Unalaska recovers $2.3 million after phishing email scam

Unalaska. (Photo by Berett Wilber/KUCB)

More than $2.3 million dollars has been returned to the City of Unalaska, after a nearly two-month federal investigation into a fraudulent financial request.

Between May 15 and July 9, the city paid out $2,985,406.10 to a fraudulent bank account as a result of a phishing email scam. The sender of the email represented themselves as a known vendor and requested a change in payment method.

City Manager Erin Reinders said as soon as they were made aware of the fraudulent activity in July, city officials acted quickly to notify the Federal Bureau of Investigation (FBI), as well as the city’s attorney and insurance company.

“It was at that point where we recognized that we had been transferring funds that were in response to legitimate invoices from a known vendor into an account that was not the vendor’s account,” Reinders said.

Reinders would not comment on who the legitimate vendor was. But that vendor has since been paid the full amount owed.

Federal officials were able to recover $2,347,544.43 of the nearly $3 million. The remaining $637,861.67 was not recovered, but Reinders said she expects the city’s insurance will cover the remainder of the city funds.

In a statement, FBI special agent Steve Forrest wrote that fraudulent schemes are increasing in frequency and sophistication.

“In the case of Unalaska, we were able to recover funds and prevent any future loss thanks to the timely and thorough response from the city administration,” Forrest wrote. “We are continuing to investigate this case in an effort to identify the perpetrators.”

Unalaska has been involved in at least three federal investigations this year. In addition to the fraud inquiry, investigators are still looking into the Mount Ballyhoo car crash that killed two teenagers in May, as well as the death of a U.S. Coast Guard seaman in January. Last week, another 19-year-old coastguardsman was charged with his murder.