Lexington has recovered all of the funds that were stolen in an electronic theft, Mayor Linda Gorton said.
The missing money – $3,905,837.05 – was seized from a private account, and refunded to the City today.
The city originally intended to transfer the federal rent assistance and transitional housing funds to the Community Action Council. The money was diverted into a private account by criminals, who inserted themselves into electronic communication between the City and Community Action and provided false transfer information.
“The Lexington Police Financial Crimes Unit, several financial institutions, our Departments of Finance and Information Technology, and local FBI and Secret Service offices have played pivotal roles in the recovery of these funds,” Gorton said. “We appreciate their expertise and swift response.”
The investigation into the theft continues by local FBI and Secret Service offices. The FBI is conducting a criminal investigation; the Secret Service is investigating the electronic transfers. Investigators have no evidence of criminal involvement of city or Community Action employees.
Sgt. Brad Williams, who leads the Police Department’s Financial Crimes Unit, said the city is fortunate to recover the funds. “This kind of theft is all too common everywhere,” Williams said. “We are fortunate to find this money. Often, the funding cannot be recovered.”
Finance Commissioner Erin Hensley said the city has already conducted an in-depth review of its financial procedures and has drafted updates. “We are closely examining our procedures, and are taking additional steps to prevent fraud, from inside or outside the government. We have started additional training within the Department to keep cyber-security a central focus,” Hensley said. “In addition, our outside auditors are conducting independent tests of our procedures and will make recommendations for improvements.”
Secret Service investigators will also examine city procedures.
Chad Cottle, Deputy Chief Information Officer, said security is always a top concern for the Department of Computer Services. “In light of this theft we will review our procedures and look for additional steps we can take.”