The city of Seattle mistakenly sent nearly $ 1 million in funds to help the homeless to scammers earlier this year, according to emails from the Seattle Times. The city confirmed in a statement that the FBI and US intelligence are investigating.
Nine payments sent between November 2020 and April 2021 totaling more than $ 800,000 went to an account that the city believed belonged to the nonprofit homeless family Mary’s Place, but it wasn’t, as seen from emails between the non-profit organization and the city. The problem was not recognized for months and officials have failed to explain how the mistake happened, but do point out potential fraudsters.
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The city is reimbursing the charitable organization for the lost money and is taking steps to prevent further fraud, a city spokesman wrote in a statement.
The news came as a surprise to many city councilors on Friday.
Councilor Teresa Mosqueda, chair of the budget committee, said she was not informed of the alleged fraud. The Council is now almost finished with the budget deliberations for the next year.
A city spokesman said staff informed council member Lisa Herbold, chair of the staff committee, and provided council members with emails in June. Herbold admitted that the city notified them, but said they were not informed of the amount of the fraud.
“I would have hoped everyone would have been informed of the extent of the problem,” said Herbold.
Councilor Andrew Lewis, chairman of the city’s homeless committee, said he intends to propose an amendment next week to give more funding to the city’s audit office in hopes of catching such issues sooner.
“This should be a wake-up call for us to put more money into the performance audit and the city auditor’s office,” said Lewis.
Mary’s Place confirmed that the organization has started receiving payments from the city for the absence.
“Mary’s Place has provided information to assist the city of Seattle in its fraud investigations,” Mary’s Place wrote in a statement to the Seattle Times.
Nobody picked up the problem in town or in Mary’s Place until well into June 2021, as emails show.
Officials may have overlooked the issue because Mary’s Place has become a popular reservoir for assets from big donors like Amazon founder Jeff Bezos over the past decade, with total sales of $ 22.5 million in 2019, according to tax records. It’s a pretty small amount for the city, too – less than one percent of the city’s total $ 167 million homeless budget.
The city is using public funds to pay Mary’s Place and dozens of other providers for help, shelter, and food for the city’s homeless population, the third highest in the country at the last census.
The city’s human resources department has also been chronically understaffed for months, particularly in its homelessness department, as that department prepares to be largely replaced by the King County’s regional homelessness agency.
Emails solicited through public records indicate that Marty Hartman, executive director of Mary’s Place, emailed an email to the city’s director of finance and administrative services, Calvin Goings, in June with the subject “URGENT: FINANCIAL COMPANY” sent.
“We discovered the bank account associated with Marys
Automatic payments from the City of Seattle changed without ours
Knowledge and our city payments have been transferred to an unknown bank account, ”Hartman wrote.
In follow-up emails between Mary’s Place CFO Kristi Tollner and city officials, Tollner said the nonprofit stopped most payments after signing up for a direct deposit with the city in November 2020.
According to a spokesman for the state auditor, whose office was notified of the loss in late July, the case may have been someone posing as Mary’s Place.
In July, Joseph Kasperski, chief financial officer of the city’s human resources department, said in an email that the deposits were sent to a “fraudulent account” and that the city is working with the FBI and intelligence agencies investigating cyber fraud.
A city spokesman emailed the Seattle Times that federal investigators had found the city and Mary’s Place to have been victims of fraud totaling approximately $ 831,062 in losses over six months. Neither the city nor Mary’s Place could explain why their number did not match the $ 882,360 tollner described in an email as “excellent”.
Jenna Franklin, director of foreign affairs for the human resources department, said in an email that the department was working with the city’s finance department to figure out how to prevent future fraud attempts. Franklin said there are now several safeguards in place to ensure payments are being made to the correct account.
“These safeguards improve the verifiability of payments to providers while minimizing the potential for future identity theft attempts,” said Franklin.
Franklin also wrote that the city will reimburse Mary’s Place, review other “suppliers” who recently changed their money orders, and this month it will change its policy on review practices.