Three Million Dollars Stolen From School District Construction Funds, SMMUSD Says
It is unclear who took the money or how so much of it was able to be recovered two months later. "It appears that a hacked email account was used to perpetrate this fraud"
October 10, 2023
In an email sent to faculty staff and parents, the Santa Monica Malibu School District announced that $2.9 million was stolen in August 2023. All but $200,000 was recovered "thanks the efforts of quick acting District staff." the email said.
It is unclear who took the money or how so much of it was able to be recovered. The District does say that "It appears that a hacked email account was used to perpetrate this fraud." The email is reprinted below.
SMMUSD Provides Fraud Investigation Public Notice
The Santa Monica-Malibu Unified School District (SMMUSD) has been involved in an investigation of a $2,933,511.64 fraudulent transaction involving construction funds that was first discovered in late August of this year. Thanks to the efforts of quick-acting District staff, Los Angeles County Office of Education (LACOE) staff, the Santa Monica Police Department (SMPD) and the Federal Bureau of Investigations (FBI), $2,733,305.38 was recovered leaving a shortfall of $200,206.26, which the District is aggressively pursuing.
"The District has not made a prior public comment regarding this incident to avoid interfering with on-going investigations and the recovery of the monetary shortfall," said Melody Canady, Assistant Superintendent of Fiscal Services. "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 became aware that it was the victim of a carefully orchestrated online hack regarding a regular Electronic Funds Transfer to a current construction contractor, on August 28, 2023. It appears that a hacked email account was used to perpetrate this fraud. The SMMUSD technology department determined that a SMMUSD email account was not the source of the hack.
The District has made a demand of the company whose email appears to have been compromised to reimburse the District for the remainder. The special agent assigned to the case commended the staff for uncovering the fraud and acting quickly.
SMMUSD continues to use all means available to pursue the shortfall.
"The fiscal, purchasing and facility improvement departments have completed a review of procedures," said Canady. "Extensive safeguards have been implemented to prevent this type of incident from occurring in the future. We appreciate the quick efforts of our staff and all law enforcement officials involved who supported this outcome."