A federal investigation is underway into a wire fraud scheme that swindled the city of Cottage Grove out of more than $1.2 million late last year, according to court documents.
The scheme, which played out over three months, involved someone who pretended to work for a contractor the city had hired for a sewage construction project, according to seizure warrant applications that a federal magistrate judge approved this month.
The fraudster ran the ruse through emails sent to the city’s accounting specialist, who believed she was communicating with the president of the sewer and water company. As a result, the city worker “fell victim to a business email compromise and electronic funds transfer wire fraud scheme” before the ruse was uncovered in December, read the affidavits prepared by a Homeland Security Investigations special agent and made public this week.
When the dust settled, the city was duped out of $1,276,061.33, which had been moved to several bank accounts.
Tasha Zerna, a U.S. Attorney’s Office spokesperson said Friday that “the government will be seeking forfeiture of the funds.”
U.S. Magistrate Judge John Docherty approved the warrants this month to seize up to $852,337.55 that allegedly is linked to the fraud and held in six bank accounts.
UNKNOWN PERSON SENT SHAM EMAILS
The city entered into a $3.5 million agreement with Geislinger and Sons for the “South District Sanitary Sewer Project” in June 2021. Jeff Geislinger, president of the Watkins, Minn.-based company, signed the contract.
Cottage Grove’s accounting specialist’s first correspondence with the company was Oct. 11 through an email sent to the office manager with an address that ended in “geislingerandsons.com.” The next day, the company emailed a tax form and an electronic funds transfer form with banking information so the city could make payments. The accounting specialist set up an automatic payment of $489,746.61 on Oct. 13.
Five days later, an unknown person sent the accounting specialist an email pretending to be the company’s president by using a “lookalike” internet domain name jgeislinger@geislingerandsonsinc.com. The email included a signature that read, “Jeff Geislinger, President/CEO, Geislinger & Sons.” However, as the affidavit notes, the added “inc.com” was unlike the original email from the office manager.
A day after the first fake email, another arrived in the accounting specialist’s inbox. It read that “Geislinger & Sons” had made “company financial changes” and moved all of its banking to PNC Bank and asked to “kindly update your vendor profile in your payment system immediately to ensure timely payment of invoices.”
A follow-up email from the imposter included an electronic funds transfer form with the new banking information. The accounting specialist replied that the company’s payment information would be updated and the second payment of $813,250.35 would be released the following week.
In November, the imposter emailed again and said they would again be sending new bank information, this time under a J.P. Morgan Chase account. Another electronic funds transfer form arrived in an email, the accounting specialist updated the information and, by mid-December, two wire transactions were made totaling $1,276,061.33.
“The city of Cottage Grove would not have sent either of these payments to the (J.P. Morgan Chase) account had they not believed it to be a legitimate business account,” the affidavit read.
The city became aware something was wrong on Dec. 22, when the office manager at Geislinger and Sons contacted the finance director to ask why they had not received the second and third payments. The finance director responded that the accounting specialist had been corresponding through email with Jeff Geislinger, but the office manager said Geislinger had been in Florida for the past several weeks.
“At this point the city of Cottage Grove staff realized they had fallen victim to a wire fraud scam,” the affidavit read.
Cottage Police Chief Peter Koerner said Friday he could not comment because the investigation is still active.
A call to Jeff Geislinger was not returned Friday.
FOLLOWING THE MONEY
A Cottage Grove police detective and a Homeland Security Investigations task force officer applied for and received a state search warrant under seal for the J.P. Morgan Chase account.
Bank records showed the account was opened in March 2021, and was held in the name of a holding company registered in Delaware and listing two men as members, according to the affidavit. Investigation showed the people “are real individuals and not false identities,” the affidavit read.
When the task force officer asked the bank to freeze the account to prevent loss and transfer of the stolen funds, just $538.02 remained in the account. After the deposits, the money had been transferred to “various other bank accounts and individuals.”
One bank account received $700,000 traceable to the wire fraud scheme. In an interview with law enforcement, the account holder — an attorney licensed in Idaho — said he is a real estate attorney representing one of the men and that the funds from the man “were for legitimate business purposes and held in his lawyer trust account,” the affidavit read.
One bank account was owned by the other man, while another by his family member, according to the affidavit.