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SOU works to recover $1.9M loss

Minimizing losses and assisting the FBI in investigating a "sophisticated" scheme were among the reasons Southern Oregon University waited more than a month to disclose the school lost $1.9 million sending a construction payment to a fraudulent account, officials say.

SOU board of trustees Chairman Bill Thorndike said he was the only board member alerted early after the spring payment meant for Andersen Construction was wired to a fraudulent account the last week of April. He said the university wanted to keep the investigation under wraps to allow the FBI to better learn who the suspects were, how the fraud happened and to maximize the amount of money they could recover.

Rumors began to swirl at the beginning of the week, Thorndike said, prompting university leadership to announce the theft. The rest of the board learned of the fraud Tuesday evening, and students and staff were told Wednesday.

Thorndike commended SOU President Linda Schott on her transparency.

“She did a great job yesterday,” Thorndike said. “I give the school and our president a lot of credit that when the rumor did appear this week, that based on the values of Southern Oregon University, that it was time to disclose as much as we could about the investigation and then to allow for the work to continue."

Schott was unavailable to talk to the Mail Tribune Thursday, but SOU spokesman Joe Mosley said it's unlikely that anyone will be held personally responsible in the loss. How the fraud happened is currently under review, but both Mosley and Thorndike described the fraud as complex and involving multiple steps via phone and email.

“We are reviewing how the entire thing happened and how the procedures played out,” Mosley said. “There’s no reason to suspect that anyone was negligent at this point.”

"It took multiple actions to pull it off," Thorndike said, adding that the scam is "reflective of the world we live in today."

Mosley called the scheme a "very sophisticated scam." 

“It involved people who knew where to look for vulnerabilities, and they’ve done this at numerous institutions,” Mosley said, adding that he believes the unknown fraudsters were part of a national organization based on the account where SOU was directed to wire the funds, which was set up in another state. 

The loss won't impact university operations or cause increases to tuition because the university's bank accounts and budgets are kept separate for construction and operations.

The university's construction account had enough to suffer the temporary loss and cover Andersen's spring payment, according to Thorndike.

“We run positive fund balances at the university,” Thorndike said. “Occasionally we have to draw upon those and bring them back up.”

“We wanted to make sure that Andersen and the subcontractors would be paid on time,” Mosley said. “Our hope is that that fund will be reimbursed as we recoup what was diverted.”

Reimbursement will take three forms, Mosley said. First, the university is taking steps to recover funds that remain in the thieves' frozen bank account; second, the university is going through its insurance policies to determine where it'll submit a claim; and third, it hopes to see law enforcement track down the rest of the stolen money.

"We do have faith in the FBI investigation, and we're very hopeful that it'll be fruitful," Mosley said.

Mosley and Thorndike said most of the money transferred is still in the frozen account, but they did not say how much.

Mosley said people at other businesses and institutions should be "very cautious" of the growing business email compromise scams.

— Reach reporter Nick Morgan at 541-776-4471 or nmorgan@mailtribune.com. Follow him on Twitter at @MTCrimeBeat.