The city of Sebastopol announced Friday that $1.2 million in budget reserves was stolen through a fraudulent wire transfer request in April and has not yet been recovered.
The money had been among co-mingled funds pooled and deposited with the County of Sonoma when someone initiated the wire transfer through an unauthorized email request that has yet to be explained.
The city’s disclosure was made in the midst of ongoing investigations and despite requests from law enforcement to keep the information confidential. Officials made the information public because of budget discussions to be held Tuesday that the city council believed could not proceed without full public transparency of the theft, city officials said.
“We’re working collaboratively with the county with our insurers and with law enforcement,” Mayor Una Glass said. “And we expected to get this resolved. But we felt it was proper to disclose this to the public before we pass our budget.”
The stolen funds would have included property tax receipts collected by the county and other moneys parked with the county and pooled with revenue from other cities to be held and invested until they were needed, said Sebastopol City Manager Larry McLaughlin, who doubles as city attorney.
The city’s Finance Department discovered at some that a third party had initiated a wire transfer of $1.2 million from the fund in late April, and the matter has been under investigation ever since by unidentified law enforcement agencies, as well as the city’s insurer, in collaboration with the city and the county.
McLaughlin said the city hoped to recover the funds but did not have assurances from its insurance providers that the money would be reinstated.
“If we had assurances we would have the money reinstated, we would have said so,” he said.
He would not disclose what agencies were involved and said that the decision to say anything about the matter at all was “because we felt we needed to be transparent at the time the budget is approved on Tuesday.”
The city policy is that 15% of the final budget be kept in reserves. The proposed general fund is $11.2 million.
Although the city has other reserve funds, the effort to maintain that threshold while the status of the unrecovered money remains unknown means certain actions contemplated in the budget will have to be delayed as part of a public discussion, McLaughlin said.
He and Glass made clear the theft is unrelated to a police department computer system failure reported earlier this week that some have speculated could have been the result of a computer hack.
McLaughlin said the police department and the city remain fully functional.
This is a developing story. Check back later for more.
You can reach Staff Writer Mary Callahan at 707-521-5249 or mary.callahan@pressdemocrat.com. On Twitter @MaryCallahanB.
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