Miami Beach 'Still Reeling' From $3.6 Million Bank Fraud

MIAMI BEACH — City Commissioner Kristen Rosen Gonzalez is still shell shocked after being informed by the city manager last week that $3.6 million of taxpayer funds had been siphoned out of an online account at SunTrust Bank. She said that officials are not ruling out the possibility of legal action against the bank.

“I’m still reeling in disbelief because this is taxpayer money and it’s too much money to go unnoticed so I’m very disappointed,” she acknowledged to Patch in an interview on Tuesday.

Two city employees — Treasury Manager Juan Rodriguez and Financial Analyst Brian S. Wagner — have resigned their jobs in the aftermath of the disclosure by City Manager Jimmy L. Morales and the city has already instituted more stringent accounting controls while asking the FBI and Miami Beach police to investigate.

Acknowledging the city’s responsibility to monitor its own accounts, Rosen Gonzalez said she also believes that SunTrust should have done more to prevent such a large amount from being removed from the city's account over multiple transactions.

“We might have to sue SunTrust Bank. I’m very disappointed in SunTrust for not flagging this larceny,” she explained.

SunTrust spokesman Tom Crosson told Patch that the bank is working closely with city officials but declined to discuss the details of the case.

"We are working diligently with the city of Miami‎ Beach to resolve this matter,” he said. “Due to client confidentiality, I cannot comment on the specifics of their account.”

Rosen Gonzalez believes the bank should have caught the suspicious activity related to the account, which is used to pay the city’s water bill and other expenses.

“It was an account that had a lot of movement which is probably why they chose that account,” the commissioner explained.

She said that the fraud will almost certainly be a topic of discussion at the next meeting of the commission in January.

In a letter to commissioners on Dec. 21, Morales said he became aware of the fraud two days earlier and apologized.

“I am personally conducting a full investigation into where our internal controls may have failed and will take further appropriate measures, when and if necessary,” he said. “I apologize for this situation and will not rest until we can make the city whole.”

According to Morales, one or more people obtained the city’s relevant account information and were able to access the Automatic Clearing House (ACH) Network through various transactions totaling $3.6 million.

Taxpayer money was then transferred from the city’s account to other banks, ostensibly where the funds could be accessed by thieves. He noted that SunTrust had already submitted claims to the banks that received city funds without authorization.

According to the Electronic Payments Association, the ACH Network moves more than $40 trillion each year through some 23 billion electronic financial transactions. These include recurring and one-time payments; government, consumer and business-to-business transactions as well as international payments.

In his letter to commissioners, Morales also said that the city had taken multiple steps in response to the fraud, including:

• Opened new general depository bank account and pending closing current one.
• Set up UPIC, a unique account identifier issued by financial institutions that allows organizations to receive electronic payments without divulging confidential banking information.
• Implemented ACH fraud control which allows the city to set parameters for which ACH transactions are allowed. This gives the city tools to monitor electronic payments and block unauthorized ACH debits before they post.

• Discontinued ACH payments unless pre-authorized.
• Discontinued ACI with MasterCard payments.
• Instituted a daily review and reconciliation of all non-check disbursements.
• Removed the two accountable staff members.

“There’s no excuse for the bank not noticing that these large withdrawals or ACH transfers were being made,” added Rosen Gonzalez. “And we’re going to get to the bottom of it. We’re going to recover this money. We’ll do whatever we have to do to recover the taxpayer money.”

Photo of Commissioner Kristen Rosen Gonzalez courtesy of Miami Beach.