Nashua City Hall

Nashua City Hall.

After being the target of cyber fraud, the city of Nashua has reached an agreement that will require it to pay $22,500 more than anticipated for work completed by a Massachusetts vendor.

Nashua was the victim of a fraudulent scheme earlier this year involving a nearly $41,000 payment that never made its way to the intended vendor.

“ … The city has reached an agreement with Sterling Corporation to share in the losses incurred from the misdirected payment of $40,522.50 that was made to another third party representing themselves as Sterling Corporation,” John Griffin, chief financial officer, wrote in a recent memo to the Board of Aldermen.

City officials were notified of the scam in April. The city was billed nearly $41,000 from a Sterling Corporation of Massachusetts for work it completed to relocate the city’s public health department from its building at 18 Mulberry St. to the Landmark Building at 142 Main St.

The temporary move was necessary to allow for renovations to take place at the public health department’s home site.

Mayor Jim Donchess explained earlier that the vendor’s computer system was hacked and that an email address was altered by one character in order to access the accounting system.

The hacker then changed the bank to which they were seeking to have the ACH (automated clearing house) transfer completed and the city’s accounts payable division unknowingly made the transfer to the fraudulent vendor in the amount of almost $41,000.

Although the city paid for services rendered, that initial $41,000 payment was retrieved by a scammer, city officials said.

“Sterling Corporation has accepted a discounted payment in the amount of $22,500 in full satisfaction of their invoices to the city of Nashua that totaled $40,522.50,” wrote Griffin.

“This is a loss and we negotiated it down,” attorney Steve Bolton, corporation counsel for the city, said Wednesday.

Bolton said the city worked well with Sterling Corporation on the negotiations, but there were some discussions on who was most at fault.

“I think there is some blame to spread around,” he added.

There was no insurance coverage in this case, said Bolton, explaining the deductible for that would be about $110,000.

The scheme bore some similarity one that recently unfolded in Peterborough, but Bolton stressed that Peterborough was defrauded by about $2.3 million.

“It is very unfortunate for those folks there, and it does present a much bigger problem for them,” said Bolton. “We wish it didn’t happen here, but it is nothing that we can’t survive quite well.”

With a fund balance of $36 million, he said an extra payment of $22,500 can be absorbed.

“Still, we don’t want to waste a penny,” added Bolton.

Safeguards have been put in place to prevent this type of scheme from happening in the future, and a procedure has been adopted in Nashua with regards to any changes in remittance instructions for pending invoices, said city officials.