A call from Dubai, a transaction through a car window: How the City of Saskatoon lost $1.04M
Published Wednesday, December 11, 2019 3:31PM CST Last Updated Wednesday, December 11, 2019 6:45PM CST
SASKATOON -- With a phone call from Dubai and a transaction conducted entirely through a car window, $1.04 million vanished from the city's coffers in August.
The money, which was recovered through a concerted legal effort and the help of investigators, disappeared after a city employee fell prey to someone posing as a local contractor's chief financial officer.
The scammer convinced the employee to alter banking information in order to redirect a legitimate payment meant for Allan Construction to another account.
Soon after the incident came to light, the money was located and frozen by court order.
A written decision from Ontario Superior Court Justice Michael A. Penny provides more insight into how the money was initially taken and the trip the massive sum took through a hazy financial world with international reach.
The court decision was in response to claims by three men who each came into possession of a portion of the city money — amounting to $345,000 — that they too were victims of fraud and therefore shouldn't be required to pay it back.
A stranger calls
According to the document, one of the men, Ali Ziloubaf, played a key role in facilitating the transaction that drained the money from a City of Saskatoon account.
Ziloubaf administered a TD Bank account registered to an Ontario numbered company which he used to conduct a money services business.
In cross-examination, Ziloubaf said his services were generally offered as a way to circumvent trade restrictions imposed on Iran.
Ziloubaf said he received a call from Dubai in August from a person he had never met who told him someone named Gavin Kolner wished to transfer $1 million into his account.
The call led to a meeting on the street between Ziloubaf and a person who identified himself as Kolner.
Kolner did not get out of his car. Instead, he passed a photocopy of his passport through the window of his car to verify his identity, Ziloubaf said.
Ziloubaf said he collected a signature from Kolner to complete the transaction and made no other inquiries.
During cross-examination, Ziloubaf also said he "did not notice" that when $1,038,744 was deposited into the account, it came from the City of Saskatoon.
Favour for a friend
Also, it emerged during Ziloubaf's cross-examination that the TD Bank account the city's money was transferred into was actually opened by a friend of his who worked at Tim Hortons.
After Ziloubaf had a prior TD account closed down because he was using it for a money services business, he approached the friend, who incorporated the numbered company and opened the associated TD Bank account.
The friend who opened the account was given between $500 and $1,500 per transaction made using the account, Ziloubaf said.
TD Bank statements included in Ziloubaf's court submission show the account had a balance of $9.8 million in May. By the end of July, just before the city's misdirected payment, it sat at $258.
By the time the City of Saskatoon became aware of the fraud incident, Ziloubaf had dispersed all but $95,000 of the city's money. However, the money was traced and frozen almost immediately, the decision said.
Ziloubaf claimed that as a victim of fraud, he should not bear the cost of repaying his part of the money which was divided between $60,000 frozen in the TD Bank account and an uncashed $35,000 money order drawn from the account.
He said he never verified the identity of people he dealt with because his business was based on “trust.”
"Regrettably, there is nothing bona fide about Ziloubaf’s conduct," Penny wrote in his decision.
"Leaving aside entirely whether the evidence supports an inference he was complicit in the fraud, it at least supports the inference that he was willfully blind to it," Penny said.
"The funds belong to the city and must be repaid to the city."
Penny ordered the money returned, with the exception of the $258 held in the account before the city's money was deposited.
Penny also rejected the other two men's claims.
Of the three claimants, Mohammad Abazari tried to retain the largest sum of the city's money, $200,000.
In his affidavit, Abazari said he asked Zilobauf to receive funds in Iranian rial in Tehran, transfer the cash to a currency exchange in Dubai and convert the money to $200,000 CDN.
In his decision, Penny said while Abazari said he received a $200,000 bank draft drawn on the TD account on Aug. 9 in exchange for 18 million rial, he did not say when the exchange occurred and did not provide any documentary evidence related to the transaction.
"Even if Iranian rial were paid to Ziloubaf’s credit in Tehran, Ziloubaf could not pay Abazari back with stolen Canadian money"
Abazari was ordered to repay the money which was frozen in a CIBC account where he deposited the bank draft.
"In the circumstances, Abazari must look to Ziloubaf, not money stolen from the city, for the performance of Ziloubaf’s obligations," Penny wrote.
Home purchase paused
The third claim which Penny denied was made by Ibrahim Bangura.
Much like Abazari, Bangura said he had given someone in either Tehran or Dubai the equivalent of $50,000 in foreign currency and that the money was then transferred to him by Ziloubaf.
Bangura provided no documentation to support this claim, Penny wrote.
Bangura used the $50,000 to pay a deposit on a home he was purchasing.
At the time of Penny's decision, the real estate company holding the money had already turned it over to Minden Gross, a Toronto-based law firm assisting the city in its recovery efforts.
Penny gave the firm permission to release the funds back to the city.
Costly court battle
While the City of Saskatoon had asked for $63,800 to cover the legal costs stemming from the three men's claims, Penny opted for a lower amount because there was no evidence they were direct participants in the fraud.
Penny ordered Ziloubaf to pay an additional $15,000 to the city and Abazari to hand over another $10,000 to help cover the fees.
Because the city funds transferred to Bangura were essentially already recovered, and little time was spent on his claim, Penny declined to order costs against him.
With files from CTV News Saskatoon's Matt Young