A residential development in Fort Myers, Florida has lost half a million dollars in the second alleged fraud scheme to surface among Southwest Florida community associations this year.
A scammer gained access to money from The Landings Yacht, Golf and Tennis Club through its payroll services company Paychex, according to the community lawyer, documents from its board of directors and a report filed with the Lee County Sheriff’s Office.
The Landings robbery happened at the same time as 35 other Lee and Collier county homeowners associations filed a civil lawsuit against their former property manager, American Property Management Services. The associations accuse the company of using its access to their accounts to embezzle more than $8 million. APMS has denied any wrongdoing. The Landings is not involved in this civil case.
“At this time, there is no evidence that our prior processes were flawed,” The Landings board wrote in an October 2021 message to owners. “We were following the common financial process used by similar organizations. The outage occurred outside of our organization.
An initial report from the Lee County Sheriff’s Office suggested the theft stemmed from a hack into Paychex’s systems.
“It appears that Paychex (payroll services) was hacked, allowing the hackers to access (The Landings) bank account information,” a sheriff’s deputy wrote in an incident report.
But Paychex disputed that description in a statement to that news agency, saying it was a sophisticated fraud and not a hack.
“This was an isolated and unfortunate incident that affected one of our more than 700,000 customers. To be clear, at no time was the Paychex network accessed inappropriately and no customer data was affected,” Paychex said in a statement.
Robert Caves, a Fort Myers-based community association attorney with Becker & Poliakoff, said in an interview that association boards should have internal controls to monitor spending and ensure employees do not abuse their access to accounts.
But even strong internal controls might not be enough if a scammer gains access through an outside payroll company, Caves said.
“When you have a vendor who apparently had this, there may be nothing the association can do, even if they’re internally approving invoice payments correctly,” Caves said. “If something happens in the backend of Paychex, it’s harder to anticipate that you can prevent it.”
Caves said he is not aware of any other instances where a third-party scammer could have compromised a payroll services company.
Paychex confirms theft investigation
Paychex, a $47 billion company based in Rochester, New York, has confirmed News-Presse/Naples Daily News to cooperate with an investigation into the alleged theft.
“While we generally cannot comment on outstanding legal matters, we are aware of the issue affecting The Landings and have been cooperating with law enforcement,” Paychex director of corporate communications Chris Muller wrote. in a press release. “We take fraud prevention very seriously and dedicate significant resources to risk mitigation.”
Paychex founder Tom Golisano has lived in Naples since 2009. The billionaire has become a major philanthropic force in Southwest Florida, including $5 million in donations to help launch the Golisano Children’s Museum in Naples and $20 million to establish Southwest Florida’s Golisano Children’s Hospital.
Efforts to reach Golisano through the publicist for his recent business book were unsuccessful.
The theft is being investigated locally by the Lee County Sheriff’s Office Economic Crimes Unit. A public information officer confirmed that the investigation is continuing.
At the federal level, the Secret Service is investigating The Landings case and robberies against other businesses possibly committed by the same Florida-based fraudsters, community attorney Jason Mikes said in an interview. The secret services do not comment on the existence of investigations.
To date, no criminal charges have been filed in this case.
The Landings, which has 1,200 homes built around a golf course, tennis courts and marina in Fort Myers, learned of the fraud in September, said Mikes, who separately represents the 35 associations suing American Property Management Services.
“Although it was a significant amount of money that was taken, luckily they were very careful with their finances,” Mikes said. “There has been no decline in services.”
The Landings earned $10.6 million in revenue in fiscal 2021 and has more than $1.7 million in capital reserve funds, according to the minutes of its annual meeting in February. The community had two crime insurance policies from Travelers and Swiss Re and is still trying to recover the funds from its insurers, according to Mikes.
“Working with our insurers is just very frustrating. There is, however, no indication that the liability or the errors occurred inside The Landings,” Landings Chairman of the Board Gary Suhadolnik wrote in a report for the annual meeting of The Landings. the community. “Although it sounds like a broken record, it continues to give us confidence that our insurers will eventually recover the missing funds.”
Swiss Re did not return a request for comment; Travelers confirmed he was investigating.
“As a matter of policy, our company prohibits us from discussing any complaints or customer details,” Travelers director of corporate communications Michael Witmer wrote in an email. “We are continuing to work with our policyholders and there is an ongoing investigation.”
$500,000 in unauthorized transactions
The Landings learned of the alleged $500,000 fraud from its accounting firm on Sept. 1, according to a report the community filed with the Collier County Sheriff’s Office six days later.
Bank records showed unauthorized transactions from The Landings’ account began May 21 and continued through August, according to a report from the sheriff’s office obtained in a public records request.
The community immediately filed a claim with its insurers and tightened its internal controls, its board said at a meeting in October.
“We recognize that many of you are feeling anger and frustration, as is the board,” the board wrote in an October message to owners published in meeting minutes. from the administration board.
In mid-January, a detective with the Lee County Sheriff’s Office Economic Crimes Unit told community chief executive Doug Marcotte that the Secret Service was also investigating the case, Marcotte wrote to Mikes in an email obtained by this news agency.
Later that month, a Secret Service agent told Marcotte that the theft appeared to be part of a larger fraud scheme involving 30 “entities” and at least 13 banks.
“He said they didn’t think they were ‘high end’ thieves, but rather appeared to be low tech drug groups between Orlando and Miami,” Marcotte wrote in an email.
Paychex told this news agency that it was not aware of any other related incidents.
Criminal justice investigative reporter Dan Glaun can be reached at [email protected] or on Twitter @dglaun.