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Lawyer who stole from clients was himself bilked by widespread scam

By Dan Morse
Washington Post Staff Writer
Friday, June 25, 2010; B06

Three years into his own scheme of dipping into clients' funds, Maryland malpractice lawyer Bradley Schwartz received an e-mail from a man claiming to represent a manufacturing company in Singapore, offering him legal work.

That was 19 months ago. What happened next, according to Montgomery County prosecutors, is that the scammer got scammed. A $385,000 cashier's check linked to the purported Singapore venture turned out to be bogus, Schwartz's bank started asking questions and authorities were called.

"When that whole thing with the check blew up," prosecutor Robert Hill said Thursday, "his scheme could no longer be covered up."

Schwartz, 62, of Rockville pleaded guilty to felony theft Tuesday and is scheduled to be sentenced Aug. 23. Prosecutors said he stole $1.56 million from 21 clients. He faces up to 15 years in prison, but state sentencing guidelines for a first-time offender call for anywhere from probation to six months.

Schwartz's attorney, Thomas L. Heeney, declined to comment Thursday. But at the August sentencing hearing, he is expected to give more details about Schwartz, and he said Schwartz's clients have been made whole by the Client Protection Fund of the Bar of Maryland.

"They are not out one cent," Heeney said.

It's not clear where the stolen money went. In some cases, money due one client was used to pay another, prosecutors said.

"For a number of years, Mr. Schwartz was able to maintain or at least hide what was really happening by virtue of robbing Peter and paying Paul. But at some point in time, his scheme fell apart. It is our general belief that this happened when he himself was scammed," Hill said in court.

He also said that Schwartz has had "a significant addiction to gambling," but he did not elaborate, and Schwartz's lawyer declined to comment.

Schwartz is cooperating with investigators and prosecutors. He has altered his life insurance policy so that upon his death, $750,000 will be assigned to help reimburse the Client Protection Fund. He agreed to be disbarred.

"He called me from South America and told me what he'd done," said Melvin Hirshman, bar counsel for the Maryland Attorney Grievance Commission.

The scam to which Schwartz fell victim has become well-known in legal circles. On Feb 6, 2009 -- just two months after Schwartz got his Singapore e-mail -- the American Bar Association sent out a scam alert.

"Beware of Phony 'Eagle Power' Checks," the ABA warned.

The alert drew heavily on an article by the Recorder, a legal publication in California, that showed how lawyers around the country had been approached by alleged Asian interests.

The scams worked like this:

The purported Asian companies said they needed help collecting debts in the United States. The lawyers took the bait. In turn, the lawyers received checks from one of the alleged debtors, including one called "Eagle Power Equipment." The checks were bogus, but the lawyers didn't know it, and deposited them. The lawyers then deducted their retainers and sent the rest of the money to the person who hired them.

"They were just blanketing lawyers all over the place," said Dana Sack, a California lawyer who received a check for $360,400 last year. Sack said he never deposited the check, but turned over his information to federal authorities.

In Schwartz's case, after signing on to represent the Singapore firm, he received a $385,000 check from a fictitious debtor. He deposited it and used those funds to issue settlement checks to clients. After the $385,000 check turned out to be bogus, some of the clients' checks bounced.

Staff researcher Meg Smith contributed to this report.

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