Portland Public Schools Respond To Fraudulent $3 Million Construction Payment

By Rob Manning (OPB)
Portland, Ore. Aug. 20, 2019 5:45 p.m.
In this 2017 file photo, District Chief of Modernization Jerry Vincent led a tour through the remodeled Franklin High School.

In this 2017 file photo, District Chief of Modernization Jerry Vincent led a tour through the remodeled Franklin High School.

Laura Klinkner / OPB

UPDATE (Tuesday, Aug. 20 at 10:53 a.m. PT) — Nearly $3 million intended for a contractor working on school construction projects ended up in a fraudulent account, according to Portland Public Schools officials.


The district's bank, Wells Fargo, flagged what the district is calling a "banking crime" involving voter-approved bond funds.

In a message to the PPS community Monday afternoon, district officials said the fraud was discovered in time to recover the $2.9 million involved. Officials said the holder of the fraudulent account is believed to be in the United States, which gives the district confidence that the money will come back to PPS.


"PPS has already begun the process to recover and fully return the funds back to the district, likely within the next several days," the district said in its announcement to parents and staff.

District officials declined to identify the name on the fraudulent account, saying only that it "was made to resemble" the name of a PPS contractor. Two district staff have been placed on paid leave, but PPS leaders say they believe the fraud was “externally perpetrated.”

PPS has been managing large sums of money earmarked for school facilities in recent years, after voters approved two bond measures, one in 2012 for $482 million and another in 2017 for $790 million. The 2017 bond has been the subject of intense scrutiny, since it was discovered to be overcommitted shortly after voters approved it. One of the signature projects from the 2012 bond, the renovation of Franklin High School, has been a recent target for criticism among students and teachers who use the building.

This latest incident — of alleged fraud involving bond funds — is an example of the district responding appropriately, argue top administrators familiar with what happened over the last few days.

Chief financial officer Claire Hertz said the details of what occurred may be shared with other school districts as a "case study" of how to spot and respond to fraud.

In addition to suspending two district staffers who were "involved with processing the transaction," PPS said it is taking several steps to learn more about how the fraud occurred, and to avoid it happening again. The district has promised a "full, independent, external investigation involving outside experts from the fields of online security, financial processes and controls, and workplace fraud." The district is also calling for its external auditor to "independently review our financial controls and vendor management protocols."

The statement signed by Superintendent Guadalupe Guerrero also said the district has updated its fraud prevention training materials and intends to have all financial staff take additional training with those materials, this week.