The City of Greater Sudbury has fallen victim to fraud, after an unknown party posing as a contractor scammed the municipality out of over $1.5 million last month.
The city says it is now trying to recover the funds, which were deposited into a Scotiabank account set up at Scarborough Town Centre.
In a lawsuit filed in Toronto earlier this month, the City of Sudbury alleges the fraudsters “infiltrated” the email accounts of Flex Modular, a construction company the municipality had hired to build Lorraine Street Transitional Housing — a 40-unit, affordable housing project.
According to the lawsuit, city staff sent an electronic funds transfer (EFT) in the amount of $1,501,380.66 to a different bank account than what was originally agreed upon between the city and the construction company.
The lawsuit says the municipality is now seeking a court order authorizing multiple banks to trace the funds, freeze the accounts and return the funds back to the city.
Vanessa Iafolla, a financial crimes expert with Anti-Fraud Intelligence Consulting, told Global News this fiasco could have all been avoided with a simple phone call.
“The first thing you should do is pick up the phone. Verify for yourself independently, don’t just take that email at its word,” said Iafollo.
“Do your homework … it takes 30 seconds to pick up the phone and say, ‘Hey, um, did you change your banking information? Did you open up a new company?’ As was the case here, because a two-minute phone call would have saved everybody hours and hours of time and tons of stress.”
Luckily, the city said the illegal activity was caught quickly by staff, and that it’s “confident” it will be able recover the majority of the funds.
In a statement, a city spokesperson said that recovering the funds will be a lengthy process as it involves several outside agencies, including the contractor, the city’s insurer, banks and courts.
“Municipalities, just like residents, are faced with complex issues of fraud. While we proactively work to prevent these types of occurrences and are continuously evaluating and implementing changes to address them, fraud events are becoming increasingly sophisticated,” the spokesperson said.
The city says a “detailed internal review” is now being conducted and the Greater Sudbury Police Service is investigating the incident.
A spokesperson from Scotiabank said the bank is cooperating with the investigation.
“While this is an external fraud event unrelated to any conduct of the Bank, we are cooperating with the investigation to help recover funds lost due to fraudulent activity,” the bank’s spokesperson said.
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