City of Sudbury trying to recover .5M sent to Toronto bank account set up by fraudsters

The City of Sudbury says it was scammed out of more than $1.5 million dollars last month when it was duped into wiring cash to a bank account set up by fraudsters at the Scarborough Town Centre.

In a lawsuit filed in Toronto earlier this month, the City of Sudbury alleges that unknown suspects “infiltrated” email accounts associated with a construction company that was contracted to build affordable modular rental housing in the northern Ontario municipality.

The suspects, according to the statement of claim, gained access to the legitimate email of a project manager and posed as the employee in communications with the city.

The fraudsters convinced city staff to send a wire transfer of $1,501,380.66 to a different bank account than the one that was originally set up by the construction company, the lawsuit alleges.

The municipality is now trying to retrieve that money, seeking a court order to force multiple major banks to trace the funds, freeze them, and return the cash to the city.

An Ontario numbered company based on Blakely Road in North York is also named in the lawsuit.

“The illegal activity was caught quickly by staff, and we are confident that we will be able to recover the majority of these funds,” a statement from a city spokesperson read.

“The process to recover these funds is lengthy and involves several outside agencies, such as the contractor, our insurer, banks and courts.”

According to the statement of claim, prior to the transfer, city staff noticed the discrepancy between the bank account information and contacted the company to provide more documentation. The lawsuit alleges that the suspects “intercepted” those emails and proceeded to create and provide “fraudulent and forged documents” to perpetrate the theft.

The money was transferred to the scammers on Dec. 21 into an account set up at a Scotiabank branch at the Scarborough Town Centre, the lawsuit states, and that account has since been frozen.

It took about a week before it was discovered that the construction company did not in fact receive the money that was wired, the lawsuit says.

 

Internal review, police investigation underway

In a statement to CP24.com, Katie Raskina, a spokesperson for Scotiabank, said it 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 statement read. “As this matter is before the courts, we cannot comment further.”

The city said municipalities and members of the public are now facing more “sophisticated” instances of fraud. 

“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 city’s statement to CP24.com read.

“The Greater Sudbury Police Service is investigating, and we are performing a detailed internal review of the matter.”

Timelines and work on the Lorraine Street Transitional Housing project, the 40-unit affordable housing building at the centre of the incident, are “unaffected” by the fraud, the city said. 

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