$330,000 taken from Newport

Cybercrime under investigation

NEWPORT — City officials in Newport learned Feb. 11 that $330,000 in city funds was stolen in what officials described as a sophisticated online scam.

The money was sent to a fraudulent account, with staff thinking it was a legitimate vendor, Newport Mayor Keith Campbell said. The Spokesman-Review reported that a staffer thought they were paying the Association of Washington Cities, Newport’s insurer.

“This is a deeply concerning situation,” Campbell said in the Feb. 26 new release announcing the crime. “We recognize that this could represent a significant loss of taxpayer dollars.”

Campbell told The Miner the loss might be covered by insurance, but it wasn’t known yet if it met certain conditions required for coverage. The city has no specific cybercrime insurance.

Campbell said law enforcement, including the FBI and Liberty Lake Police Department, is conducting an ongoing investigation. There is no indication that individuals’ personal information was taken; the loss appeared to be limited to municipal financial transactions.

The city is conducting a comprehensive review of financial controls and identifying and implementing additional safeguards.

“We take our responsibility to safeguard public funds extremely seriously,” Campbell said in the news release.

The week following the press release, a few dozen concerned citizens attended the Newport City Council’s March 2 meeting in person and over Zoom Monday night.

Campbell and city council members discussed the cybercrime after a half-hour executive session where they discussed enforcement actions; litigation or potential litigation; and legal risks with the city lawyer. They took no action.

Newport is the third Pend Oreille County municipality in the last four years to suffer a big financial loss through theft. In 2022 more than $200,000 was stolen from the Town of Cusick by Luke Servas, a former council member and town clerk. He pleaded guilty and is serving a 51-month sentence in a federal prison. Last year the Town of Metaline lost more than $100,000, allegedly through misappropriation by a city employee, Kelly Flanagan, who was arrested by the Pend Oreille County Sheriff’s Office. That case was turned over to the FBI.

Campbell said there is no evidence that this was a case of embezzlement, such as those in Cusick or Metaline.

“Our goal is to give you factual information,” Campbell said at the meeting. “And with that goal in mind, we won’t release much information until we know all the facts.”

Kristen Yake, co-owner of My Sidewalk Café in downtown Newport, was the first of four audience members to address the council.

Yake asked the council about the city’s current policies related to cybercrime. She also asked which employee or employees, if any, had fallen for the scam and whether the city had taken any disciplinary action against them.

While he said he could not elaborate on much due to the ongoing investigation, Campbell responded that the city did have policies related to cybercrime in place, which will be updated in order to prevent another case like this one.

“The staff part, the policies and procedures, that’s the investigation we want to get going,” Campbell said. “That takes a little bit more time.”

Another audience member, Chris Johnson, asked the council similar questions about the city’s policies, saying that another cybercrime could occur anytime. Campbell responded with a similar answer.

“If I could divulge every single thing, I would, and I still want to,” Campbell said. “But it’s just one of those things you have to kind of wait for.”

Leslie Maki asked if the city had insurance that covers this cybercrime and if not, how the city will recoup the $330,000. The city is exploring its options, Campbell said.

Because council members voted last year to implement a lesser water-sewer rate increase out of consideration for taxpayers, council member Nathan Longly said the city has less budgeted for savings this year — only a fraction of what was stolen, meaning it is not an option for recouping all $330,000.

“My concern is the taxpayers,” Maki said. “It’s getting expensive out there, and so if we’re the ones that have to make up the difference, that’s not going to be good.”

One last audience member at the Monday night meeting, who did not identify himself before addressing the council, asked if the city had information technology services, recommending those employees be investigated as well. That was also under investigation, Campbell said.

Scams such as the one in Newport are not uncommon, Campbell said the state Auditor’s Office told him.

“Not only do these sorts of ‘cyberlosses’ occur across local governments in Washington state, but they are common across the globe,” said Adam Wilson of the State Auditor’s Office.

Since 2016 the total of all cyberlosses at all government types in the state has surpassed $38 million. In 2023 $3.4 million was stolen from governments by cybercrime in Washington, $2.4 million in 2024 and $1.5 million in 2025, Wilson said.

“Over those three years, governments reported recovering a total of $2.5 million,” he said. “We also should note the amount of money recovered may increase over time.

“Governments are required to report the loss incident immediately and they don’t always know yet whether they will see some recovery from their bank or insurance. We update the amounts recovered in our next regularly scheduled audit.”

As for the situation in Pend Oreille County, Wilson said it is certainly concerning to see another loss. “After the Cusick case, we worked with the county auditor to host a training session for area governments on fraud prevention.”

Small governments do tend to be more vulnerable to fraud and loss than larger governments, Wilson said, and that is not unique to Pend Oreille County.

“Small governments may have a harder time setting up strong financial controls because there are simply fewer staff to perform the cross-checks and divisions of responsibility that can detect fraud or errors,” he said. “A small city may have one or two people doing everything. They may have to rely on the mayor or city council members to monitor their finances, the success of which might depend on how much time these usually-volunteer officials have to devote to the task, their financial expertise or their willingness and availability to seek out training.”