SEATTLE—The city of Seattle mistakenly sent nearly $1 million of funds intended to help homeless people to fraudsters earlier this year, according to emails obtained by The Seattle Times. The city confirmed in a statement that the FBI and U.S. Secret Service are investigating.
Nine payments sent between November 2020 and April 2021, totaling more than $800,000, went to what the city thought was an account owned by family homelessness nonprofit Mary’s Place but wasn’t, emails between the nonprofit and the city indicate. The problem wasn’t caught for months, and officials have not explained how the mistake happened but point to potential scammers.
The city is reimbursing the nonprofit for the lost money, and taking steps to prevent further fraud, a city spokesperson wrote in a statement.
City Councilmember Teresa Mosqueda, who chairs the budget committee, said she was not notified about the suspected fraud. The council is now nearly finished with next year’s budget deliberations.
Mary’s Place confirmed that the organization has started to receive city payments for what is missing.
“Mary’s Place has provided information to assist the City of Seattle in their fraud investigation,” Mary’s Place wrote in a statement to The Seattle Times.
No one caught the issue, at the city or Mary’s Place, until well into June 2021, emails indicate.
Officials might have missed the issue because Mary’s Place in the last decade has become a favorite receptacle for assets from big-ticket funders such as Amazon founder Jeff Bezos, and had $22.5 million in total revenue in 2019, according to tax documents. For the city, too, it is a fairly small amount — less than one percent of the city’s entire $167 million homelessness budget.
The city uses public funds to pay Mary’s Place and dozens of other providers for outreach, shelter and food for the city’s homeless population, which was the third-highest in the nation at last count.
The city’s human services department has also been chronically understaffed, particularly in its homelessness division, for months while that division prepares to be replaced largely by the King County Regional Homelessness Authority.
Emails obtained via public records request show that in June, Marty Hartman, executive director of Mary’s Place, emailed the city’s director of finance and administrative services, Calvin Goings, with the subject line “URGENT: FINANCE CONCERN.”
“We’ve discovered the bank account that was associated with Mary’s
Place automatic payments from the City of Seattle has been changed without our
knowledge and our city payments have been deposited to an unknown bank account,” Hartman wrote.
In follow-up emails between the chief financial officer at Mary’s Place, Kristi Tollner, and employees at the city, Tollner said that after signing up for direct deposit with the city in November 2020, the nonprofit stopped receiving most payments.
The case may have involved someone “posing” as Mary’s Place, according to a spokesperson for the state auditor, whose office was notified of the loss in late July.
In July, the city’s Human Services Department’s chief financial officer, Joseph Kasperski, said in an email that the deposits were sent to a “fraudulent account” and that the city was working with the FBI and the Secret Service, which investigates cyber fraud.
A city spokesperson wrote in an email to The Seattle Times that federal investigators determined that the city and Mary’s Place were victims of fraud with losses totaling approximately $831,062 over a six-month period. Neither the city nor Mary’s Place could explain why their number doesn’t match up with the $882,360 Tollner described as “outstanding” in an email.
Jenna Franklin, director of external affairs for the human services department, said in an email that the department worked with the city’s treasury division to figure out how to prevent future fraud attempts. Franklin said that there are now multiple safeguards to ensure payments arrive at the correct account.
“These safeguards enhance the auditability of payments made to vendors while minimizing the potential of future identity theft attempts,” Franklin said.
Franklin also wrote that the city is reimbursing Mary’s Place, reviewing other “suppliers” who changed their payment instructions recently, and will be changing their policy for verification practices later this month.
