way. When I get random calls, the first thing I ask is how the caller found my name. At least with referrals, you have something to verify.

It would not surprise me if someone overseas could dress up their operation to look legitimate. I wonder if he asked for a retainer. It has been my experience that the retainer request usually drives away prospective “clients” looking for free legal work or scams.

Anonymous Coward says:

There is a bigger issue and solution here.
The laws concerning holding checks were written when all transactions were done on paper and it may actually have taken a week to “clear” a check. These days, there is no excuse for a bank to hold a check or not confirm it within 24 hours.
Instead, the banks “hold” the money for you, “just in case” but meanwhile are using that money to earn interest for themselves by lending it out.
When banks stop holding out of state checks for 7 days or longer, and stop charging up to $50 for NSF, then it can complain. I hope this guy DOES win.

Danny (profile) says:

I don't know

I have no opinion as to whether the lawyer should win or lose. As, unlike some posters above, I realize I don’t know all the facts.

I do have some sympathy for the story the lawyer is telling, though. My rental tenant paid her October rent by check on October 3. I deposited it on October 6 and it cleared quickly. On October 21, the bank pulled back the money (she didn’t have cash in her account to cover the check). That caused me to bounce quite a few checks. I’d presumed once the check cleared it was mine to spend.

John says:


I’m a commercial litigation attorney, and have been approached by scamsters like this. Fortunately, I asked a few too many pointed questions, after which the scammers “settled” and decided they didn’t need me.

A few points: 1. Many people don’t understand the UCC provisions re: checks clearing. Ignorance? Perhaps, but totally understandable in my opinion. 2. My policy has been that any incoming checks must wait 10 business days to clear before leaving my IOLTA account. 3. It’s very perverse for a lawyer because he may SUSPECT he’s being scammed, but the client confidentiality provisions restrict him from contacting the FBI &/or local police departments. 4. I’m glad the lawyer made the other clients whole, but I can certainly empathize with him.

Man, there but for the grace of God go I… I hope the rest of the sanctimonious folks out there appreciate that.

cynthia powell (profile) says:


Greed, just common greed, it is bringing this country down. i will say this about lawyers, somebody had to be on the bottom of the list in school and this guy had to be the one. I am a housewife and I can see from here this is crooked. But that makes it better for some of these lawyers. A collection lawyer? What do you think? Sure someone is going to drop hundreds of thousands of dollars in your bank account just for doing a “good job”. I can hear him bragging about it now. I think it serves him right for being so ignorant and not being able to read enough to know how long this has been going on. It’s been all over the papers and I won’t even expect him to get on the internet. It’s pure greed and payback.

IANAL says:

How did he pass the bar?

This guy is a lawyer. He should be familiar with the Uniform Commercial Code. A check is not good until it is “presented” and “accepted.” A layperson might have a case against the bank, but a lawyer (especially one who practices in this area) must know the difference between these two terms and a check “clearing.”

Nigerian checks and subprime mortgages same differ says:

Everyone is blaming the banks and brokerage firms for their part in the subprime mess. No one is blaming the ignorant or uneducated slob who took out a zero interest loan for a house he couldn’t afford, but without him, there would be no subprime mess. In reading this article, alot (but thankfully not all) of people are blaming Citibank. How’s about blaming the lawyer who thought he could get a gob of money for no work down. America, what happened to taking responsibility for your actions? A sucker is born every minute, is it the duper’s fault you are an idiot and greedy?

desideratum says:

Alright, here’s how they work. Often times a cheque will clear and then the issuing bank will retract it. I had this happen to me two weeks ago with a cheque written to me. It cleared the next day, but within a few hours was taken back out of my balance because the issuing bank found the cheque was written on a closed account. Also, if you deposit an amount that’s not out of the bankers normal habits, the bank will usually front the money right away, or within the next 24 hours. So, it’s possible the 182.5k wasn’t anything out of the ordinary to the lawyers account so Citi made the funds available right away.

We could go on until we bleed over who is at fault over this.

NANCY says:



CL says:


You are all forgetting something basic. Even if the other persons bank has sent the money to my bank, the writing party has 60 days after recieving the bank statement to say wait I never wrote that check. If the check is proven not to be legit then the money must be refunded. It is not uncommon for large businesses or just some rich people to have lots of money in an account. Depending on how many people are involved with the account it can also take time for something like this to be caught. How would you feel if some duplicated your check (very easy to do-store clerk (travel agent) copies information places order with mail order company for checks)wrote a check knowing you are on vacation for a month. You come back open your statement and $XXX.XX is gone and the bank said to bad we cleared your check. Forgery is always fraud and parties who were defrauded get made whole. This lawyer has no case and missed his banking law class.

Anonymous Coward says:

I think this lawyer is difinitly going to win if he is good and or have a good partner. For a large amount of funds like this the bank knows better if its clear or validated before make funds available to the lawyer in this case. cus the lawyer could be the scamer… so now they are taking the money back cus they didnnt tell the lawyer to be aware of the check not being validated thats like scaming the lawyer themselves.

Jessica says:

Happened to me today!!

I tried to sell an instrument through craigslist. The guys sent me a check for 2500. He gave a bunch of bull of why it was for that much. Three business days pass and the bank cleared it. This morning, the money was still in my account and marked as “available”. 5 hours later, my bank said it wasn’t valid and took it away.

Once the bank labels the money “available” that means its available to use.
Whenever we overwithdraw, the bank tells us.. check your available balance. It is always correct.

To make it worse, my bank charged me money for the check.

A world without banks, sounds like a perfect solution.

J says:

“You are all forgetting something basic. Even if the other persons bank has sent the money to my bank, the writing party has 60 days after recieving the bank statement to say wait I never wrote that check. If the check is proven not to be legit then the money must be refunded”

The trouble is you can’t have it both ways – if one account holder can stop payment for 60 days, both can. My guess is if this were to go to a jury, the bank would get shredded, including possible punitive damages. If the bank told him the check was good, they assumed the risk.

Joe says:

The whole problem is someting nobody has mentioned – there is no system in place that tells a bank when an item has cleared another financial institution. They are only notified when a check DOESN’T clear. The other way around would require moving 1000 times more data around, since a lot fewer checks bounce than clear.

Banks CAN’T know when individual checks clear under the current system – even a phone call to the issuing bank isn’t useful, as there is a lot of liability involved if something goes wrong. While such a system may exist in the future, doing such a thing now would require 1000 times more information going back and forth between banks and the Fed as does now – it would be a logistical nightmare.

Paul Gagnon says:

Check Fraud from a realtor

I was scammed in a real Estate Fraud in Baja Mexico. The realtor also Fraud Checks from my San Diego Wells Fargo Bank account. The Land was in Baja but the Realtors were Mexican Americans in Baja Mexico. Even though they Fraud Checks one Filed a False Police report on me. I presented all evidence to the San Diego District Attorney and They did NOTHING said the Crime happened in Baja but yet checks were fraud out of my Wells Fargo Bank account. Stole my Whole retirement in a real estate scam.

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