While many victims of the so-called “Nigerian e-mail scam” would be too embarrassed to trumpet that fact, others end up infamous for their victimhood like the appellant in a published opinion of the California Court of Appeal in Riverside. Also known as an advance-fee fraud, the Nigerian scam baits the victim with an advance sum of money now in the hopes of realizing an even larger payment later.
In March 2009, Brian Peters received an email from someone purporting to be a citizen of Malaysia. The e-mail informed Peters that certain third parties in the United States and Canada owed the purported Malaysian money, but that “they can not transfer the funds to any bank account outside America continent due to their new company policy [sic].” He asked Peters to “assist me in receiving the funds and forward to me.” He offered to pay Peters 12 percent of the money. Peters agreed after apparently negotiating an increase of his fee to 15 percent.
Peters deposited the $808,988.90 in checks received from the purported Malaysian at Chino Commercial Bank. After the bank notified Peters that the checks had cleared, Peters wire transferred $468,000 to Hong Kong. Shortly thereafter, the checks were dishonored after the bank detected that they had been altered. Since Peters was personally liable for any overdrafts on the account, which had only a few thousand dollars, the bank sought to attach property owned by Peters to collect on the overdraft. The trial court granted the bank’s motion to attach against Peters in the amount of $458,782.60.
Peters appealed and lost again, this time in Riverside’s District Court of Appeal. (Chino Commercial Bank v. Peters (Dec. 13, 2010, Case No. E049170).) The court held that the bank had demonstrated the probable validity of its claim, citing California Uniform Commercial Code sections 4201, subd. (a), and 4214, subd. (a)- the bank’s notification that the checks had cleared gave only provisional credit until that collection was final.
Despite the obvious life lessons, the legal one is this – don’t transfer funds received unless and until you know that collection of the original deposit is final. This is particularly true for lawyers and others who receive funds in trust.
David G. Moore is a Senior Attorney at Reid & Hellyer law firm in Riverside, CA, where he began his legal career after completing law school in 1964. Reid & Hellyer practices business, real estate, litigation and bankruptcy. He may be reached at email@example.com or via phone at (951) 682-1771.
Update from Reid & Hellyer (1/3/2011): This blog post was mentioned in inland Southern California’s Business Press.