Butte Schools Superintendent Judy Jonart released details Friday about a sophisticated cyber theft on Butte School District No. 1 resulting in a wrongful payment of more than $1 million.
According to Jonart, the school district received an email that appeared to be from its main contractor, Langlas and Associates Inc., requesting direct deposit for East Middle School construction work. The district, seeing nothing unusual or wrong with the request, complied.
Jonart said a payment of over $1.1 million was made in May via direct deposit rather than by check.
The request actually came from a cyber thief using detailed information illegally obtained from an unknown source. When school officials learned of the theft, the FBI, along with Homeland Security were notified.
“Those two entities are currently investigating and seeking to recover the money stolen from the district,” said Jonart.
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At the same time, school officials contacted a forensic investigator to review the district’s network.
“Based on a full review of the district’s accounts they concluded that Butte School District accounts were not subject to unauthorized access which would have led to the fraudulent wire transfer,” Jonart said.
The most pressing problem for the school district was that the actual contractor, Langlas, had not been paid, which led to local subcontractors and vendors being left without paychecks, too.
“It was necessary for the district to enter into an agreement in order get the contractor and local subcontractors paid while Homeland Security and the FBI continued with their investigation,” said Jonart.
Following negotiations, Butte School District No. 1 and Langlas agreed on an $837,500 settlement, which was about $262,000 less than the originally agreed upon price tag.
Jonart explained that because of the settlement agreement, both parties were able to avoid costly litigation and pay the subcontractors and vendors.
“The agreement between Langlas and the district further provides that Langlas will share in any recovery if the district recovers from the FBI and/or Homeland Security a sum larger than the amount paid by the district to Langlas,” said Jonart.
Langlas was paid from interest payments from metals mine funds, insurance proceeds, along with the school district’s legal allocation.
“The payment will have no impact to the general fund, nor will it have any impact on taxes,” said Jonart.
Experts report that cybercrime affects people and companies across the globe. Yearly, it is estimated the escalating problem costs the American economy a reported $3.5 billion. Which is pretty much what a Homeland Security agent told Jonart.
“They are dealing with it more and more all the time,” she said, “but it is our hope we recover the money.”
