Insurer settles lawsuit accusing lawyer of scheming to steal $500K
The lawyer was accused of hijacking a $3.1 million settlement meant for a policyholder, from which more than $500K was siphoned before the scam unfolded.
An insurance company that sued an attorney over allegations he conspired with online fraudsters to steal more than half a million dollars meant for a policyholder has settled its claims with Villa Rica solo James “Jay” Davis III.
Coface North America Insurance Co. sued Davis in federal court in Atlanta in January, claiming unknown “John Doe” confederates used a bogus email account to hijack a $3.1 million settlement. The insurer discovered the ruse in time to recover most of the money from Davis’ trust account, but it said $552,766 was never accounted for.
In back-and-forth filings, Davis’ lawyers argued that Coface itself allowed the scam by ignoring clear signals of fraud, including grammatically garbled messages sent from a phony email account similar to the policyholder’s, except that its domain name ended in “.cf” rather than “.com.” The “.cf” internet domain is used for websites in the Central African Republic.
Davis was a victim himself, who had been “duped into acting as an escrow agent/paymaster for funds wire transferred into his IOLTA escrow account” by someone who knew about the settlement, his attorneys said, “and were clever enough to get a copy of the original wire transfer instructions to attach to the ‘imposter’ email.”
Coface said Davis had a history of such behavior, pointing to a 2014 case in which a bank sued the lawyer for racketeering and other claims over $100,000 that was transferred into an allegedly phony company and then immediately transferred to Canada.
In that case, the plaintiff bank was awarded $299,850, “which included treble damages for the Georgia RICO violation, plus attorneys’ fees and costs,” Coface’s motion for a temporary restraining order said.
Davis said in a response filed in that case that both he and the bank had been “duped by an Internet fraudster.”
Davis is represented by Richard Hendrix and Emma Cecil of Finch McCranie; and William Story, R. David Ware and Tiffany Winks of Hall Booth Smith. Neither Davis nor his attorneys responded to requests for comment.
Coface is represented by David Broussard of Greenberg Traurig and Christopher Freeman of Carlton Fields. They also did not respond to queries.
The complaint Coface filed against Davis in January in the U.S. District Court for the Northern District of Georgia said the credit insurer had agreed to pay about $3.1 million to settle a claim last December and sent an email requesting payment instructions from its insured.
The next day, Coface got an email purportedly replying to its message and including its original message in the chain. The message said, “Please disregard the below bank details i [sic] sent you and check an attached Letter of authorization [sic] with our updated bank details for payment.”
Attached was a “Letter of Authorization and Declaration” saying “our bank account details which was [sic] provided for payment yesterday is undergoing its yearly audit and we cannot receive any payment with that account at the moment[.] Below is our ATTORNEY bank details for payment.”
The letter provided a Wells Fargo bank account in the name of “J. Davis – Attorney at Law IOLTA,” and had what appeared to be the policyholder’s corporate logo and the signatures of its CEO and two other corporate representatives.
Coface contacted Davis for his tax information and transferred $3,093,085 into his trust account.
On Dec. 31, the imposters emailed Coface, saying Davis had informed them that the payment had arrived.
Coface learned that same day that the emails with its policyholder were compromised and replaced with an account “identical in all respects to the email address of the actual policyholder representative, with the exception that ‘,com’ had been replaced with ‘cf.’”
Coface immediately reported the scam to the FBI, Wells Fargo and Citibank, and demanded Davis return its money. Wells Fargo emptied Davis’ IOLTA account and transferred $2,540,319 to Coface, but $552,766 had already been transferred to the fraudsters.
When the suit was filed, Davis told the Daily Report said that he felt as much a victim of the scheme as Coface, and noted that the IOLTA funds sent to Coface included about $3,500 in funds belonging to other clients.
On Oct. 4, Judge Amy Totenberg entered an order saying a settlement had been reached and closed the case.
This story originally published on ALM’s Law.com.
See also: