State Auditor: City of Alamogordo lost $250,000 to fake vendor

A scam artist was able to defraud the City of Alamogordo out of more than $250,000 “and recovery of that public money is likely to be difficult, if not impossible,” said Wayne Johnson, an auditor with the State of New Mexico.

Johnson said Tuesday all public entities should be extremely cautious and aware when it comes to e-mail communication from any vendors. “An email seeking to alter banking information should always be a red flag. Talk to your vendors, especially when they do something out of the ordinary,” Johnson said in a news release.

The auditor further states it is important to establish personal relationships so finance staff can talk to people already known to them. “There’s no excuse for not taking that extra step to make sure to prevent the theft of a quarter of a million dollars in public money,” Johnson said.

The auditor’s office said a staff member with the City of Alamogordo received an email request to change banking information from someone who appeared to be a representative of Cooperative Education Services, (CES) a New Mexico purchasing cooperative.

“The email appeared to come from a person known to work for CES, and contained an outdated version of the CES logo,” a news release states, “The City accepted the change in banking information and paid all invoices, only to discover the email was fraudulent.”

The auditor said CES is a commonly used purchasing cooperative for schools and other government entities in the State of New Mexico. The FBI and law enforcement was immediately notified after the City learned of the scam.

Officials with the City of Alamogordo said the request for payment did not appear to be unusual because the amount owed to the company was correct.

“The e-mail appeared to come from an agent the procurement officer knew and had worked with in the past. It bore an official looking logo from CES. The procurement officer didn’t question or confirm the e-mail and the information contained within it,” the City said, further stating, “She forwarded it to the finance department which changed the payee information as requested. Payment for outstanding invoices was made for more than $250,000 and went to the fraudulent bank account instead of to the actual vendor.”

The City suspected something was wrong when representatives from CES called requesting payment on the outstanding invoices. “Managers believed payment had already been made, and only then realized they had transferred money to a fraudulent entity,” the City said.

CES is notifying all customers of the potential for fraud.

“Those who handle public dollars need to pay attention and realize these scams can happen at any time and they are constantly evolving,” Johnson said, “These thieves are creative and effective. Public entities have to make sure they have strong anti-fraud procedures and that they are following them in every instance in order to safeguard public money.”