Baltimore City alerted to $1.5 million theft by fraudulent vendor, prompting investigation
Baltimore City officials are taking steps to increase security after being alerted to a fraud incident in March, according to the Comptroller's Office.
Two payments, totalling $1.5 million, were approved for a city vendor, according to our partners at The Baltimore Banner. The payments were instead directed to a bank account that was not associated with the vendor.
A bank alerted the city after an account received the two payments, one for $803,000 and another for $721,000.
The banner reported that the account was eventually frozen and the second payment was reversed, but the first $803,000 payment has not been recovered by the city.
The incident has since been reported to the Federal Bureau of Investigation (FBI) and the city's inspector general. The investigation is ongoing.
Who facilitated the theft?
City officials have not discovered who is behind the theft, according to the Banner.
Before the payment was made, city officials spent months emailing back and forth with the person who was pretending to be a vendor.
Baltimore City's Deputy Comptroller Erika McClammy told the Baltimore Banner that the person initially contacted officials in the finance department in the fall. The person later switched the bank account used by the vendor by providing proper documentation and a tax identification number.
"The fraudulent actor started doing things such as changing account information, which is what vendors sometimes do. That part is normal," McClammy told the Baltimore Banner.
Officials did not share the name of the vendor, but said they are a regular contractor with the city's Department of Public Works (DPW).
The Baltimore Banner reported that the person was able to bypass the city's virtual geographic boundary system, which monitors mobile devices and IP addresses. The person used an IP address that was set up through the satellite internet company Starlink.
City officials increase security
The incident of fraud prompted city officials to begin implementing more security measures.
According to the comptroller, the city's Accounts Payable and Finance departments have started reviewing internal controls and taken other steps to prevent fraudulent payments in the future.
The departments are also working with the City Administrator and IT officials to create immediate security measures.
"The Department of Accounts Payable followed all existing verification protocols and, upon learning of this incident, took immediate action," Comptroller Bill Henry said in a statement.
City officials are now urging vendors to review their security protocols to ensure their account information is secure. Vendors can expect additional guidance about adding security measures.
