City of Alamogordo victim of $250,000 email scam

ALBUQUERQUE – State Auditor Wayne Johnson is cautioning all New Mexico government entities about an unknown email scam after the city of Alamogordo paid more than $250,000 to a scam artist Thursday.

Johnson said the recovery of that public money will be difficult if not impossible to recover.

He said he is reminding all the state’s government entities to be extremely cautious and aware when it comes to email communication from any vendors.

“In this Snapchat and Instant Message world, it’s critical to verify information with a real person, either in person or by phone,” Johnson said. “An email seeking to alter banking information should always be a red flag. Talk to your vendors, especially when they do something out of the ordinary, like send a change in banking information. It’s important to establish personal relationships so that finance staff can talk to people already known to them. There’s no excuse for not taking that extra step to make sure to prevent the theft of a quarter of a million dollars in public money.”

Johnson said Alamogordo city leaders followed the correct procedures by notifying the Office of the State Auditor and by calling in law enforcement and the FBI.

He said if a government entity or agency has a fraud incident or email scam that happened to them, they’re required to notify the State Auditor.

“For example, Bernalillo County not too long ago got a fake $50 bill that was passed to them,” Johnson said. “They notified police and notified the State Auditor per state statue. In this particular case, $250,000 was a lot of money for an email scam. We feel like these situations, we need to make sure that all the other state agencies and local governments go back and review their internal controls to make sure this type of thing doesn’t happen again.”

An Alamogordo city employee received an email request to change banking information from someone who appeared to be a Cooperative Education Services(CES) representative. CES is a New Mexico purchasing cooperative.

The email appeared to come from a person known to work for CES. The email contained an outdated version of the CES logo. The city accepted the change in banking information and paid all the CES invoices, only to discover that the email was fraudulent, Johnson said.

He said CES is a commonly used purchasing cooperative for New Mexico schools and other government entities.

Alamogordo officials have acknowledged that the amount owed to the company was correct, so the request for payment was not unusual, Johnson said.

He said the email appeared to come from an agent the procurement officer knew and had worked with in the past. The email bore an official looking CES logo. The procurement officer didn’t question or confirm the email and the information contained within it.

The employee forwarded the email to Alamogordo’s Finance Department which changed the payee information as requested. Payment for outstanding invoices were made for more than $250,000 and went to the fraudulent bank account instead of the actual vendor’s bank account.

CES representatives called the city requesting payment on the outstanding invoices, Johnson said.

City managers believed CES’ payment had already been made to the company then realized they had transferred the money to a fraudulent entity.

Johnson said CES is notifying all their customers of the potential for fraud and advised the State Auditor’s office that it has not changed their banking information nor does the company plan to change the information.

“Our office has warned local governments before about email scams,” Johnson said. “Those who handle public dollars need to pay attention and realize these scams can happen at any time. They are constantly evolving. These thieves are creative and effective. Public entities have to make sure they have strong anti-fraud procedures and that they are following them in every instance in order to safeguard public money.”