The Santa Monica-Malibu Unified School District was the victim of a fraudulent transaction involving construction funds in late August, with nearly $3 million taken from the district coffers.
On August 28, the district became aware that it was a victim of “a carefully orchestrated online hack,” as a hacked email of a construction contractor was used to perpetrate a fraud, taking $2,933,511 from a regular electronic funds transfer to the contractor. During an investigation between SMMUSD, the Los Angeles County Office of Education (LACOE), the Santa Monica Police Department (SMPD) and the Federal Bureau of Investigation (FBI); it was determined that a hacked email account of the company was the source of the fraudulent transaction, not a district email account.
The investigation efforts recovered $2,733,305 of the lost funds, leaving a shortfall of $200,206 that the district is “aggressively pursuing.” The district is demanding the company, unknown at this time, behind the compromised email reimburse the shortfall.
“The District has not made a prior public comment regarding this incident to avoid interfering with ongoing investigations and the recovery of the monetary shortfall,” said SMMUSD Assistant Superintendent of Fiscal Services Melody Canady. “While the investigations have not concluded and efforts are still underway to recover the shortfall, given the duration of time since the incident the district believes it appropriate to share the details of this incident with the community.”
SMMUSD states it will “continue to use all means available” to pursue the remaining $200,206; and that fiscal, purchasing and facility improvement departments have completed a review of procedures to prevent further incidents.
“Extensive safeguards have been implemented to prevent this type of incident from occurring in the future,” Canady said. “We appreciate the quick efforts of our staff and all law enforcement officials involved who supported this outcome.”