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State-appointed receiver investigates phishing scam that drained $400,000 from Chester coffers

A phishing scam siphoned more than $400,000 from Chester in June, and the state-appointed receiver who manages the beleaguered city’s finances wants to know why his office wasn’t notified until two weeks ago.

In a memo sent Monday to Mayor Thaddeus Kirkland and Chester City Council, Michael T. Doweary said “the whole incident is extremely disturbing” and noted that his office only learned of the fraud on October 21 when the city ​​publicly announced the loss. .

The theft took place on June 6, when Councilman William Morgan, the city’s accounts and finance manager, received an email he said was from Connor, Strong & Buckelew, the company that provides the workers’ compensation insurance, asking for monthly payment. Morgan paid the bill, he later told police, only to find the request for payment had been sent by a thief who had created a fake email address that looked a lot like the email. of the insurance company.

Chester police investigated, according to Police Commissioner Steven Gretsky, and referred the matter to the Delaware County District Attorney’s Office Cybercrime Unit in October after learning how much money had been stolen.

A spokesman for District Attorney Jack Stollsteimer declined to comment Wednesday, citing the ongoing investigation.

As of this week, the funds have not been recovered, according to Morgan.

The phishing scam is the second to hit a government agency in Chester in recent months, authorities said. Last year, the Chester Upland School District lost $13 million to cybercriminals who used a fake email address to divert public funds to a private account.

” LEARN MORE: Hacked email and ‘romance scam’ helped thieves siphon off $13million from Chester Upland schools, officials say

State employees overseeing district finances noticed the payments and were able to “recover” most of the stolen money, officials said in August. The scheme does not appear to be linked to the Chester government’s latest theft of funds, authorities said.

Doweary’s chief of staff, Vijay Kapoor, said Wednesday Chester’s receiver was “stunned” when he learned Morgan had waited three months before telling his office about the theft.

“Chester is a city that is on the verge of bankruptcy and was at the time of this incident,” Kapoor said. “The receiver has been tasked with resolving the city’s financial and operational issues, and in order for the receiver to do his job, he needs to receive information like this immediately.”

Morgan, in an interview Wednesday, said he launched an internal investigation as soon as he discovered the fraud, notifying police, the insurance broker and the bank holding the city’s account.

“I wanted to do an investigation first, so that we could gather all the relevant information,” he said. “We wanted to make sure we had all of those things in place before we came to the receiver with new internal controls and next steps.”

State officials appointed Doweary in 2020 to help oversee Chester’s finances as it neared insolvency. The Delaware County town is only the second municipality in state history, after Harrisburg, to receive such statewide intervention.

As receiver, Doweary, whose appointment ends in December 2023, fought public battles to rescind lucrative contracts he said were unfair to the financially-struggling city, including one with a parking meter salesman. More recently he warned that the city is close to bankruptcy.

In March, he asked a Commonwealth Court judge to strip Morgan of his financial oversight of various city affairs, including improperly inflated payments to police officers and other employees, and IRS filings that contained errors. which resulted in $750,000 in penalties.

The court denied Doweary’s request, but ordered Morgan to share any correspondence regarding city finances with the receiver’s office.

“The receiver went to court in March to try to prevent a situation exactly like the one that just happened,” Kapoor said. “The court ordered the municipal authorities to immediately inform the receiver of financial matters such as this. That was not done here, and the matter was not referred to an organization that specializes in investigating such matters.