One Mobile city employee was fired and two put on paid leave over the $14.7 million theft. The mayor said a fraudster posed as a real vendor.

The city of Mobile has fired one employee and put two others on paid administrative leave over the $14.7 million in city money lost to fraud.

Updated Nov. 4: The council’s Nov. 3 agenda listed three residents to speak on the loss. One asked for an independent review of financial controls and a forensic accounting investigation looking back 10 years. The agenda also carried a resolution, sponsored by all seven council members and the mayor, to create a seven-member volunteer Advisory Committee on Financial Transaction Security. Under the draft resolution in the agenda packet, the committee would study payment and verification procedures and advise the council. It could not investigate specific incidents or employees. The city has not yet published minutes, so we cannot yet confirm the outcome.

Mayor Spiro Cheriogotis announced the personnel moves Monday, Oct. 26, in a written statement on the city’s website. He said they followed the city’s internal investigations. The two employees on leave will stay there “pending further investigation.”

The city will not release the three employees’ names, positions or personal information. The mayor said that was to protect their safety.

How the city says the money was taken

The statement is the city’s first account of how the theft worked. The mayor said:

  • the city’s IT systems were not compromised, based on what the city knows so far
  • the loss did not come from an employee clicking a bad link
  • a fraudster impersonated a legitimate vendor
  • the fraudster “built misplaced trust with critical employees” through a series of emails, documents and phone calls

“To be clear, nothing we have learned suggests this was an ‘inside job,’” Cheriogotis said.

The statement did not name the vendor that was impersonated. It did not say when the money was sent, how many payments were involved or whether any of it has been recovered.

What the mayor said about the anger

“I understand the public’s anger. I am angry, too,” Cheriogotis said. “The loss of taxpayer dollars to fraud and malfeasance is extremely painful.”

He asked residents to direct their anger at the criminals. He said the city would keep working with the FBI and the U.S. Secret Service to recover the money and pursue those responsible.

“Our top priorities are putting protections in place to ensure this never happens again and holding the responsible parties accountable,” he said.

He also said the independent investigations should proceed “unfettered,” and that he would reserve final judgment until their findings are complete. Nobody has been charged.

Residents return to the council Tuesday

The statement said the administration would share more details at the City Council’s Oct. 27 meeting, at council members’ request. The city has not yet published minutes or a written account of what was said there. We reported on the residents who asked to speak at that meeting.

The fraud is back on the agenda when the council meets at 10:30 a.m. Tuesday, Nov. 3, at Government Plaza, 205 Government St. That is also Election Day. Three residents are listed to speak on the loss, according to the agenda for the Nov. 3 meeting published by the city clerk. Their topics include:

  • comments on the $14.7 million in city taxpayer dollars lost to fraudsters
  • cutting unproductive services and projects on hold, as a way for the city to show accountability for the wire transfer scam
  • an independent review of financial controls and a forensic accounting investigation, with a 10-year look back at city financial transactions

The agenda lists no resolution or vote on the fraud.

What it means for you

  • City services. In its first release on Oct. 20, the city said its reserves mean the loss will not affect its services or the timeline of its capital projects. Monday’s statement did not change that.
  • Have your say. Council meetings are open to the public. Our guide to who to call at City Hall lists the council office and other numbers.
  • If you run a business. The mayor said the same kind of criminals target businesses, nonprofits and families. A request to change where a regular supplier is paid is worth checking by phone, using a number you already have on file.

We will update this story when the city publishes the record of the Oct. 27 meeting or when the city or a federal agency says more.