A recent scam targeting Texas’ Camino Real Regional Mobility Authority city streetcar project lost $2.9 million to thieves posing as city vendors and prompted the FBI to launch and investigation.
(TNS) -- The Downtown streetcar project is $1.3 million shy of its $97 million budget about a year after the city and the agency overseeing the project fell victim to an email phishing scam.
Raymond Telles, executive director of the Camino Real Regional Mobility Authority, which is overseeing the construction of the project, said the agency has absorbed the loss through conservative financial planning throughout the course of the project.
“The impact is that the final contingency fund for extras at the end of the project for stuff like additional landscaping or whatever is cut short (by the $1.3 million)," Telles said.
Telles said the CRRMA knew from the beginning it would not receive any additional funds from the Texas Department of Transportation, which is funding the project, or the city, which has said it would not contribute any funds to it.
“The climate was pretty clear from our end, so we went in with the mindset that if we got into trouble (financially), we wouldn’t be able to make up for it,” Telles said. “We were more conservative than with other projects.”
Being conservative meant having an active contingency management plan that was larger at the onset than for other projects. Telles said it was that initial financial planning that has allowed the CRRMA to absorb the financial loss from the phishing scam.
City officials said the FBI, the agency leading the investigation, was able to recover $1.6 million of the stolen funds last year, but no more money has been recovered.
FBI officials said the investigation is ongoing and would not comment further.
In October 2016, city staff discovered that a $300,000 electronic payment to a vendor had been misdirected to a different account. City officials then realized that a second electronic payment of $2.9 million on behalf of the Camino Real Regional Mobility Authority for the city’s streetcar project also had been misdirected.
The city had not released information about the scams until the El Paso Times first reported on them in November 2016.
The scams involved someone posing as a vendor to obtain payment from the city totaling $312,000 for unspecified city projects and $2.9 million for the streetcar project.
Officials have said $292,000 was recovered by law enforcement from the first payment for city projects and nearly $1.6 million was recouped in the second case for the streetcar project.
Scam led to security changes
The incident has led to process and security changes for both the city and the CRRMA. The CRRMA is a political subdivision of the state that was created by the El Paso City Council in 2007 to handle major transportation projects like the Downtown streetcar project.
The El Paso city government acts as the fiscal agent for the CRRMA, including paying vendors.
The scam occurred when the payment meant for Paso del Norte Trackworks, the lead contractor for the project, went to a scammer who had convinced the two entities to change the company’s bank account information.
Miscommunications occurred between city staff, Telles and officials with Paso del Norte Trackworks, which delayed the discovery of the missing payment by about a month.
In recent email responses to the Times, city officials said, “The city is processing electronic payments for vendors. The financial team instituted enhanced controls for vendor account management, and financial transactions. The vendor account changes are verified internally, and with the vendor prior to making any modifications in the financial system.”
Telles said, “If any entity that we work with or our vendors change anything related to their information, they have to request it from the city directly. I think it’s a great move.”
He said the city also has established separate bank accounts for CRRMA funds. Telles said prior to the scam, the agency’s funds would go into a concentration account controlled by the city.
“That’s huge for us because it segregates the RMA funds from the city’s accounts,” Telles said.
He also said the agency is working toward hiring another employee. Currently, Telles is the sole employee of the CRRMA.
The city also has changed its policy on workers who are leaving city employment after it was discovered that an official with Paso del Norte Trackworks left a voice message asking about a missed payment with a city employee who had retired.
The city employee had retired two months before the streetcar contractor left the message about the missing payment, which might have delayed the discovery of the phishing scam.
“As a result of this incident, our exiting employees create voicemail and email messages with an alternate city employee’s contact information that may provide the necessary assistance,” city officials said.
No further information has been released about the city projects or the phishing scam. The Times filed multiple open records requests with the city and the CRMMA after discovering the incident.
While the Times was able to obtain some of the requested information, the Texas attorney general in separate rulings earlier this year determined most of the remaining documents could be withheld.
©2017 the El Paso Times (El Paso, Texas) Distributed by Tribune Content Agency, LLC.