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HomeLatest NewsSudbury files legal claim after paying $1.5 million to ‘fraudster’

Sudbury files legal claim after paying $1.5 million to ‘fraudster’

Michael Lewis

Special to Ontario Construction News

The City of Greater Sudbury has filed a legal claim in an attempt to recover more than $1.5 million it paid to a “fraudster” in late December who was allegedly impersonating a contractor on a transitional rental housing project in the city.

Filed Jan. 15 with the Commercial List at the Ontario Superior Court of Justice in Toronto, the claim names Jane and John Doe, a numbered corporation registered in North York and the Big 5 Canadian banks.

“The illegal activity was caught quickly by staff, and we are confident that we will be able to recover the majority of these funds,” the city said in a press release, adding that it is performing an internal review of the matter, and the Greater Sudbury Police Service is investigating.

“The process to recover the funds is lengthy and involves several outside agencies, such as the contractor, our insurer, banks and courts,” the statement says. “Timelines for the Lorraine Street project completion are unaffected, and work continues.” It said the lawsuit is to be heard in a Toronto courtroom at a later date.

The statement of claim says the city issued an electronic funds transfer of $1,501,380.66 on Dec. 21, 2023, believing it was paying into an account held by Flex Modular, the general contractor in charge of the Lorraine Street project in the Northern Ontario city.

But it alleges the payment was intercepted by someone who had hacked into the network and email of the project’s senior manager, with the fraudster directing the funds to a bank account opened to receive the transfer.

Using the project manager’s email address, the fraudster allegedly sent the following message to the city:

“So sorry for the confusion, but our accounting department just confirmed we changed our bank recently from RBC (Royal Bank of Canada) to ScotiaBank which I have re-attached the correct information for the EFT (electronic funds transfer) along with the requested documents for your reference.

“Please can you confirm receipt and have it updated as soon as possible. Also, can we get an expected time frame for the payment?

Please let me know if you need anything else.”

This email included a legitimate chain with the actual project manager and referenced documents previously submitted by the manager.

The fraudster is alleged to have intercepted follow-up emails from the city to facilitate the electronic transfer of the funds to the Bank of Nova Scotia account – with the city’s payables department completing the transfer on December 21. On December 28 municipal staff learned that Flex Modular did not receive payment.

The city in its claim seeks information from the banks to trace the e-transfer to an account held by “persons unknown” so the funds can be frozen and returned.

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