A single scammer from Nigeria, who was living in New York City perpetrated a massive scam on the Boulder Valley School District (BVSD) which potentially could have had a catastrophic effect of hundreds of millions in losses. The “good news” is that the school district was able to get a lot of the initial payments totaling about $500,000 back, save for $172,000 which can still go a very long way in a Third-World country.
The school district claims it has added safeguards but the fact that they fell prey to a single scammer and not a sophisticated network in some vast overseas conspiracy, should be a warning as to how vulnerable we can all be to fraud. How a scammer took a School District to school?
A Little Knowledge is a Dangerous Thing
The person committing the fraud, 36-year-old Sherifdeen Mogaji had just enough knowledge of how public contracts work and the ability to forge a signature to be successful. The prime contractor for BVSD is Adolfson and Peterson Construction.
In 2016, the “company” presumably asked for a payment on an account that was allegedly past due. The district had been sending in payments all along. It was initially confusing because a person apparently called the district that alleged he or she was with Adolfson and Peterson asking the district to change the way payments were being made.
Rather than do intense due-diligence, BVSD sent the caller a form. It was returned (as an email attachment) with the alleged signature of the CFO of Adolfson and Peterson Construction. On the form was a bank account where the district was asked to send the payments.
From then on, payments were sent to the new account which was a fraudulent account. Bill Sutter, Boulder Valley’s chief financial officer, called the attack “fairly sophisticated.” I will get to that in just a minute.
There were several payments made before the scam was detected. Very fortunately, the police were able to track the transfers to a bank not in Nigeria, but New Jersey. They were able to recover about a half-million dollars.
The district says it has taken many precautions to guard against future scams. Including a move away from direct deposits to paper checks.
“We put controls in place and slowed the process down,” Sutter said. “We had a nearly identical attempt after we changed these procedures and stopped it in its track.”
Who Was Minding the Store?
Fortunately (to a point) the BVSD was able to minimize their losses with insurance coverage against such scams. Instead of potentially losing many hundreds of millions of dollars, they obviously lost a lot less. Said Randy Barber, the Boulder Valley Spokesman:
“Any loss isn’t something we would want, but we’re glad that the vast majority of the money is back where it’s supposed to be.”
The school district was very lucky and also very naïve. It also suggests that no one was trained to safeguard against unethical behavior.
Contracts and financial documents are frequently posted for transparency. Like it or not signatures are posted with the documents. Indeed, many organizations and many executives within those organizations are often proud of their “electronic signatures.” For the most part, the signatures are harmless for general use, however in the hands on a thief they may be very powerful.
We must remember that what any unethical person initially looks for is an opportunity to commit fraud. In this case, the winning contract was posted with the signature. All it took was a telephone call and a fraudulent email address, to start the ball rolling. As the person committing the fraud (and/or his accomplice) was so unethical, they were unafraid to reach the accounts payable office with a bogus story. The email address was even easier. Sometimes just changing from “.com” to “.net” is all that is needed.
Here is also something any unethical person lives for: a lack of oversight. Someone in the A/P Office went ahead and sent a form without oversight or due-diligence. It required a “human response” and examination not just a knee-jerk reaction.
When the first payment was prepared, did anyone in the CFO’s office check to make sure the supposed bank account and its routing number was valid? Again, bank accounts can be named virtually anything but routing numbers are unique.
It is always interesting to me how we are often more cautious with our personal checking accounts for an item costing a few dollars, than in our workplaces when millions of dollars are involved, especially tax dollars. We often become so focused on the job that we lose sight of the much bigger picture. The unethical know this and in fact, they hope for it. How a scammer took a School District to school?
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