Unanswered questions linger in Fresno’s secret scam loss. Councilmember calls for change
Fresno City Councilmember Miguel Arias wants to propose a new city policy that would address how the city discloses funding losses after he confirmed last week that Fresno in 2020 lost hundreds of thousands of dollars to an online phishing scam.
The city lost over $600,000 in 2020 after an employee transferred money twice to an account listed on a fake invoice made to look like an invoice from a contractor working on the Fresno Police Department’s southeast substation. Fresno police launched an investigation, which later was handed over to the FBI.
FBI investigators told then-Mayor Lee Brand and his administration not to speak publicly of the loss, and current Mayor Jerry Dyer also did not disclose it until a Bee reporter asked him about it.
“What I’m concerned about is how we publicly acknowledge when there’s significant loss of city taxpayer money, so that there’s no allegations of cover-up, as well as making sure we are in compliance with our credit rating agencies and our fiscal and auditing standards as a city,” Arias told The Bee this week. “So the question that I’ve gotten from the public is, if the city can conceal $600,000 that easily, what else is the city able to conceal when it comes to a financial loss of that magnitude?
“At some point, we have to acknowledge it because it’s not our money,” Arias said.
Dyer told The Bee the loss was recognized in the city’s 2020 comprehensive annual financial report, but Arias said that was news to him. Plus, Arias said he wasn’t able to find where the loss was identified in the report, despite sitting on multiple council committees and being notorious for closely inspecting city documents. The Fresno City Council has authority over city policy and approves the city budget.
“We need to address the process on how we acknowledge a public disclosure of taxpayer funds when they’re lost, either from a mistake or litigation or settlement,” Arias said.
Arias cited other cities with budget processes that clearly identify such losses, such as Long Beach. He said he would like to see budget losses treated similar to expenditures, which must be approved by the city council. And, he’d like to see the policy applied to other revenues as well, such as parking fees that have yet to be collected.
Dyer follows FBI direction
Dyer said this week he won’t answer any more questions about how the city of Fresno lost the money, citing the now two-year-old law enforcement investigation led by the FBI. Dyer last week said investigators recovered less than $2,000. So far, authorities haven’t arrested anyone.
Last week, Dyer said Fresno wasn’t the only major American city to fall victim to online scammers but has refused to say which other cities might be in the same boat. Dyer also said he was “embarrassed” that the public found out about the heist.
“I know in the future that as the mayor of this city, I am going to be much more cautious in terms of the information that I share that I know to be confidential in certain settings,” he said.
This week, the mayor’s spokesperson Sontaya Rose refused to acknowledge questions from The Bee. Dyer, in a text message, said he wouldn’t answer questions until the FBI closes the case. The FBI has a long-standing policy of neither confirming nor denying the existence of any investigation.
Arias pointed out that the Fresno County District Attorney and police routinely confirm the existence of FBI investigations.
Arias said he thinks city officials should err on the side of disclosing public information as soon as possible.
If Dyer wants to build public trust, he should not follow the lead of the previous administration, he said.
“The mayor is no longer the police chief. He has a different responsibility and obligation to the city and to the council,” Arias said.
“If this incident has taught us any lesson, it’s that the administration that kept this from the council and the public only lost public trust — trust with the council and the general public,” Arias said. “So I don’t believe it would be wise for (Dyer) to act any differently than he acted in this case.”
Arias said the mayor and city councilmembers are responsible to the public and taxpayers that elected them, not any other agency, such as the FBI.
Unanswered questions
Dyer said the city ruled out the possibility of an inside job but also said they had yet to discover how the scammers were able to replicate invoices from a company doing business with the city.
It’s unclear when — or if — Fresno taxpayers will learn how the system was hacked and what new protocols have been put in place to prevent future scams.
Arias told reporters last week that he was under the impression the money likely won’t ever be recovered.
“There’s very little hope that we would ever recover the money given that these are sophisticated criminal organizations that engage in these online financial fraud schemes,” he said.