Technology impacts society all the way from affecting eavesdropping law, to social media sites becoming accepted by courts, to technology being used for scams. Technology is a great tool, but be sure to be careful when using it.
In the last issue, one of the topics of the article was eavesdropping. Even if you missed the last article, you have likely heard by now that the Illinois Supreme Court overturned Illinois’ eavesdropping statute declaring it overly broad and unconstitutional. The eavesdropping statute required that all parties to a conversation had to consent to the conversations being recorded, even if the conversations were held in a public place where there was no reasonable expectation of privacy. There were actually two cases in which the Supreme Court of Illinois issued opinions that struck down Illinois’ eavesdropping statute. Although a new eavesdropping statute has not yet been crafted by the Illinois General Assembly, there will no doubt be an eavesdropping statute that replaces the one stricken by the Illinois Supreme Court. Many attorneys and commentators have looked at the opinions and have thought about the way eavesdropping should be handled, especially in the day of cell phones which are also video cameras with sound.
One issue receiving a lot of attention is that while recording a public conversation should no longer be prohibited (as it was prior to the Court striking down the law) if there is an “expectation of privacy” by one or more of the persons involved in any conversation, that should be one of the important factors in a new eavesdropping law. If two people are having a conversation in a place where they both reasonably assume that their conversation would remain private, should the recording of that conversation by a participant or third party be a factor of whether there has been an eavesdropping violation?
The potential problem of basing an eavesdropping statute upon the concept of “an expectation of privacy” is the question of when is it reasonable to have an expectation of privacy? For instance, if you are having lunch with someone in a public restaurant but you purposely sit in a corner away from other patrons, do you and your guest have an expectation of privacy? If you do have an expectation of privacy, is that expectation of privacy reasonable? I believe that this will be a difficult issue as time goes on. For instance, after revelations that the U.S. Government is monitoring e-mails and telephone conversations, and now that the public knows that the U.S. Government has the capability of seeing every electronic communication or listening on any telephone conversation that it desires (whether legally or illegally), is there a reasonable expectation of privacy when you send an e-mail to a friend or client? Some might argue that it is no longer reasonable to believe that such communication would be private in light of recent public knowledge of widespread monitoring capabilities, and a willingness to use that technology.
If the main factor in any new eavesdropping law is based on a reasonable expectation of privacy, it seems that the expectation of privacy may begin to erode in a society where audio recording devices exist on nearly every cell phone, and with the knowledge there are video cameras and security cameras (which could have the ability to record audio in virtually every public place). Does that mean that a person cannot have a reasonable expectation of privacy when having a conversation? If there is no reasonable expectation of privacy, then someone eavesdropping on that conversation may not be violating a future eavesdropping statute depending on how the statute is drafted. It also raises the question if the government were to say that no citizen has any expectation of privacy in any location because the government announces it has the technology to “hear everything,” does that mean that there is no longer a reasonable right to privacy, and thus every conversation is unprotected from eavesdropping?
Hopefully, whatever the eavesdropping law eventually looks like, it will not rely solely on whether or not there is “expectation of privacy,” or in the alternative there will be at least some identification of types of conversations, electronic e-mails, other types of communications or certain locations where there is a presumption of a reasonable expectation of privacy. The tough nut to crack will be whether conversations which are held in public but in the corner of a restaurant or on a park bench when no one else is around supports a reasonable expectation of privacy? To put it in the business context of REALTORS®, do buyers who are touring a home with an agent have a reasonable expectation of privacy in their conversations, when it is known that there could be webcams or security cameras that also record voice throughout the home. Before the eavesdropping statute was overturned, a seller was not allowed to have any device capable of recording sound which could potentially pick up the conversations that a buyer or buyers have with the agent, unless all of the parties agree to a recording of the conversation.
In our last issue, I also talked about the beginning of the use of drones by real estate agents in order to obtain video or still photos of a home for sale. One of the most popular cameras used on drones is being advertised for its improved microphone. Query whether while videotaping a property with a drone, you pick up a conversation through the microphone, would that violate any new eavesdropping statute? It definitely would have violated the previous Illinois eavesdropping statute. You did not even have to actually record the conversation to be in violation of the eavesdropping statute. For instance you may have the microphone in the off position, but under the old eavesdropping statute if the device was capable of recording audio, then all persons being recorded would have to give consent.
Finally, since there is no current eavesdropping statute in Illinois, you may want to consider if you are a buyer’s agent taking the buyers through a property that there may be recording devices. There will be no requirement that you or your clients be made aware of this, or give consent to eavesdropping, until a new statute is adopted.
With regard to the concept of reasonable expectation of privacy, if you post what you thought was a private conversation on social media, remember you have just given away any right to privacy with regard to that statement that you put out on social media. The feature article on the cover of the June 2014 Illinois Bar Journal (Vol. 102, No. 6) is entitled “Building Your Case With Social Media Evidence” written by Ed Finkel. In this article, Mr. Finkel discusses how social media can be used to bolster your case against an adversary, but remember that it can also be turned against you if you have not been careful in how you use your social media. There have been various articles regarding the use of social media in the Illinois Bar Journal in the last few years. Things have changed in how social media is used in litigation. It used to be that parties in litigation would subpoena social media networks such as Facebook, My Space, etc. to try and get e-mails and messages of the user. Litigants have learned over the last four years, however, that subpoenaing the social networks can cause delays due to laws trying to protect social media firms. Federal law governs as to what the social media entities have to disclose. See, eg. Illinois Bar Journal, July 2010, Vol. 98, No. 7 “Does What Happens On My Facebook Stay on Facebook? Discovery, Admissibility, Ethics, and Social Media,” by Beth C. Boggs and Misty L. Edwards where they refer to the case of Ledbetter v. Walmart Stores, Inc., 2009 W.L. 1067018 (D Colo 2009).
Now commentators recommend that “When an attorney suspects the contents of an opposing party’s social media account might be needed for discovery, the first step is to send out a preservation-of-evidence letter to opposing counsel as soon as possible, says attorney Peter LaSorsa . . .”. Illinois Bar Journal June 2014, Vol. 102, No. 6, “Building Your Case with Social Media Evidence,” Ed Finkel. Therefore, instead of sending subpoenas to the social media companies, a letter is sent to the potential defendant advising that they preserve all electronic evidence and social media. This way you can usually obtain more specific information and put the potential defendant on notice that if they would try to alter or delete past information, they would have spoliation of evidence matter on their hands. The social media sites are protected by the Federal Stored Communications Act, which has been upheld in multiple court decisions. It bars attorneys in civil cases from getting the actual social media content directly from the providers, although they might be able to get dates and times of postings or other potentially useful metadata. Id.
Technology has had positive benefits, creating better and immediate communication and allowing “virtual tours” through the Internet. But with the good there comes some bad. The Internet, whether talking about e-mail, advertisement, or social media, is a technology that some criminals have embraced and they use it for what we commonly refer to as “scams.” Some particular scams have arisen over the past few years that directly target real estate licensees and their customers and clients. Be on the lookout for these two scams especially.
#1 – Nigerian Scam or 419 Scam
First is a variant of the “Nigerian scam” which is a scam that has been around for a while that used to target (and still does) the average person, but is now being used against licensees. The Nigerian scam also known as the 419 scam due to the fact that the section of Nigerian law that prohibits fraud is Section 419 of their code. This is a situation where you (the “target”) receive an e-mail from someone who claims they have a large amount of money that they want to move to the U.S. and want the target’s help and is willing to pay for that help. Now we are seeing it targeting business investments as well. In the basic scam, a promise is made that millions of dollars would be put into a business but ultimately it proves to be a scam because the perpetrator starts asking for money and fees to pay bribes to officials and banks, and other costs before they can get the money out of their country to the target. The perpetrator then asks for money to help pay for these things because the scammer’s money is still temporarily tied up. The target pays these fees hoping to gain 20 percent of a multi-million dollar fortune being transferred to the U.S. After paying those “fees” the target never sees that money or the promised money.
In the situation where money is promised for a real estate business investment, the money forwarded to the U.S. is usually by a counterfeit check. The target broker deposits the check in his account, but is asked to send part of the money back as payment for expenses, etc. before it is learned that the check is counterfeit and there is no money in the account.
One real estate broker who was the target of a 419 scam ended up doing jail time himself. The United State v. Ross, 502 F.3d 521. In this case, Ross, who was the target, met an individual at a National Association of REALTORS® meeting that he attended in Washington, D.C. While there, he began talking to a person from Nigeria, Didi Duke, who said he was looking to make an investment in a real estate project in the U.S. The two traded contact information, and a deal was negotiated, and was put into writing and reviewed by the attorneys for the target. What happened next was that Duke sent a check to Ross, a real estate agent in Ohio, for $90,000 that was to be the beginning of a total investment of $12.5 million. Upon receipt of the $90,000 check, Ross took it to his bank where it was deposited into his account, and was allowed to withdraw $5,000 until such time as the check cleared and the funds were determined to be good funds. Ross used the $5,000 to make payroll at one of his low-income housing construction sites. A few days later Ross withdrew another $8,000 from the account which he used for a vacation. While on vacation, the bank froze his credit card and his ATM card. Ross spoke to the bank and they informed him that the $90,000 check was counterfeit. After Ross returned from the vacation he contacted Didi Duke about the money. Duke told Ross that his investors were no longer interested in investing in the U.S. after the events of 9/11 and had backed out of the transaction. Ross’s accounts at his bank remained frozen and he was forced to file Chapter 7 bankruptcy.
Several months later he was contacted by another Nigerian businessman named Didi Hassan. During the summer and fall there were several e-mail exchanges and telephone communications between Ross and Hassan discussing the resurrection of the original transaction with Duke. Ross received a check via overnight mail for $336,990. It was drawn on the account of Gregory Dodge Hyundai Car Dealership in Highland Park, Illinois. Ross believed this check was a check from one of the investors in the proposed real estate deal. However, Ross called the car dealership and the car dealership said that the check was fraudulent. A few days later another check for $5,000 drawn on Bank of America cashier’s check came to Ross. He deposited the check into his account, believing it to be money sent from Hassan. The bank contacted Ross after he had left the bank and let him know that the check was another counterfeit. At that point Ross informed the bank he was dealing with Nigerians who were interested in investing in the U.S. Ross shared with the bank investigator e-mails between himself and Hassan. The bank investigator informed Ross this was likely a scam and to stop dealing with Hassan or any other Nigerians. Ross promised to cut off his dealings with them at that time.
In the summer of 2004, Hassan contacted Ross again in an attempt to revive the real estate deal with new financing. In an effort to avoid any more counterfeit checks, Ross informed Hassan that any money had to be sent by wire transfer from a United States bank. Hassan agreed and in July of 2004 the bank received an envelope containing a United States Treasury check for $700,000 rather than a wire transfer. No hold was placed on the check because treasury checks are considered guaranteed funds. Ross knew that $700,000 had landed in his account, which he believed was sent by wire transfer and claimed that he was unaware that the money was actually a United States Treasury check. Ross used the money to purchase several cashier’s checks to pay off debts that he owed and he moved $505,000 into an investment account. Within days, however, the treasury check was returned from National City as counterfeit. With the cooperation of Ross, National City was able to recover all but about $60,000. This is when Ross testified that he found out for the first time that the funds had come by check rather than by a wire transfer. In the late summer of 2004, the phone number that Hassan had given him was cut off and Hassan stopped communicating with Ross.
In November 2004, the U.S. Secret Service agents came to Ross’s office and said that they were investigating Nigerian counterfeit check scam of which Ross may have been a victim. Believing agents were there to help him, Ross happily discussed all of the dealings with Duke and Hassan in detail. Id. 521. Later on in the meeting, Ross figured out that the Secret Service agents were there for him and he was the actual suspect. Ross was arrested. A Grand Jury in Cleveland, Ohio indicted Ross on two counts of bank fraud. The first count related to the $90,000 counterfeit check passed at First America Bank and the second count was related to the $700,000 check deposited at National City. The jury found that Ross was guilty and he was sentenced to 37 months in prison. He was convicted using a theory known as “deliberate ignorance.” The idea is that a person should not be able to avoid responsibilities of crime by deliberately ignoring the obvious. On appeal, the Appellate Court upheld the conviction and the sentence. Therefore, turning a blind eye to what you think may be a scam, but you participate in the hope that it will work out, can turn you from a victim to a perpetrator.
#2 – Rental Scams
A more recent scam involves criminals looking through valid sales listings on the Internet posted by brokerage companies. They then take the information from the website and manipulate it so that it appears to be a rental or a vacation home. The manipulated information is then copied onto another site such as Craigslist and has an appearance of legitimacy since it still names a duly licensed real estate agent and brokerage company and often contains the official company logo. The scammers then will find persons looking to rent or buy a vacation home and “sell or lease” the property to the proposed buyers/lessees. Most of the time in these cases the scammers only get away with an earnest money check or a security deposit for the property, which can still be significant. Sometimes, however, when they can target a vacant house, there have been instances where tenants have moved in to homes paid rent only to discover they had been paying rent to a person who did not own the property and they were going to have to vacate the property because the property had been purchased by a new owner.
General Counsel for the Indiana Association of REALTORS® has seen similar scams and offers this advice of how you can protect yourself and your listings.
Thanks to Richelle Cohen Mossler, Legal Counsel for the Indiana Association of REALTORS® for permission to reprint from the March 2014 article appearing in the Indiana REALTOR® Advocate describing the rental scams where the listing is essentially stolen by criminals who use it for fraudulent activities.