Galveston OKs $600K settlement offer after trash truck scam
By B. Scott McLendon
Galveston County Daily News
Sep 14, 2023
GALVESTON -- The city council on Thursday agreed to pay $591,000 to a Texas trash truck company to avert a lawsuit stemming from a phishing scam.
The payment absolves the city from the threat of a lawsuit by Longhorn International Trucks, which in April made an agreement with Galveston to sell the city three trash trucks for about $1 million.
City staff members made the first payment without issue, but an apparent phishing email told staff to send the remaining money, about $695,000, to a Kentucky-based bank account. The city did, but Longhorn International said the money had been stolen and demanded payment.
Phishing is the common, fraudulent practice of sending emails or other messages purporting to be from a reputable source only to lure someone into sharing sensitive information such as bank account details.
The city would be paying about 85 percent of the claim, City Attorney Don Glywasky.
“I think it’s in everybody’s best interest to have an early disposition of this claim,” Glywasky said Thursday. “No one is happy about the circumstances, but steps have been taken to ensure it doesn’t happen again.”
The city has established new policies because of the loss, he said.
If a vendor wants to change how it’s paid, a checklist of protocols have to be met and a verification phone call must take place between the vendor and city staff, Glywasky said.
Three people from the United Kingdom were charged and extradited to the United States for trial in the county case and in connection with scams defrauding more than $5 million from various U.S. victims.
The city of Galveston’s fleet and mass transit division wrote a check for the first truck, which the company received, according to a letter from Longhorn’s attorneys. Longhorn then sent the other two trucks, which cost about $347,000 each, but the city didn’t pay for them, according to a letter from the company to Galveston staff.
Longhorn learned the city wired the remaining funds, about $695,000, to the wrong bank account, and the city initially took the position that it doesn’t owe Longhorn the money, according to the letter.
David Smith, Galveston director of fleet, transit and special events, emailed Longhorn May 31 saying the second check would be hand delivered June 2, according to the letter.
The city department then got an email staff members thought was from a Longhorn representative.
“Could we kindly ask if it would be possible to make this payment through electronic transfer rather than by check?” the email from a phisher said.
“We are presently implementing some enhancements to our billing system, which could impact the time at which we process check payments,” the email stated. “Let me know if this is possible so we can forward our remittance instructions.”
City staff said it would be possible to make the transfer next week, according to the letter.
The phisher purporting to be from Longhorn gave city staff wiring instructions on June 2, including information for an out-of-state bank and an incorrect Austin address, according to Longhorn’s letter.
On June 29, Longhorn’s accounts payable department asked the city where it sent the payment.
“This is not our account,” wrote a Longhorn representative. “Where did this information come from?”
Without calling to confirm wiring instructions with Longhorn, the city wired $695,418 to an out-of-state bank, according to the letter.
“There are constant warnings about wiring money without verbally confirming wiring instructions,” according to the letter. “Further, several red flags should have gone up for the city because BuyBoard participants must be in the state of Texas, and it would not be likely that a Texas company would do its banking in Kentucky.”
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