An Edina law firm that lost nearly $400,000 to a Nigerian fraud ring claims that Wells Fargo & Company is to blame and wants the bank to cover its losses.
According to a Star Tribune report, Milavetz, Gallop & Milavetz (MGM) says that it was the victim of a Nigerian collections scam through which it lost the money-and in a 50-page lawsuit filed Friday, the firm alleges that Wells Fargo had plenty of warning that the scam was targeting U.S. lawyers.
A government investigation recently led to a federal indictment in Pennsylvania of a Nigerian man and a Canadian resident, according to the Star Tribune. The government reportedly claims that they were part of a complex international conspiracy that has cost 80 victims-both lawyers and law firms-at least $32 million; the scheme unsuccessfully attempted to extract more than $100 million from about 300 additional targets.
In its lawsuit against Wells Fargo, MGM said that it requested special precautions on its escrow account with the bank, but the bank ignored red flags and allowed the money in question to be wired to a Hong Kong bank, where it disappeared. The bank then charged MGM for the missing funds.
Citing the federal indictment in Pennsylvania, the Star Tribune reported that the fraud scheme worked like this: One co-conspirator contacts a law firm, typically by e-mail, indicating that he or she is trying to help to collect a legal settlement or payments from a divorce or real estate transaction. Then a second co-conspirator poses as a representative of the party who owes the money and delivers a counterfeit check. After the check supposedly clears, the money is wired to a bank, usually in Asia, and it disappears.
According to the lawsuit, Wells Fargo flagged a $396,500 counterfeit check that MGM received as possibly fraudulent several days prior to a corresponding wire transfer, but Wells Fargo employees told the law firm that the check had cleared and then failed to tell the firm that wasn't the case until about a week after it had wired the same sum.
MGM alleges that Wells Fargo relied on a computer program to determine whether to clear the check, but the firm says that clearance process is meaningless because the bank has a policy that allows it to reverse its decision after funds go missing, according to the Star Tribune.
Through the suit, MGM seeks reversal of the nearly $400,000 charge to its trust account.
San Francisco-based Wells Fargo-which has a major presence in Minnesota-defended itself against the allegations. In a brief statement issued to the Star Tribune on Monday, the bank said: "We believe the allegations have no merit. We will vigorously defend, and expect to prevail."
To read more in the Star Tribune about MGM's lawsuit and the fraud scheme through which it lost money, click here.