Jury Finds Fresno Could Have Avoided Massive Phishing Scam

(USNewsBreak.com) – The city of Fresno, California, fell victim to a massive phishing scam in 2020. It received an electronic invoice that looked legitimate but definitely wasn’t. The scam cost the taxpayers around $600,000. Now, a grand jury has found that the city could’ve prevented the massive loss.

The Fresno Bee broke the scam story in 2022 when it reported that the city lost several hundred thousand dollars, and the administration failed to disclose the error to taxpayers and the Fresno City Council. It started when an employee received an invoice from a contractor the city was using to build the new Southeast Fresno police station. The header listed the contractor’s name, but the body of the invoice listed an incorrect account number. A city staffer failed to notice the fraudulent invoice and paid it.

Fresno officials should have noticed a phishing scam that cost taxpayers more than $600,000, jury says https://t.co/t4BKMDZnsI

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In its ruling, the grand jury said that “conspicuous red flags within the Finance Department” went unnoticed. While the city had no written policies in place, finance staffers received training. The grand jury said that fact should have prompted staffers to detect the scam.

The scammers raised another red flag when they requested payment through an electronic transfer, something employees remarked on as unusual. The city paid most invoices using paper checks. Additionally, the city typically authenticated payments through an automated clearing house, but employees didn’t authenticate the two payments, leading to the massive scam. Finally, staffers never sought a second approval, as procedurally mandated for significant payments.

The grand jury issued recommendations to help the finance department improve invoice handling and prevent more fraudulent activity. It recommended that the city adopt the Department of Defense’s policies and institute a review system requiring the directors to approve specific payments. The grand jury advised the city to enact the suggestions before the end of the year or early next year to prevent further losses.