How scammers tricked a northern Ontario city into wiring $1.5 million to a Toronto bank account

The City of Greater Sudbury is seeking court orders requiring major banks to track and freeze the money that was stolen.

Thestar.com
Jan. 31, 2024
Sheila Wang

The City of Greater Sudbury is trying to recover more than $1.5 million in public funds swindled by fraudsters into a bank account allegedly set up at the Scarborough Town Centre.

In a recently filed lawsuit, the northern Ontario city alleges that scammers infiltrated the email accounts of a construction company contracted for an affordable housing project and duped the city into sending money into a different bank account.

The city is now seeking court orders requiring several major banks to track and freeze the money it was tricked into transferring on Dec. 21.

“The illegal activity was caught quickly by staff, and we are confident that we will be able to recover the majority of these funds,” the city said in a statement.

It appears the City of Greater Sudbury tried to keep quiet about the significant loss it suffered in late December. It filed the lawsuit in a Toronto court on Jan. 15 but did not make any public mention of the fraud until two weeks later -- after the Star asked questions about the case. It did not explain the nearly two-week silence, only noting, “With the statement of claim filed with the court, it was an appropriate time to inform the public.”

North York firm allegedly linked to bank account
The lawsuit also names 14645065 Canada Inc. as a defendant, and the city alleges the corporation is affiliated with a Scotiabank account that received the city’s money. The lawsuit identified Pirinthapan Sathiyanantham and Sai Pavan reddy Edla as the directors behind the numbered company.

The company is registered with a home address in North York. Sathiyanantham and Edla moved out of the house about a year ago and have left Canada for India, their former roommate told the Star. They could not be reached for comment.

The Scotiabank account in question has been temporarily frozen after discovery of the fraud, according to the claim.

“While this is an external fraud event unrelated to any conduct of the bank, we are co-operating with the investigation to help recover funds lost due to fraudulent activity,” said Katie Raskina, a spokesperson for Scotiabank.

None of the allegations have been tested in court. No statements of defence have yet been filed.

Amount stolen 'is quite significant'
“The amount is quite significant. I think that is something that is a bit shocking,” said Vanessa Iafolla, principal at Halifax-based Anti-Fraud Intelligence Consulting, who isn’t involved in this case.

Iafolla said this type of impostor fraud is often seen on a much smaller scale, and not as common when it involves this amount of money. “Usually when you get to a level like this, there's a lot of due diligence that goes into making an agreement with someone.”

Greater Sudbury works proactively to prevent fraud and is continuously evaluating and implementing changes to address them, the city says, noting “fraud events are becoming increasingly sophisticated.”

The lawsuit alleges that the impostors, posing as a senior project manager for a city-contracted construction company, emailed city staff forged documents and claimed the company changed their banks from Royal Bank of Canada to Scotiabank.

In its process of setting up an electronic transfer, the city noticed the new banking information did not match what they had on file and emailed the contractor to ask about the change. That email was intercepted by impostors who eventually convinced the city to proceed with the transfer, according to the lawsuit.

Sudbury police investigating the fraud
The city says that it’s performing a detailed internal review while the Greater Sudbury Police Service is investigating the matter. The process to recover these funds is lengthy, which involves outside agencies including the city’s insurer and the contractor.

The $1.5 million was intended for the ongoing construction of the Lorraine Street affordable housing project, the city’s 40-unit affordable housing complex for those suffering from addictions and mental health problems.

With a total budget of $12 million -- including $7.4 million from the federal government’s Rapid Housing Initiative -- the publicly funded housing project won’t be hampered by the fraud, the city says.

The project is expected to be complete this summer.