In 2020, a Fresno staffer paid a city subcontractor $400,000 through two electronic transfers for work on the new southeast police station. There was just one problem. The invoice the staffer received was not from a legitimate contractor at all. It was an electronic phishing scam originating out of Africa.
The $400,000 payments represent the largest single loss the city has ever incurred as a result of fraud, according to Councilmember Miguel Arias. And yet the city council was not notified until 2021 when Mayor Jerry Dyer requested funds to cover the shortfall. The Fresno City Attorney’s Office also rejected a public records request from the Modesto Bee pertaining to the matter in December 2021.
Dyer has since told the Bee that he learned of the loss about two months before he took office and that he put it on the council’s closed session agenda for immediate discussion.
“When he informed us of it, he was blindsided and surprised that council had not been informed of such a significant incident,” Arias told the Bee. “So credit to the mayor for disclosing it to the city as he came into office, and shame on the previous administrative staff that kept it from the council and the public.”
The scam was reported to Fresno Police and then handed over to the FBI. The FBI asked city officials to keep the incident quiet, Dyer said. Less than $2,000 was recovered.
If you’re wondering how a city like Fresno falls for a scam like this, it’s important to understand just how complex some of these schemes have gotten. The fraudulent invoice looked like a legitimate invoice from the subcontractor who did work on the police station. It had the same letterhead but a different account number.
Fresno has already spent millions upgrading its electronic security. Other cities should use this as a cautionary tale.
“I think it’s important for the public to know that even organizations as large as the city, with its own police department and multiple safety measures in place, can be a victim of electronic products. It should be important for the public to take as many precautions as they can,” Arias said. “In this case, Fresno is not immune to folks attempting to defraud the city. They’re very complex financial schemes, so it’s unfortunate. Unfortunately, it happened to us.”