The city of Blaine this week acknowledged it was the victim of a billing fraud scheme after a local television news station reported that officials sent a $1.5 million payment to scammers posing as a construction firm.

The city issued a news release Tuesday saying the fraud, which occurred in August 2023, is the subject of an ongoing federal investigation that has resulted in several arrests, and that $700,000 of the stolen sum has been recovered so far.

KARE-TV reported Monday that Blaine officials submitted the payment to scammers posing as New Look Construction, an actual company based in Rogers that had done some road construction work for the city.

When staffers discovered the fraud in September, they reported it to local and federal law enforcement immediately, Blaine officials said in their news release. The City Council was informed four days later.

KARE’s report tied the scam to an ongoing investigation by federal authorities, who allege a fraud ring in Maryland has been using phony email addresses and bank accounts to impersonate real businesses that are owed money by their victims.

The city said in its news release that federal law enforcement officials advised not to discuss the case publicly to avoid compromising the investigation, but added that the council has received regular updates on the case.

City officials also said Blaine’s finance department has taken steps to ensure it is not victimized in the future, and “remains committed to updating internal controls and safeguards, including regular monitoring of vendor files to identify and verify changes, implementation of enhanced fraud prevention measures, screening to authenticate vendor change submissions, and continuing to conduct extensive employee training.”

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