February 2014 • Volume 102 • Number 2 • Page 100
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Put Not Your Trust in Nigerian Princes
A recent iteration of the Nigerian email scam teaches lawyers that 1) if it sounds too good to be true it almost certainly is and 2) doing business with clients requires careful attention to ethics rules.
Your rich uncle died
And left you all his M----
The Electric Company1
The story you are about to read is true - but the underlying scam was pure fiction.
Robert Wright Jr., a general practitioner in Des Moines, Iowa, was representing Floyd Lee Madison in a criminal case when Madison told him some remarkable news. Madison was the beneficiary of an $18.8 million bequest from a long-lost cousin in Nigeria, which would be paid as soon as Madison paid taxes of $177,600. He asked Wright for help in securing the transfer of the funds from Nigeria, and Wright agreed to do so for a fee of 10 percent of the funds collected.
Wright took an active role in helping Madison obtain the money to pay the taxes. He approached Danny Wayne Rynearson, whom he was representing in a felony criminal case, to see if he would be interested in lending Madison some money. Wright arranged for Rynearson and his wife to meet with Madison in Wright's office, and the Rynearsons agreed to lend Madison $12,000. In return, the Rynearsons were to receive $50,000 once Madison received his inheritance. Wright prepared a letter confirming this agreement. Later on, in response to an urgent plea from Wright, the Rynearsons agreed to loan an additional $12,500.
Another client, Linda Putz, was about to receive approximately $25,000 from a workers compensation settlement. Wright told her about Madison, who needed to borrow money to pay Nigerian authorities for an "anti-terrorism certificate." Putz agreed to loan Madison $12,500, for which she was to be repaid $50,000 when Madison received his inheritance. Wright drafted the loan agreement. Ultimately, Putz agreed to pay an additional $12,500 in exchange for Madison's promise to pay her $100,000 upon receipt of his inheritance. Wright also solicited and received loans for Madison from three former clients totaling $187,000.
After all of the funds were transferred, Wright and Madison received word that the inheritance - now in the form of U.S. currency - had been shipped in two trunks to Spain and were now in the possession of a "diplomat" in Madrid. The diplomat's email to Madison instructed him to come to Madrid to pick up the trunks - after paying "administrative Logistic charges" of €25,600. The diplomat wrote that he didn't "know of any Bank here" and so he suggested bringing the Euros "in your baggage, have it hide in your trouser's and have the trouser fold careful package in your luggage." Madison did indeed travel to Madrid, where he saw, but for some reason was not able to collect, the trunks.
To date, Madison has not received his inheritance, and none of the loans made to him by Wright's clients or former clients have been repaid. In December 2013, the Iowa Supreme Court suspended Wright's law license for one year.2
Maybe the trunk isn't in the mail
Most of the commentary about the Wright case has focused on the fact that an experienced lawyer - Wright passed the bar in 1981 - fell for the old "Nigerian inheritance" scam.3 It does seem incredible that he bought into the story so completely - and yet the Iowa disciplinary board was convinced that he did: "Wright clearly believed in the legitimacy of Madison's inheritance... [H]e appears to have honestly believed - and continues to believe - that one day a trunk full of...one hundred dollar bills is going to appear upon his office doorstep."4
Wright did, apparently, make some efforts to confirm the story. He received a will and other documents, and spoke with persons identifying themselves as representatives of the Central Bank of Nigeria, an adviser to the President of Nigeria, the Nigerian lawyer who witnessed the will, and an English lawyer who had traveled to Nigeria and investigated the legitimacy of the inheritance.
But, as the court noted, Wright did not verify that the documents or the callers were what and who they claimed to be, and a simple Internet search would have turned up evidence that a scam was afoot. The Court held that Wright's failure "to make a competent analysis of the bona fides of Madison's Nigerian legal matter" constituted a violation of Rule 1.1 - the duty to provide competent representation to the client.5
The Wright case is a good reminder to be vigilant about scams, and to discern glitter from gold when evaluating legal matters. 6 As the court pointed out, Wright is far from the only lawyer to be taken in by "a deception with ostensible Nigerian connections."7 Taking steps to avoid being scammed is not only a sensible precaution but also an ethical obligation.
Unpacking the conflicts of interest rule
But there is another lesson in the Wright case, and it is applicable even to sophisticated lawyers who routinely delete emails that purport to be from Nigerian royalty and/or involve far-fetched tales of foreign intrigue and desperate pleas for legal assistance.8 Wright stands as a stark reminder of the perils of doing business with clients and the importance of compliance with the Rules of Professional Conduct - whether the transaction takes place in Nigeria or Naperville.
Often overlooked in discussion of the case is the fact that Wright was also found to be in violation of Rule 1.8(a) regarding conflicts of interest with current clients. The court determined that Wright's 10 percent contingent interest in Madison's inheritance constituted a pecuniary interest adverse to his clients Rynearson and Putz. Iowa's Rule 1.8(a) forbids knowingly taking such an interest unless
(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction;9 and
(3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.
Wright failed to satisfy any of these conditions. He did not disclose his contingent fee interest to Rynearson and Putz - in writing or otherwise. He did not advise them to seek counsel from an independent lawyer regarding the loans he solicited from them. And he failed to obtain their informed written consent to the fact that he had a contingent fee interest in the inheritance and was not representing their interests in the loan transactions.
The court also found that Wright's conduct violated Rule 8.4(c), which states that it is professional misconduct for lawyers to engage in conduct involving dishonesty, fraud, deceit, or misrepresentation: "The commission found Wright's failure to disclose to Rynearson and Putz: (1) the substantial risks inherent in the loans to Madison in furtherance of the risky Nigerian transaction, (2) that he did not intend to protect the interests of Rynearson and Putz in the loan transactions, and (3) his contingent fee interest in Madison's inheritance claim constituted deceit and resulted in a violation of rule 32.8.4(c). We agree."10
As the Iowa court noted, lawyers who engage in business transactions with their clients "[skate] on thin ice and will receive little sympathy…if the ice should break."11 Lawyers venturing out on that perilous pond should first consider whether the risk is worth taking at all, and proceed with caution and scrupulous attention to the requirements of the Rules of Professional Conduct.
Karen Erger is vice president and director of practice risk management at Lockton Companies.
- The Electric Company was a Children's Television Workshop show for "graduates" of Sesame Street that aired from 1971 to 1977. This annoyingly earwormish tune was part of a skit involving an unfortunately truncated singing telegram, forcing the recipient to guess what the bequest might be, knowing only that it begins with the letter "M." Marshmallows? Mermaids? Monsters? As I recall, the word "Money" was never suggested. This, kids, is what passed for after-school entertainment in the Dark Ages.
- Iowa Supreme Court Attorney Disciplinary Board v. Robert Allan Wright, Jr., 13-0780, December 6, 2013 (hereafter, "Opinion"). The Iowa Supreme Court's opinion is worth reading, both for the additional details of the fraud and for Justice Hecht's even-handed, empathetic treatment of truly incredible facts. The stoic refusal to be sarcastic or take a cheap shot is one of the best things about Iowans and Iowa. http://www.iowacourts.gov/About_the_Courts/Supreme_Court/Supreme_Court_Opinions/Recent_Opinions/20131206/13-0780.pdf
- See, e.g., David Lat, Lawyer falls for Nigerian Inheritance Scam, Gets Suspended, Above the Law, March 6, 2013: http://abovethelaw.com/2013/12/lawyer-falls-for-nigerian-inheritance-scam-gets-suspended/
- Opinion at 7-8.
- Rule 1.1 of the Illinois Rules of Professional Conduct, like the Iowa rule, states that "[a] lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation."
- For a helpful primer on scam-spotting, see Robert S. Held, "Note to law firms: Beware of the Nigerian scam," www.illinoislawyernow.com, Summer 2012 at 17: http://www.isba.org/sites/default/files/publications/ILNQ%20Summer%202012.pdf.
- Opinion at 9, and see, e.g., Alan Farnham, Lawyers Scammed? Now There's a Switch, ABCNews.com, August 7, 2012 http://abcnews.go.com/Business/lawyers-scammed-29-million/story?id=16946726
- For an amusing analysis of the "fiction writing" that underlies these email scams, see Douglas Cruickshank, I crave your distinguished indulgence (and all your cash), Salon.com, August 7, 2001: http://www.salon.com/2001/08/07/419scams/. "I've fallen…not for the scam part, but for the writing, the plots… the characters, the earnest, alluring evocations of dark deeds and urgent needs, Lebanese mistresses, governments spun out of control…and all manner of other imaginative details all delivered in a prose style that is as awkward and archaic as it is enchanting. It's some of the most entertaining short fiction around these days."
- Iowa's 1.8(a)(2) differs slightly from Illinois' Rule 1.8(a)(2), which requires that the client be "informed in writing that the client may seek the advice of independent legal counsel on the transaction, and is given a reasonable opportunity to do so."
- Opinion at 12-13.
- Opinion at 11, citing 16 Gregory C. Sisk & Mark S. Cady, Iowa Practice Series: Lawyer and Judicial Ethics § 5.8(c), at 373 (2013).