City faces $100,000 in legal fees for $1M fraud recovery
SASKATOON -- The City of Saskatoon spent an estimated $100,000 in legal fees to recover more than $1 million stolen by a fraudster posing as a city contractor earlier this year.
"There's no question that’s a big bill, $100,000 in legal fees, I think it will be just under $100,000," said city manager Jeff Jorgenson while delivering a report on the incident during a Monday committee meeting.
In July, while posing as the chief financial officer for Allan Construction, a scammer tricked a city employee into rerouting a $1.04 million payment intended for the company into a fraudulent account. The city didn't learn about the misdirected payment until Aug. 12.
Jorgenson said the city immediately sought help from the financial institutions in Toronto, as well as teams of lawyers who had experience dealing with this type of fraud.
While the city said a large portion of the fraudulent payment has been recovered, there's still about $300,000 that's still in a holding account, awaiting a Dec. 23 appeal deadline for others an Ontario court decision.
The $100,000 legal fee cost could rise in the event of an appeal, Jorgenson said.
The Ontario court ordered the return of the money plus $25,000 to partially cover the city's legal costs.
As for the remaining legal fees, Jorgenson said no matter how they are paid, it's a loss to the city.
"One way or another whether it's out of the capital reserve for that project or the general stabilization fund, no matter what it's a loss to the city there's no way around that.”
The city won’t comment on the specific systemic failures leading to the fraud, or the improvements the city has made, after a review by the city’s internal auditor.
"As an organization, you wouldn't want to talk about all those particulars because it would give too much information to the people who are trying to defraud you," Jorgenson said.