City of Saskatoon loses $1M to fraudster

SASKATOON • The City of Saskatoon is reviewing its procedures after falling prey to a fraudster who stole $1.04 million by posing as a construction company executive.

The city called an “urgent” news conference on Thursday to announce the unprecedented loss and to warn others.

City manager Jeff Jorgenson said to his knowledge this type of theft has never happened at city hall before.

“So right now, the focus is on the recovery of funds,” Jorgenson told reporters packed into city hall’s media room. “The banks are working on it. The police are working on it. We have our internal auditor working on it as well. So that’s where our priority is.”

The fraudster impersonated the chief financial officer of a prominent construction company to advise the city of a change in banking information. The payment of $1.04 million was sent to the fraudulent account.

City hall found out about the fraud on Monday. Jorgenson said he could not reveal further details because there is a police investigation. He would not name the construction company.

Jorgenson said a lot of the information on city contracts is made public, so city hall needs to ensure it has proper processes in place to protect against fraud.

City hall staff have spoken to experts since the fraud was discovered to try to determine the probability of recovering the lost money.

“The research we’ve done has shown that some agencies were able to recover a significant amount of money, some agencies found it virtually impossible to recover the money,” Jorgenson said.

“What I would say is that we’re chasing down every lead, cautiously optimistic that we will be able to recover a significant portion of the funds.”

Jorgenson said the contract with the company is not affected by the fraud and city hall still owes the money to the contractor.

“Clearly, the control that was used wasn’t strong enough to prevent (the fraud),” he added. “What I would say is internal and external staff who are experts in this area are reviewing all financial processes and controls in this area.”

The fraud began a “handful” of weeks ago and involved a single payment, Jorgenson said. No city employee has been disciplined, he said, but a human resources investigation will happen after the police investigation.