Rushford recovers nearly $250K lost to wire fraud scheme

RUSHFORD, Minn. (KTTC) — The City of Rushford has recovered almost all of the more than $250,000 mistakenly wired to a scammer last month, city officials confirmed Monday night.

During a city council meeting, Rushford City Administrator Hayden Stensgard explained that in mid-August, city staff believed they were wiring funds to pay off a legitimate state loan. Instead, the wire transfer was directed to a fraudulent account linked to a compromised email.

The city was able to get back the majority of the money thanks to quick action from its financial institution, Merchants Bank, through a legal process known as an indemnity.

Under the indemnity agreement, Merchants Bank promised to absorb any legal liabilities or losses incurred by the receiving bank if that institution froze the recipient’s account and returned the money. The maneuver worked, allowing Merchants Bank to successfully retrieve $249,199.25.

The remaining balance of roughly $3,500 will be covered by the League of Minnesota Cities Insurance Trust. Because of the insurance coverage, the city will only be responsible for paying a $250 deductible.

While the financial loss was averted, officials are taking aggressive steps to shore up city network defenses. Reports have been filed with both the State of Minnesota’s IT department and the FBI’s Internet Crime Complaint Center.

Through the League of Minnesota Cities, an outside firm is investigating whether an internal city email account was compromised or breached.

Moving forward, the city plans to consolidate its email system under one secure umbrella and explore contracted third-party IT support to protect its servers and databases. City staff will also undergo updated training to recognize increasingly sophisticated phishing and cyber scams.

“These IT support groups will also send out training that they’ll have for us to be aware of these situations,” Stensgard said. “It seems like there are new ongoing methods that fraudsters or scammers will utilize to get around what people are already aware of.”

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