Town Administrator          December 30, 2019

Town of Erie Victim of Financial Fraud
The Town is the victim of a criminal fraud committed by as yet still undetermined perpetrators. The information below is a summary of what we know at this time about how the crime was committed, and the actions taken since we learned of the crime on November 5^th. The Erie Police Department continues to work with the FBI to investigate this case, and Town staff continue to work with the Town’s insurance providers on the loss claim.

On October 21, 2019, an unknown suspect completed an electronic form on the Town’s website requesting a change in how one of the Town’s vendors, SEMA Construction, Inc., the primary contractor for the Erie Parkway bridge, would receive payments for its work on the bridge. Specifically, the change was to receive payments via electronic funds transfer rather than by check. Although Town staff checked some of the information on the form for accuracy, they did not verify the authenticity of the submission with SEMA Construction; they accepted the form and updated the payment method.
 
On October 25, 2019, and as the result of two properly documented and reviewed pay requests from SEMA, the Town processed two progress payments to SEMA for its work on the Erie Parkway bridge. The payments totaled $1,016,233.80. The Town sent these payments via electronic funds transfer to what Town staff thought, based on the form submitted on October 21, was SEMA’s account. However, the form submitted on October 21 directed the payments into an account not authorized by SEMA. Once the payments were in that account, the perpetrators of this fraud sent the money via wire transfer out of the country.
 
On November 5, 2019, the Town’s bank notified the Town of the possible fraud. The Town contacted SEMA, and SEMA confirmed that it had not received the payments sent by the Town on October 25^th and had not changed its payment preferences. The Finance Director then notified the Town Administrator and the Erie Police Department of the fraud. The Town Administrator contacted the Colorado Intergovernmental Risk Sharing Agency (CIRSA), the Town's insurer, to file a claim and initiate its consideration of the loss. 
 
The Erie Police Department is working with the FBI on the case and the results of their investigation to date are summarized above. The Police Department and FBI did not find any evidence that any Town employee engaged in any criminal activity, nor do the facts in the case suggest any criminal intent on the part of any Town employee.
 
After being informed by the Town’s bank of the suspected fraud, the Finance Director removed from the Town’s website the form used to perpetrate the fraud and discontinued making vendor payments via electronic funds transfer unless appropriately verified. The Town is actively using other information gleaned from the investigations to identify potential risks and to mitigate those risks.  
 
In October, prior to learning of this criminal fraud, as part of the Town’s 2020 budget request, the Finance Director and Town Administrator requested, and the Town Board of Trustees approved the creation of two new positions, Accounting Manager and Finance Manager, and increasing an existing part-time Risk Manager position to full-time. The Town has filled the Risk Manager’s position and is actively recruiting for the Accounting and Finance Manager positions. These additional positions will provide additional support, oversight, segregation of duties, and management of the Town’s financial operations, which have expanded significantly in magnitude and complexity as the Town has grown in population. 
 
On November 15, the Town sent two physical checks totaling $1,016,233.80 to SEMA Construction for the work it completed on the Erie Parkway bridge.

Town staff are working with the Town’s insurers (CIRSA and American International Group (AIG)) to secure reimbursement for the loss.
 
Any leads regarding this matter should be reported to Erie Police. Questions regarding this matter should be directed to the Town Administrator, Malcolm Fleming.