Flagler County Sheriff Rick Staly this afternoon confirmed that the amount of money the Flagler County school district lost in a wire-transfer phishing scheme is $719,583, but that “it’s close to 100 percent long gone.”
The district made the payment on Sept. 22. Its fraudulent nature was not detected until Tuesday morning–11 days later, an eternity of comfort for phishing scams to evade controls and make it out of the country.
The school district and its contractor building the $22.6 million expansion at Matanzas High School, for which this was to be a payment, in effect were caught in the sort of Nigerian-Prince phishing scheme innumerable Americans fall prey to by carelessly or inadvertently clicking on the wrong email or making hazardous downloads from the web.
With little hope of recovering the money, th district is exploring different avenues of making up some or all of the money through its insurance carrier or other means. Kristy Gavin, the school board’s attorney, said the district’s bank, its insurer–the North East Florida Education Consortium–and the vendor’s carrier may play a role in the possible recovery, though none of that is certain as policies are being examined to see what is covered by whom. “There’s a lot of moving parts of funding recovery,” Gavin said.
But the Matanzas expansion will not be delayed, Gavin said today, and payments will continue to be made. The project is continuing, with HA Contracting Corp. of Miami-Dade as the general contractor.
The $719,583 payment was for work already accomplished. Design costs aside, the project’s construction phase is to cost $18.75 million, with a 10 percent (or $1.875 million) as contingency, which now could potentially cover some of the lost money.
The Sheriff’s Office released a significantly redacted incident report that fills two-thirds of a single page
It is still not clear who was responsible for making the transaction to a bogus recipient, which was done through what’s called an electronic wire transfer (EFT) through the Automated Clearing House (ACH).
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FlaglerLive has learned that the fraudsters somehow managed to spoof impersonate the vendor’s email, but it’s not clear if this was at the vendor’s end or at the district’s end, though from the wording of the incident report, it appears to be at the district’s end. What is clearer is that somehow, somewhere, inadvertance, lax procedures or a combination of the two enabled a relatively common scheme to target an unusually large sum.
The district’s finance department issued the payment on Sept. 22. On Oct. 2–Monday–the contractor contacted the district and told staffers they had not received “After some communications between Flagler County School personnel and [the contractor] it was determined the Flagler County School District was a victim of fraud and law enforcement was contacted,” the sheriff’s incident report states.
On Tuesday, a very brief, terse statement from the district was issued late in the day to say that the Sheriff’s Office and the FBI were involved. In fact, the sheriff is leading the investigation. Sheriff Rick Staly said today that while there was some contact with federal agencies, they are only on standby if the Sheriff’s Office needs help.
“There’s a ton of work that has to be done,” the sheriff said today after a press conference outside the Sheriff’s Operations Center in mid-afternoon. Other than the more precise sum of the money lost, the press conference summarized what FlaglerLive reported on Tuesday evening.
The sheriff said that while at this point the criminal investigation is taking nothing off the table, there was “no indication” of criminal intent on the district’s side, but he stressed that “it’s unlikely the money will be recovered.” Gavin today again confirmed what a spokesperson had said yesterday: no district personnel has been relieved of duty in any way as a result of the fraud. Internal financial procedures, which have have had their issues well before this incident, are again being examined for.
In late September, Fort Lauderdale lost $1.2 million in a similar scheme as the city was financing a $144 million construction project, a new police station built by Moss Construction. “It wasn’t just an email, like, ‘Hey, this is Moss Construction. Send me $1.2 million,’ It was followed up with full documentation, multiple paperwork,” Fort Lauderdale Mayor Dean Trantalis told a CNN affiliate in the city, which may hint at the method used in Flagler’s case. George Mayo, a resident addressing the Flagler County Commission at its Monday morning meeting, more than a day before the school district’s revelation, alerted the commissioners of the scheme.
The Flagler County School Board met for a three-hour workshop on Tuesday. It did not discuss (and was not yet aware of) the fraud, its focus again more on firing Gavin–one of a small handful of remaining top staffers with deep institutional history of the district–than on finding some stability in a district wracked by a series of upheavals. The three board members who want Gavin fired–Will Furry, Sally Hunt, Christy Chong, the majority that fired the previous superintendent–have not disclosed why they want Gavin fired beyond vague grievances about trust, but somehow seem in agreement that she must and will be.
Even before the board learned of the fraud after the meeting, Superintendent LaShakia Moore, who participated in the three-hour meeting (as Gavin was investigating the fraud elsewhere in the building) was aware that she already had the second major crisis on her hands, on her short watch, just weeks after the controversy of Bunnell Elementary’s segregated assemblies that drew national attention. Moore has yet to sign the contract making her the permanent superintendent. There are no indications that she is eying that closing window as an escape hatch.
