Nearly $600,000 has been stolen from one of Nelson’s largest non-profit organizations in a case of international fraud.
Nelson CARES Society, which operates several affordable housing developments and programs in the city, says $596,694 was transferred from its account with the Nelson and District Credit Union (NDCU) on July 19 without its prior consent.
Representatives for Nelson CARES and the NDCU confirmed the fraud Monday after multiple sources with knowledge of the situation spoke to the Nelson Star last week.
The only prior public acknowledgement of the crime was in the pages of Nelson CARES’ yearly financial statement, which was released at an annual general meeting in October.
Nelson CARES executive director Jacqueline Nobiss said the organization is currently using reserves to pay the salaries and benefits for its 160 employees, as well as for programming and operational expenses. But the impact of the financial loss, they said, can’t be understated.
“This was huge. I think for any non-profit, this is massive. And this dollar value is absolutely massive.”
Nelson Police Department’s Chief Donovan Fisher confirmed an investigation is underway and that the department is working with U.S. law enforcement.
Nobiss and Nelson CARES board chair Ron Little said they believe the theft began with a wire transfer payment made to BC Housing on July 15. The organization had previously only made payments by cheque, but opted for a wire transfer in order to secure the mortgage on its Lakeside Place development prior to an Aug. 1 deadline.
On July 19, two payments were made out of the Nelson CARES account with the credit union by wire transfer, according to Nobiss and Little. The first, for US$233,160.12, and the second of US$221,130.32, were made to U.S.-based accounts.
Nobiss and Little said Nelson CARES had never previously sent any money to U.S.-based companies.
After being alerted to the transfers, Nobiss said they attempted to have them stopped at the credit union on July 20. They failed, but Nobiss found out about two more pending transfers that Little said would have emptied out Nelson CARES’ account had they not been cancelled in time.
How was the money stolen?
The theft raises questions about security measures used by Nelson CARES and the Nelson and District Credit Union.
Nobiss said Nelson CARES has since discovered its webmail was compromised. Thirty days before the transfers took place, an email from a Nelson CARES account was sent to the credit union requesting an account be added as an authorized signatory.
For that to happen, the credit union requires two current signatories to sign off on the application and a letter from the organization. This also includes signers present two pieces of government identification in person at the branch.
Nobiss said the required signatures appear to have been forged. It isn’t clear, however, if any suspects visited the credit union in person to provide ID prior to their application being approved.
Nelson CARES still doesn’t know how its webmail was hacked.
In the interim, the organization has made changes to its webmail. Nobiss said an internal investigation has found no evidence the fraud was carried out by a current employee. Nobiss added confidential staff or client information was not compromised.
The credit union, meanwhile, has yet to reimburse the entirety of Nelson CARES funds five months after the incident occurred.
Only $211,079 of the stolen funds have been returned, and Little said the two organizations are negotiating over the remaining amount.
“We’ve made a commitment to the directors of the NDCU to work in good faith to come to an agreement.”
Credit unions in B.C., which are regulated by the BC Financial Services Authority, are not required to insure money lost due to fraud from a depositor’s account.
NDCU board chair Michael Ramsay declined to provide specifics in an email when contacted by the Star.
“NDCU values its long-standing 48-year relationship with Nelson CARES and the contributions Nelson CARES makes in the community,” Ramsay said. “We are committed to continuing to seek a resolution to this situation.”
In the last two years, Nelson CARES has opened a pair of new housing developments while also maintaining a number of services for vulnerable residents. The non-profit also runs the Nelson Committee on Homelessness, Kootenay Seniors and Stepping Stones shelter, as well as the popular Coldest Night of the Year fundraiser.
Nelson CARES had a $9.6-million budget for the financial year ending last March 31, but only had $45,019 in excess revenue over expenses. Its biggest revenue source is provincial and federal grants, which provided $6.3 million last year, while its largest expense was $5.9 million was earmarked for wages and employee benefits.
Despite the theft, Nobiss said Nelson CARES has so far been able to avoid layoffs or major programming cuts. They said the focus is on protecting staff and supporting their new housing units.
“At this point in time, it has meant that I’ve had to juggle matters, I’ve had to look at each of the programs, I had to pull back in some areas where I could, robbing Peter to pay Paul, so to speak.”
Little is concerned by what the fraud will do to Nelson CARES’ reputation, which he said is crucial when applying for grants and asking the community for donations.
“This community trusts us. How can we go to the community and have the Coldest Night of the Year and make sure those funds are being used to support the people in Ward Street Place if the community sees we can’t even hang onto our money?”