Update: San Benito County recovers $696k stolen through phishing scam

San Benito County recovered $696,602 that was stolen by a suspect or suspects through a complicated phishing scam, according to local officials. 

Authorities are investigating the fraud attempt, in which the county’s auditor-controller’s office had approved the payment to someone who falsely posed as a construction contractor doing work for the county, the sheriff’s office said. The San Benito County Auditor-Controller’s office had approved the payment and processed it on Oct. 15. 

On Oct. 17, county officials reported that the bank had recovered the stolen funds. A statement from the County Administrative Officer’s Office said the bank had blocked the transition upon flagging it as suspicious. 

County Treasurer Melinda Casillas alerted county administration officials of the suspected fraudulent payment shortly after it was processed, the sheriff’s office said. The county was alerted by the bank that the payment was likely fraudulent. 

The sheriff’s office said verifying the accuracy of such claims is an ongoing responsibility of the county auditor-controller’s office. The office is managed by Auditor-Controller Joe Paul Gonzalez, an elected official who is not overseen by county administration or the board of supervisors. 

Upon recognizing the scam, the county treasurer’s office and the bank immediately filed a fraud claim with the FBI and requested reversal of the payment, the sheriff’s office said. 

The sheriff’s office said it is working with the FBI to investigate the fraud. 

In a statement, Gonzalez said the scam “was an extremely sophisticated and targeted fraud attempt that unfortunately bypassed a key verification step in our internal process. While the error was human in nature, we take full responsibility for ensuring that our safeguards are strengthened so this does not happen again.”

He added that the county is conducting a comprehensive internal review of its vendor setup and payment verification procedures. Immediate steps in the process, currently underway, include reinforcing multi-level vendor verification; enhancing staff training in fraud awareness and verification protocols; implementing additional internal control measures, including segregation of duties and cross-departmental verification before any vendor banking information change is processed; and auditing all recent vendor changes to ensure no additional irregularities occurred.

“The county’s leadership recognizes that protecting taxpayer dollars requires constant

vigilance,” Gonzalez added. “Criminals continue to evolve their methods, but so will we. We are committed to learning from this incident and strengthening our defenses to stay ahead of emerging fraud risks.”

The fraud is at least the second notable incident that has come to light in recent months in which the county auditor-controller’s office has allegedly been scammed into authorizing fraudulent payment requests. Earlier this year, two employees of the San Benito County Library—Erin Baxter and Mary Alvarez—were convicted and sentenced for embezzling more than $360,000 from the county.

In that incident, the employees had stolen county funds from 2019-2023 by submitting fake invoices to the auditor-controller’s office, according to authorities.

In response to that case, the board of supervisors in September agreed to hire a forensic accounting firm to conduct a thorough audit of the county library’s finances. 

Nobody from the auditor-controller’s office has been accused of being involved in the scams. 

Supervisor Kollin Kosmicki, chair of the board of supervisors, said in response to the Oct. 15 fraud attempt, “We’ve had some alarming problems with the auditor-controller’s office. We’re very concerned about what’s happened here, and we’re going to do everything we can to be as transparent as possible with the public.” 

The San Benito County Board of Supervisors will hold a special meeting at 9am Oct. 21 to discuss an investigation into the county auditor’s fraud procedures that failed, and potential reforms to prevent future lapses.