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Galveston County Drainage District Cyber Theft

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Cybercrime Hits Galveston: $1.29 Million Stolen in Drainage District Fraud

A massive cyber theft has left the Galveston County Consolidated Drainage District reeling, with nearly $1.29 million in public funds stolen through an elaborate scheme. The Friendswood Police Department and the FBI are now investigating how the perpetrators exploited email spoofing and forged documents to access the district’s bank account and siphon taxpayer money over the course of several weeks.

How Cybercriminals Targeted the Drainage District

The Galveston County Consolidated Drainage District, responsible for maintaining flood mitigation infrastructure in Friendswood and parts of League City, oversees more than 80 miles of waterways across 20 square miles. Despite its critical role, the district became the latest victim of a sophisticated cybercrime that relied on digital deception rather than in-person fraud.

Rusty Burkett, president of the district’s board of directors, detailed how the scheme unfolded. The attackers cloned the email of the district administrator and used it to add a fictitious “Chief Financial Officer” to the district’s banking profile without ever stepping foot in the bank.

“No one knew about [this person], no one knew who he was,” Burkett said. “They did all of this by email. The bank never required them to come in to meet this guy. Never came and signed anything with original ink.”

Using forged documents and emails, the perpetrators orchestrated multiple wire transfers from the district’s account. Paige Bailey, the district’s CEO and General Counsel, confirmed that fraudulent transfers occurred on November 7, November 14, November 20, and November 27. Alarm bells finally rang when the bank flagged a fifth wire transfer request on December 10, prompting a call to the district for verification.

Bank Negligence Under Fire in Galveston Cyber Theft Case

Hometown Bank, where the district’s funds were held, is facing allegations of negligence. Burkett criticized the bank’s failure to verify the authenticity of the email requests or require in-person confirmation for such significant transactions.

“The theft could have been thwarted if Hometown Bank had required the fake CFO to come in person or verified the email requests by calling the district,” Burkett said. He also noted that the drainage district had never used wire transfers before, a detail he believes should have raised red flags.

Hometown Bank’s President and CEO, Allan Rasmussen Jr., declined to comment on the matter, citing pending litigation.

Financial Impact of the Cyber Heist on Galveston County

The stolen $1.29 million represents approximately 18% of the district’s annual operating budget, which ranges from $6 million to $7 million. Despite this significant loss, Burkett assured the public that the district’s operations and ongoing flood mitigation projects would continue uninterrupted.

“We will recoup the stolen money one way or another,” Burkett pledged.

In the wake of the theft, the district has removed its accounts from Hometown Bank and is implementing stricter financial oversight measures.

The Rising Threat of Cybercrime Targeting Public Funds

The FBI’s Internet Crime Complaint Center reports that email spoofing and similar scams have caused $55.5 billion in global losses over the past decade, with government entities frequently targeted. This incident is not isolated; other Galveston-area organizations have suffered similar attacks in recent years.

In 2018, a phishing scam exploited Galveston County’s financial systems, stealing $525,000 after staff failed to follow proper security procedures. The City of Galveston was also a victim in a separate incident, losing nearly $600,000 intended for garbage truck purchases. In that case, Kentucky resident Fawn S. Sloan, 52, was arrested for her role in the scheme. However, the funds stolen from Galveston County remain unrecovered, with no arrests made.

Ongoing Investigation into Galveston County Cyber Theft

While Friendswood police and the FBI are actively investigating the theft, they have yet to identify suspects or recover the stolen funds. Friendswood Police Department Public Information Officer Taylor McCombs stated that the investigation is ongoing. As is standard policy, the FBI has not commented on the case.

Steps to Strengthen Cybersecurity for Public Institutions

This cyber theft serves as a stark reminder of the vulnerabilities government entities face in the digital age. It underscores the importance of robust cybersecurity measures and vigilant financial oversight to safeguard public funds. For the Galveston County Consolidated Drainage District, the focus now is on recovering the stolen money and implementing changes to prevent future incidents.

With the rise in cybercrime targeting public institutions, this case is likely to prompt broader discussions about the security of taxpayer dollars and the role of financial institutions in safeguarding public funds.

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