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School District Investigating $3 Million Hack Involving Construction Funds

By Jorge Casuso

October 4, 2023 -- A construction contractor for the School District was the victim of a "carefully orchestrated hack" that resulted in a fraudulent transaction of $2,933,511.64 from District funds, officials said Tuesday.

Federal, local and County agencies investigating the August 28 transaction have recovered $2,733,305.38, leaving a shortfall of $200,206.26, which the District is aggressively pursuing, officials said.

"It appears that a hacked email account was used to perpetrate this fraud," District officials said in a statement Wednesday.

"The SMMUSD technology department determined that a SMMUSD email account was not the source of the hack."

The District became aware of the fraudulent transaction shortly after the regular Electronic Funds Transfer was made and quickly notified the Los Angeles County Office of Education (LACOE), the Santa Monica Police Department (SMPD) and the Federal Bureau of Investigations (FBI), officials said.

District officials have made a demand that the contractor whose email "appears to have been compromised" reimburse the unrecovered balance, officials said.

"SMMUSD continues to use all means available to pursue the shortfall," officials said.

The District's fiscal, purchasing and facility improvement departments have completed a review of procedures and made changes, said Melody Canady, assistant superintendent of Fiscal Services.

“Extensive safeguards have been implemented to prevent this type of incident from occurring in the future," Canady said.

"We appreciate the quick efforts of our staff and all law enforcement officials involved who supported this outcome.”

Canaday said the District has not made a prior public comment regarding the incident "to avoid interfering with on-going investigations and the recovery of the monetary shortfall,”

“While the investigations have not concluded and efforts are still underway to recover the shortfall, given the duration of time since the incident the District believes it appropriate to share the details of this incident with the community,” she said.

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