Monday, 29 January 2007

US County Treasurer Arrested after Stealing Money to Pay Scammers

Sophos is warning computer users about the danger of internet scams, following news that a former treasurer of Alcona County, Michigan, has been arrested after allegedly investing more than USD 1.2 million of county funds in Nigerian fraud scams.

Thomas Katona, who was treasurer of the county for thirteen years, has been charged with forgery and multiple counts of embezzlement. Both charges carry a jail sentence of ten years or more.

County treasury employees became suspicious of Katona's dealings after local bank officials informed them that he had directed several unauthorised transfers to overseas accounts during late 2006, including to beneficiaries linked with Nigerian 419 scams. It was then uncovered that he had made further payments using his personal savings, and had previously been advised by bank officials that he was investing money in fraudulent schemes. Sophos notes that a shortage of USD 1.236 million has now been reported by Alcona County—more than one quarter of its yearly budget.

"Nigerian scam e-mails promise the world but deliver nothing in return for the cash that people continue to invest," said Graham Cluley, senior technology consultant at Sophos. "Thomas Katona may well have thought it possible to return the funds that were allegedly embezzled, but irrespective of his intentions, the upshot is that his County must now suffer a financial shortfall for the year ahead."

419 scams are named after the relevant section of the Nigerian penal code where many of the scams originated and are unsolicited e-mails where the author offers a large amount of money. Once a victim has been drawn in, requests are made from the fraudster for private information, which may lead to requests for money, stolen identities, and financial theft.

"Many people fall victim to e-mail scams due to naivety, but in this case Katona was warned about the consequences of investing, and decided to proceed regardless," continued Cluley. "There's not much that can be done to stop people who serve up their wallets on a plate to scammers, but clearly handing over your county's money cannot be tolerated, and hopefully this arrest will serve as an example to others."