Ben Schachtman: So, Nikolai, we covered this story when it first came out in December of last year. Pender County discovered it had lost roughly $667,000 in a fraud scheme where a scammer impersonated a county vendor. They've kept pretty mum about it until Monday's meeting. What all did they share?
Nikolai Mather: So the county is still keeping the identities of the staff involved in the transactions private. But on Monday, we finally learned who the vendor was: it was the Lower Cape Fear Water and Sewer Authority.
BS: That’s the regional utility that provides raw water to Brunswick County, CFPUA, Pender County, and others.
NM: Right – and according to county manager Colby Sawyer, correspondence with the scammer dates back to September 29th. Around that time, Pender County was working to fulfill an invoice to Lower Cape Fear that amounted to about $581,000. Sawyer said that the scammer reached out pretending to be the utility company, and asked to change their banking information. Here's Sawyer at Monday's meeting:
Colby Sawyer: "I'm not harming the investigation to say it appeared very valid."
NM: And so the county made that change and fulfilled the invoice on October 1st. They'd go on to fulfill three more payments to the bad actor before realizing the mistake.
BS: Wow. So, I mean, if Pender paid a scammer, I imagine they didn’t actually pay the real Lower Cape Fear – so how did the actual utility respond?
NM: Apparently, the utility did reach out in November saying like, hey, what's going on, where's our money? But it's unclear if any county staff actually saw that message. Here's Sawyer again:
Colby Sawyer: "It was either not seen or it wasn't responded to. We don't know if it was seen or it wasn't. There was no read receipt sent back, so we don't know that that message was ever seen."
BS: Yikes. Okay, I feel like this begs the question: what are the protocols for handling county money? Is this more an issue with the processes in place or with staff not fulfilling their duties?
NM: Well, county finance director Meg Blue talked a little bit about that. Blue said that when they receive a request like this, either they'll go to the department that has a relationship with that specific vendor and get a contact for their accounting department, or they'll go on the vendor's website and find a contact that way. Here's Blue at the meeting:
Meg Blue: "In this particular instance, again, we had, we trusted the communication because of the perceived legitimacy, and that phone call was not made."
NM: She went on to say that the county has changed the process to require confirmation from multiple people prior to a bank info change. Also, everyone involved in county invoices has had to go through "enhanced phishing training" to prevent something like this from happening again.
BS: What else is the county doing to address this scam?
NM: Sawyer said they asked the North Carolina state auditor's office to conduct a review of the county's IT and do an audit on its finances generally. And the SBI and FBI are still conducting a criminal investigation into the matter.
Something I also wanted to note is that during the meeting, Sawyer mentioned that they had been in touch with the county's insurance providers and the insurance providers' legal team. I requested the county's insurance policy – hopefully, that'll shed some light on whether the county can recoup the money lost.
BS: Well, before we go, let's expand on that. Can Pender County get the money back? Also, where'd the money come from in the first place?
NM: According to Blue, it was not taxpayer money – it was enterprise fund money. That's money from utility ratepayers. And county spokesperson Brandi Cobb told me that it was still too early to tell whether they could get back any of the money, but "the goal is to recoup all of it, and everyone involved is fully committed to making that happen."
BS: So we'll just have to wait.
NM: Yup.
BS: Well, Nikolai, thanks for your reporting.
NM: You're welcome!
Read more:
- WHQR: Pender County manager shares new details about $650k scam
- WHQR: Pender County loses hundreds of thousands of dollars in fraud scheme
