Investigation continues into theft of federal funds

The Lexington Police Financial Crimes Unit and local FBI and Secret Service offices continue to work on the electronic theft investigation of $4 million in federal rent assistance and transitional housing funds.

Steps have already been taken inside government, including a thorough internal review.

Mayor Linda Gorton has also ordered an in-depth examination of the city’s internal wire transfer processes through the Division of Internal Audit. Additional steps are under consideration.

“The government is a victim of a crime at a time when it is partnering with agencies across the community to provide critical financial assistance,” Gorton said. “Cybercrime is a growing problem around the world. We must be sure government employees are well trained to detect it.” 

Currently, the city believes there was no criminal involvement of City or Community Action Council employees. “However, this an active investigation and facts continue to emerge,” Gorton said. 

The sophisticated criminal operation involved multiple emails and a complicated scheme. Simply put, criminal actors inserted themselves into communication between the City and Community Action Council. City employees received an email from a sender they thought was Community Action Council with new bank information. Unfortunately, the sender was not Community Action Council, which was the intended recipient of the funds. The City, not realizing the bank information was bogus, sent three wire transfers totaling about $4 million to the fake bank address.

“This kind of theft is all too common everywhere. It happens all the time to businesses, universities, non-profits, governments … no one is immune,” said Sgt. Brad Williams, who leads the Police Department’s Financial Crimes Unit. “It is officially called a business email compromise scam.”

Erin Hensley, Commissioner of Finance, said the financial institutions that are involved acted swiftly to freeze this private account, working late into the evening on Aug. 25. “We greatly appreciate their cooperation,” she said.

The city is working through the fund recovery process and to help Community Action Council ensure continuity of housing assistance, she said. Wire transfers of cash to CAC have been suspended until the investigation is complete.

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