Monadnock Ledger-Transcript – Legislative solution to recovery of fraudulent Peterborough funds unlikely

During public discussions about a $ 2.3 million fraud perpetrated against Peterborough, some wondered if the New Hampshire legislature could pass a bill to restore lost taxpayers’ money.

So far, that doesn’t seem likely.

“Discussions on such legislation have taken place with members of our delegation and with others in the state government; so far none of those conversations have been fruitful, ”city administrator Nicole MacStay said in an email.

Lisa Thompson, a lawyer and chair of the intellectual property section of the New Hampshire Bar Association, said such a bill would set a bad precedent.

“It would mean that whenever a city had a problem like this, it would expect to be reimbursed,” she said. “I mean I understand trying to legislate, but I think the state would be foolish to do that because it would cause everyone to come and want to be reimbursed.”

She said such legislation could also cause city officials to become complacent about e-learning and less assiduous in protecting against online crime.

It has been two months since Peterborough officials exposed the fraud, which occurred when criminals described legitimate city vendors in emails and persuaded city employees to route payments to bank accounts configured fraudulently. Much of the money was then converted into cryptocurrency so that it could not be recovered.

The US Secret Service, which is investigating the case, was able to recover $ 594,331 that had not yet been converted.

MacStay said the city still had no final answer on coverage of the incident by its insurer, Primex, the New Hampshire Public Risk Management Exchange.

Speaking at a board meeting last month, local resident Doug Whitney questioned whether the city could exert legal pressure on Primex to get it to cover the claim.

“If you have a fire and your house burns down, the insurance company will build you a new house. If we have cybersecurity insurance and we have an error or something, or if we have errors and omissions insurance like I have with my business, and you have an error, then the insurance company pays. “, did he declare.

“The job of an insurance company is to try not to pay the claim, so of course that’s what they’re going to do. At this point, we need to step back. If we have adequate coverage, they have to reimburse us.

MacStay said she couldn’t discuss legal strategy on this or another public suggestion made at the September 21 meeting: explore legal action against a bank that could have been used by criminals in connection with their scam.

Thompson, who runs an e-learning course for city officials, said such a litigation would be difficult.

“It looks like it would be a contributory negligence claim, and I don’t think it would hold up,” she said. “For the bank to be negligent, it should have known that these were fraudulent accounts.”

MacStay said city employees did not follow proper verification procedures when the routing of electronic payments destined for ConVal School District and Main Street Bridge contractor Beck & Bellucci was sent to accounts created by the perpetrators of the fraud.

It is not clear whether such a mistake on the part of city staff could affect the viability of the insurance claim.

Three supplier payments were involved. It’s also not clear if the insurance company would treat this as separate claims, which could result in a higher amount of coverage than if they viewed the crime as a single incident.

The city has not identified the staff member (s) affected by the fraud.

CFO Leo Smith, who was long scheduled for retirement after the fraud was exposed, declined to comment.

Marty Karlon, spokesperson for the New Hampshire Retirement System, said Smith retired on September 1 and his preliminary monthly retirement benefit was $ 894.

City accountant Shannon Kelley, who was in charge of accounts payable, resigned on September 7. She could not be reached for comment. Kelley did not work in government long enough to receive a state retirement benefit, Karlon said.

MacStay said no city employee had been financially penalized for the incident.

“No city staff member, current or former, has been held criminally responsible for the loss, and therefore no fines or penalties have been imposed,” she said.

Lilli Gilligan has been hired as the city’s new finance director and MacStay said the city is in the final stages of hiring a new accountant.

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