It started with a fight at the Cow Shed Bar & Grill in San Marcos.
It ended up creating precedent-setting law for California.
But on the way to a court’s decision, an ingenious fraud netted almost half a million dollars.
The battle at the Cow Shed led to a lawsuit, with the customer alleging that he had been seriously injured during his altercation with two restaurant employees.
The customer won the lawsuit and the restaurant, which was owned by the Corbyn Restaurant Development Corporation, settled and agreed to pay $475,000.
The story turned when emails started to go back and forth between the parties to the lawsuit. Both law firms were discussing details for transferring the funds from the losing defendant’s attorneys to the winning plaintiff’s lawyers.
It was during this process that an unknown third party entered this legal arena.
San Diego-based attorney Monty McIntyre is familiar with the case; in fact, he tipped us to this story. “I’m not an expert in computers, you know, forensics and all that, but I know a little bit,” he said. “I think they hacked in, and they were monitoring things, and the platform didn’t know.”
McIntyre said that the hackers didn’t rush, they took their time, and firmly set the hook in the targeted law firm’s jaw.
“They went through a number of communications to get this thing to work, but hell, they got almost half a million dollars,” he said. “That’s a big payday.”
When their funds didn’t arrive, the winners of the case naturally began to wonder. So did the sender after they were soon alerted that something was up by the opposing counsel.
The bad news for all concerned was that $475,000 dollars had evaporated.
And so it ended in a lawsuit, with Daniel Fallon of Tyson & Mendes LLP representing the defendants, and Chambers & Noronha representing the plaintiff. The courts would eventually recognize this lawsuit as the result of a cyber scam.
There were a number of “tip-offs to ripoffs” that were red flags. It began with the first communications between the two firms — when the plaintiff wanted to know when the funds would be arriving. The response was quick: they had to check on funds.
It is important to note that at this point everything involved in the communications included real telephones, real email addresses, and legitimate business addresses.
A week later, the imposter — now swapped in for the real plaintiff — asked to transfer the funds electronically and not use a check. It was agreed to.
The address the hacker used was “@tysonmenrdes.com.” The legitimate address was “@tysonmendes.com.”
The top address mimics part of the bottom address, resulting in a deceptive technique called spoofing.
A series of emails followed; the hackers slowly tightened their noose, clever with what email addresses and phones they kept, some real and some fake.
During the process, the hackers seem to drag their feet, as FindLaw.com wrote, it was an effort, they said, “aimed at delaying the Chambers & Noronha firm from suspecting a scam occurred.”
A phone number was provided by the hackers that looks legitimate but went nowhere. When the plaintiff’s office called the number, no one answered.
The scammers, still posing as legitimate people, told the attorneys that “Mark Anderson,” their “head of finance,” was the person to deal with, and in doing so managed to move all of the financial dealings entirely online
The result? The hackers ended up with the money and no one knows who or where they are.
When the $475,000 didn’t show at the lawsuit winners office, the defendants told them they didn’t owe it. This sparked another lawsuit, in which each side said that the other was guilty of falling for the scam.
Arguing their side, the defendants said that they did try to call the phone number the hackers provided, but it was “inoperable.” However, they did call another phone number the hackers provided. The firm also noted they had alerted the bank, the insurance carrier and the FBI. Their IT personnel said it was the plaintiff’s computer that was vulnerable.
However, the evidence revealed the hackers never contacted the plaintiffs; they only communicated with the people sending the money.
The trial court resolved the issue by answering the question of which party was in the best position to prevent the fraud.
The Superior Court concluded the defendant still owed the plaintiff $475,000. The loser wasn’t happy with the verdict, so the case moved on up to the Court of Appeals.
In their research and decision, the appellate court noted “the lack of California authority” to answer the question that’s central to this case: Which party was in the best position to prevent this fraud.
It became what is called an “issue of first impression” and to resolve their quandary, the court would need locate a federal statute that applied in this case.
The court’s decision was this: The winner is still the winner, the victim of the bar room beat down got the money.
And with the ruling, a new published case law has been added to California’s codes.
Attorney McIntrye believes the lesson from the case is clear. “I think you’re an absolute fool if you make a decision to send a lot of money to somebody over online by pure email communications,” he said. “You’re asking for trouble.”
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