Portland lost $1.4M, but city leaders aren’t saying how

A city could do a lot with $1.4 million.

In Portland, that amount of money could help families at risk of losing their home stave off eviction for one more week. It could pay for another two dozen or so unarmed park rangers, intended to curb spiking gun violence. It could double the money going to outreach at the city’s worst off homeless camps.

In April, homeless services nonprofit Central City Concern needed $1.4 million for a new 100-unit affordable housing project called The Starlight in the heart of the Old Town neighborhood. The Portland Housing Bureau had signed a $17 million contract with the nonprofit last March to construct the building, and Central City Concern needed some of the money to cover the latest round of construction costs.

So the nonprofit did what it had done dozens of times before: submitted what’s known as a “draw request” to the housing bureau, asking to withdraw some of the money awarded to them — this time for $1,468,775.59. The city did what it does many times every day: OK’d the transfer.

Only this time, the money didn’t go where it was intended.

According to one city official familiar with the matter but not authorized to speak about the investigation, the money the nonprofit requested was redirected to a different bank account unrelated to Central City Concern. In the time it takes to complete a wire transfer, the city was out $1.4 million. It appears to be the single biggest theft in Portland government history.

City leaders have been extremely tight-lipped about the incident. On Friday, the Office of Management and Finance sent reporters a short press release, saying they learned of a “cybersecurity breach” that led to a “fraudulent financial transaction” late last month after a second similar transaction was attempted on May 17 from “the same account.” It’s not clear whether the second attempt targeted money meant for Central City Concern or another entity owed money from Portland.

City officials say they caught the second attempt before the money went out. They did not catch the first. According to the statement, Portland leaders have notified the FBI, the U.S. Secret Service and Portland Police.

City leaders have declined to answer any questions raised by the brief statement. A spokesperson for the housing bureau and staff working for Commissioner Dan Ryan, who oversees the housing agency, referred all questions to Office of Management and Finance spokesperson Carrie Belding. Belding declined to answer questions, referring OPB to the initial press release. Asked if she could confirm the breach stemmed from the housing bureau, Belding said she couldn’t provide that “level of detail.”

But OPB was able to learn more about the breach through publicly available records. The city keeps a regularly updated database of payments made to vendors, which shows a payment of $1.4 million dispensed from the housing bureau on April 25 to Central City Concern. According to the records, the money came from the Portland Housing Bond, a $258 million bond package voters approved in 2016 to build more affordable housing. (The Office of Management and Finance sent a second release to local reporters after OPB published, stating that though the project is partially funded by the housing bond, the money lost in the transaction had actually come from the city’s general fund.)

Juliana Lukasik, communications director for Central City Concern, confirmed this was the payment at the root of the incident.

Lukasik said city staff informed them that the money was missing last Monday — one month after the funds were transferred out of the city’s account. She said city officials promised that Central City will be “made whole” and they anticipate the building at 355 Northwest 6th Avenue that is expected to add 100 units of desperately needed housing will be finished on time this fall.

But she said the big question — how exactly did money intended to build affordable studio apartments end up in someone else’s hands — was left unanswered by the city.

“They’re not telling us anything other than we’re going to make sure that you receive the funding as promised,” she said.

The city’s Friday release said municipal officials think the breach was due to an “unauthorized, outside entity” who obtained access to a city of Portland email account. To pay contracts, the city uses a software program called SAP, which only Portland employees can access. It’s unclear if the breach was related to that software.

City leaders also have yet to say whether the breach was limited to just one payment or if there could be more money missing. A city spokesperson said an employee within the city’s housing bureau noticed the second attempt to reroute city money before it left the city’s coffers, though they were not clear what got that second payment flagged.

A spokesperson for Portland Police Bureau said the FBI was the primary agency “investigating the criminal matter.” The FBI, and the agent in charge of the U.S. Secret Service office in Portland, said they cannot comment on whether an investigation is underway.

Nobody has been charged in relation to the incident.