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Livingston Parish School Board mistakenly paid $2 million to scammers last year, audit says

1 year 3 months 2 days ago Monday, February 13 2023 Feb 13, 2023 February 13, 2023 3:35 PM February 13, 2023 in News
Source: WBRZ

LIVINGSTON - The Livingston Parish School Board inadvertently paid millions of dollars to scammers last year after the fraudsters reportedly sent messages posing as contractors who worked with the school system.

According to a report from the Louisiana Legislative Auditor's Office, the payments totaling $2,251,861 were all issued over the course of about a month starting Jan. 12, 2022. Most of the money has since been recovered.

The audit says it started after the school board received emails from "bad actors" posing as vendors who were supposed to received payments from the school system. Those emails requested that the school board make changes to its electronic payment setup with those vendors.

School board staff then made those changes without verifying them with the contractors, and the scam was only detected weeks later after one of those vendors asked about the payments. 

Once the school system realized what happened, it canceled the last payment and contacted law enforcement. The school board was able to recover a little over $1.9 million. The audit said $343,967 is still unaccounted for, and an insurance claim has been filed to get that money back.

Those responsible for the scam have yet to be identified, according to the audit published this week. 

Read the full statement from Superintendent Joe Murphy below. 

Here is an update on the bank fraud incident that occurred in January of 2022. Let me start by saying that this incident was perpetuated by, as our annual audit indicates,  by "bad actors" posing as employees of contractors who completed work for our school system. It was specifically EFT fraud. There were two contractors whose accounts were compromised. I would like to point out that at no time during the investigation was an employee of LPPS accused of any fraudulent activity. This was a matter of electronic fraud and not mismanagement of existing funds. This incident is not unlike incidents many of us have experienced with our own banking/savings accounts. 

As the Legislative auditor's report shows the amount of incident was $ 2,251,861 with a recovered amount of $1,907,894. That recovery was made possible by the excellent investigative work of the Town of Livingston police department, the FBI and other law enforcement agencies working with our own staff. 

Additionally, LPPS carries two insurance policies applicable to this loss and claims have been filed with our carrier. Those policies are applicable for Social Engineering Fraud. One policy carries a 250K per incident limit and the other policy carries a 100K per incident limit. Our carrier has asked for and received information regarding these claims and we are waiting on verification of coverage related to this incident. 

Lastly as a result of this incident, LPPS has modified its procedures regarding EFT transfers to further protect our system from future electronic fraud. LPPS now requires that any change to electronic fund transfers requires written and verbal verification from the vendor. 

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