Garden City Park Water/Fire District says it lost $15 million to online scammers, sues bank
Garden City Park Water/Fire District offices in New Hyde Park. Credit: Debbie Egan-Chin
The Garden City Park Water/Fire District has sued the First National Bank of Long Island for more than $11 million after online scammers impersonating district officials initiated a flurry of wire transfers from the district’s accounts, including to accounts in China and Mexico, according to the lawsuit.
The transfers totaled more than $15 million, according to the suit, which was filed in state Supreme Court on Wednesday. The bank recovered about $4.45 million but insisted the district, which has an annual budget of $11.75 million, should be responsible for recouping the remainder of the missing funds, the lawsuit states.
“As fiscally responsible stewards, we are undertaking this legal action because the district should not suffer for the bank’s failures and incompetence,” the district said in a statement. “We will continue to do everything possible to fight for our residents and hold responsible parties accountable.”
Tanweer S. Ansari, the bank’s executive vice president, chief risk officer and general counsel, said in a statement that the bank is “continuing to seek additional recoveries” for the district.
“The bank’s investigation did not yield evidence of unauthorized bank network activity. Further, the bank believes that it followed its reasonable procedures regarding online wire transfers,” Ansari said in the statement. “The bank intends to continue to work to recover customer funds, while defending itself in the lawsuit, and remains committed to ensuring a full recovery of all customer funds.”
The district does not anticipate tax increases as a result of the fraud, an official said, and no residents’ personal information was compromised as part of the incident.
On July 12, a scammer posing as Robert Mirabile, a district commissioner, contacted the bank’s New Hyde Park branch manager using a fake email address, the lawsuit says. The scammer then persuaded the branch manager to email banking authorization forms that made online international and domestic wire services available to the district, according to the litigation.
The forms also added the names of a district administrative assistant and a district supervisor as authorized approvers of wire transfers, the lawsuit states.
The bank then provided the scammer confidential login information for those two district officials, or permitted the scammer to create login information on their behalf, according to the lawsuit.
Three days later, the lawsuit states, the scammer used the two district officials' login information to access the bank accounts online and initiated 15 wire transfers totaling $15.55 million to various accounts. The scammers used the account of one of the officials to compose the transfers and the account of the other official to approve them, according to the litigation.
Eight payments totaling $12.53 million were transferred to banks in China; two payments of a combined $1.87 million to banks in Mexico; and five payments totaling $1.15 million to banks in the United States, according to the lawsuit.
“Various bank personnel, without actual authorization from, or prior notice to, the district, reviewed, approved and/or processed all of the fraudulent online payment orders,” the lawsuit reads.
The district was made aware of the transfers later that day when it received a call from a Florida law firm asking why it had received a $500,000 wire transfer, according to the lawsuit. The district then called the bank. The bank’s bookkeeper notified the district of the transfers and said the bank “would make you whole,” the lawsuit states.
The district was able to recoup about $4.45 million after contacting the FBI and the Nassau County Police Department, according to the litigation.
The payments “resulted in nearly all of the district’s funds being withdrawn from its bank accounts,” according to the lawsuit.
The bank had never initiated a transfer of more than $842,609 prior to July 15, or wired money to an international account, according to the litigation.
“The district demanded that the bank return the remaining stolen funds, but the bank refused, taking the position that it had followed an agreed upon commercially reasonable security procedure in accepting the fraudulent online payment orders,” the lawsuit says.
The lawsuit also calls for the bank to cover “reasonable attorneys’ fees in connection with this action.”
“What happened to the district is every bank customer’s nightmare,” Jon Ward, the district's Uniondale-based attorney, said in a statement. “The district relied on their bank to protect the security and integrity of its deposits, and First National Bank of Long Island failed.”
The district no longer has any accounts with First National, an official said, and has since moved to another bank.
The Garden City Park Water/Fire District has sued the First National Bank of Long Island for more than $11 million after online scammers impersonating district officials initiated a flurry of wire transfers from the district’s accounts, including to accounts in China and Mexico, according to the lawsuit.
The transfers totaled more than $15 million, according to the suit, which was filed in state Supreme Court on Wednesday. The bank recovered about $4.45 million but insisted the district, which has an annual budget of $11.75 million, should be responsible for recouping the remainder of the missing funds, the lawsuit states.
“As fiscally responsible stewards, we are undertaking this legal action because the district should not suffer for the bank’s failures and incompetence,” the district said in a statement. “We will continue to do everything possible to fight for our residents and hold responsible parties accountable.”
Tanweer S. Ansari, the bank’s executive vice president, chief risk officer and general counsel, said in a statement that the bank is “continuing to seek additional recoveries” for the district.
WHAT NEWSDAY FOUND
- The Garden City Park Water/Fire District has sued the First National Bank of Long Island after online scammers posing as district officials initiated wire transfers totaling more than $15 million from the district’s accounts, according to the lawsuit.
- The bank recovered about $4.45 million but insisted the district should be responsible for recouping the remainder of the missing funds, the lawsuit states.
- A bank representative said in a statement that First National is seeking "additional recoveries" for the district and that a bank investigation did not yield evidence of unauthorized bank network activity.
“The bank’s investigation did not yield evidence of unauthorized bank network activity. Further, the bank believes that it followed its reasonable procedures regarding online wire transfers,” Ansari said in the statement. “The bank intends to continue to work to recover customer funds, while defending itself in the lawsuit, and remains committed to ensuring a full recovery of all customer funds.”
The district does not anticipate tax increases as a result of the fraud, an official said, and no residents’ personal information was compromised as part of the incident.
Suit: Scammer posed as district official
On July 12, a scammer posing as Robert Mirabile, a district commissioner, contacted the bank’s New Hyde Park branch manager using a fake email address, the lawsuit says. The scammer then persuaded the branch manager to email banking authorization forms that made online international and domestic wire services available to the district, according to the litigation.
The forms also added the names of a district administrative assistant and a district supervisor as authorized approvers of wire transfers, the lawsuit states.
The bank then provided the scammer confidential login information for those two district officials, or permitted the scammer to create login information on their behalf, according to the lawsuit.
Three days later, the lawsuit states, the scammer used the two district officials' login information to access the bank accounts online and initiated 15 wire transfers totaling $15.55 million to various accounts. The scammers used the account of one of the officials to compose the transfers and the account of the other official to approve them, according to the litigation.
Eight payments totaling $12.53 million were transferred to banks in China; two payments of a combined $1.87 million to banks in Mexico; and five payments totaling $1.15 million to banks in the United States, according to the lawsuit.
“Various bank personnel, without actual authorization from, or prior notice to, the district, reviewed, approved and/or processed all of the fraudulent online payment orders,” the lawsuit reads.
The district was made aware of the transfers later that day when it received a call from a Florida law firm asking why it had received a $500,000 wire transfer, according to the lawsuit. The district then called the bank. The bank’s bookkeeper notified the district of the transfers and said the bank “would make you whole,” the lawsuit states.
District recoups $4.45M
The district was able to recoup about $4.45 million after contacting the FBI and the Nassau County Police Department, according to the litigation.
The payments “resulted in nearly all of the district’s funds being withdrawn from its bank accounts,” according to the lawsuit.
The bank had never initiated a transfer of more than $842,609 prior to July 15, or wired money to an international account, according to the litigation.
“The district demanded that the bank return the remaining stolen funds, but the bank refused, taking the position that it had followed an agreed upon commercially reasonable security procedure in accepting the fraudulent online payment orders,” the lawsuit says.
The lawsuit also calls for the bank to cover “reasonable attorneys’ fees in connection with this action.”
“What happened to the district is every bank customer’s nightmare,” Jon Ward, the district's Uniondale-based attorney, said in a statement. “The district relied on their bank to protect the security and integrity of its deposits, and First National Bank of Long Island failed.”
The district no longer has any accounts with First National, an official said, and has since moved to another bank.
Joshua Needelman covers the Town of North Hempstead for Newsday. A Long Island native and University of Maryland graduate, his work has appeared in publications including The New York Times and The Washington Post.
Nonprofits facing grant freeze ... Plainedge best buddies ... Get the latest news and more great videos at NewsdayTV
Nonprofits facing grant freeze ... Plainedge best buddies ... Get the latest news and more great videos at NewsdayTV
