On Wednesday 3/25 in the early afternoon, City of Stuart commissioner Sean Reed posted the following:
“$125,909.12 reasons why I love being able to represent the StuartLife – The City of Stuart, Florida residents on transparency.
The fraud happened in October of 2021. Police report was not made until May of 2022 simply because the StuartLife – The City of Stuart, Florida was contacted by an out of state Sheriff’s Office. The money was never recovered and no insurance claim was made since the City allegedly would have had a $100,000 deductible.
It’s a little more than just a delinquent revenue for the utility department. It’s a disregard for the tax payers not being aware when issues like this happen. Information should not be withheld for “security” reasons. Allegedly elected officials during this time period were aware of this as well yet no one talked about it publicly until now.
-Sean Reed
upset tax payer”
The text was accompanied by a screenshot that was apparently part of a police incident report.
The screenshot begins with, “Boglioli advised that approximately one week ago, he was contacted by Detective Sergeant David Gunter from the Fayette County Sheriff’s Office in Georgia. Sgt. Gunter advised that he had just arrested a male named Andrew Schulte, who was involved in a scheme to defraud with several other suspects, who was able to exploit the Paymentus Platform.”
The question that was asked by many is why was Commissioner Reed the one sharing this and who knew about the $125,909.12 loss to the City?
You just have to look at the police report.
The Timeline of the Fraud
Martin County Press obtained a copy of the 28-page police report through a public records request on Thursday.
A number of people, including one later identified as Andrew Schulte of Fayette County, Georgia, identified a flaw in the Paymentus system.
As stated in the police report, “Paymentus is the company that the City of Stuart uses for the online bill pay option. On the City’s website, a customer can pay their utility bill, permit fee, parking tickets, and other miscellaneous bills. Paymentus also gives an option of “other”, where the customer has to enter an account number before proceeding to the next stage of making a payment.”
Mr. Schulte and others found that he could submit a payment request for an account / address that didn’t exist and the money would be refunded without the money ever leaving his account.
Basically, the system saw there was a payment made that really wasn’t ever made and, if cancelled by the municipality, created a refund for a non-existent account holder.
Per the police report, “Sgt. Gunter advised that a year ago, he had spoken to someone at Paymentus about the glitch in their system which would let someone receive money fraudulently, the company advised that if the city that received the fraudulent payment, they could leave it alone and let it expire. If the fraudulent payment was left alone for a certain amount of time, it would expire, and self-terminate because the account does not exist.”
The municipality, in this case, the City of Stuart, would be notified there is no valid account. And the municipality would be prompted to refund the money creating a loss for the municipality, because they never received the money to actually issue a refund.
For the City of Stuart, there were five pre-authorized payments equaling the total of $125,909.12 mentioned in Commissioner Reed’s comments that were set up for accounts and/or addresses that don’t exist. The dates and amounts of the transactions were as follows.
- 10/01/2021 – $21,079.04
- 10/04/2021 – $12,141.16
- 10/06/2021 – $24.288.82
- 10/08/2021 – $24,035.82
- 10/12/2021 – $44,364.25
The Police Report
The police report was filed on May 17, 2022, not in October 2021 when the City realized the money had been removed from its ledger, but as a result of another municipality contacting a City representative, Louis “Joly” Boglioli. Mr. Boglioli was the Finance Director for the City of Stuart.
According the police report, on or about May 10, 2022, Mr. Boglioli was contacted by Detective Sergeant David Gunter with the Fayette County Sheriff’s Office in Georgia.
Sgt. Gunter had arrested Mr. Schulte for exploiting the Paymentus system in his town allowing for Mr. Schulte to basically obtain $533,000 from his municipality from refunds for bills he never really paid.
Sgt. Gunter learned that this scam ran from December 2020 to July 2021 in Fayette County.
According to the police report, “Sgt. Gunter advised that in August of 2021, the fraud that had been occurring to Fayette County, was finally caught, and stopped. That is when Schulte and his co-defendants started to look at different government agencies to continue the scam.”
Sgt. Gunter, using a search warrant, found in Mr. Shulte’s emails receipts for Stuart, Great Falls Montana, Kane County, Illinois, and Porterville, California.
The transactions at the City of Stuart took October 2021.
So What Did the City Know and When?
The transactions at the City of Stuart took place between October 1 and October 12, 2021.
The police report was filed May 17, 2022. So what happened in between?
According to the police report, Ms. Amanda Salen, who was at the time the Assistant Finance Director for the City of Stuart, notified Paymentus via email on October 4, 2021, as she should have done.
Ms. Salen was advised by a representative at Paymentus to not cancel any pending transactions so the funds could settle first (meaning the transactions would be completed with the money for the payments fully transferring) and then to process the refund.
However, it is questionable if the transactions were, in fact, cancelled by staff – versus letting the transactions expire and nullify themselves – which thus prompted the non-existent refunds to be given to Mr. Schulte as suggested in the police report.
“Schulte would submit a payment to the City of Stuart using his Venmo account with a fictitious account number, knowing that it would be rejected. Since the payment would be rejected by the City of Stuart, due to a flaw in the system, Schulte would receive the amount he fraudulently paid to the City of Stuart.”
It appears that City Staff did not notify the Police to file a police report until City Staff was contacted by Sgt. Gunter.
As reported previously, Mr. Boglioli resigned from the City of Stuart in February after serving the City for almost 30 years. Ms. Salen also resigned also this year, shortly after Mr. Boglioli did. She had been employed with the City of Stuart since February 2020.
Did the City Do All It Could Do?
According to Commissioner Reed’s post, elected officials were aware of the activity. It has also been stated, but not confirmed, that the former City Manager, David Dyess, and the former City Attorney, Michael Mortell, were also aware. It is not known what response they had to the situation. Though neither they nor the Commission made any public statements about this activity.
Mr. Schulte ultimately pleaded guilty 10 charges in Fayette County. His offenses include eight counts of theft by deception, one count of conspiracy, and one county of racketeering. Should he serve all of the time to which he was sentenced, his release date would be 11/29/2030.
It is unknown if the plea agreement included an order for restitution to any of the municipalities impacted. Specific to the City of Stuart, based on informal conversations, it does not appear any money was reimbursed to the City, through an insurance claim, nor returned or provided through restitution.
Activities where monies are fraudulently taken by deception should have be reported to law enforcement immediately. The incidents with the City occurred October 2021. A police report was not filed until the City was contacted by Sgt. Gunter.
Paymentus has assumingly improved their systems to prevent this kind of cyber-manipulation to allow this again. And the City of Stuart has presumably improved their systems, including when to report these items to law enforcement, should this happen again.
Commissioner Reed stated, “I think this is a prime example why taxpayers don’t trust government. And you need to pay attention to who you elect.”
When asked for clarification, he stated basically any commissioner who knew should have made the public aware, even if it was after the situation had been remedied reiterating “this is why people don’t trust government.”