Insurance will cover $125,000 of Peterborough’s $2.3 million scam losses

Peterborough’s insurer will cover $125,000 of the $2.3 million lost in a scam, according to Town Administrator Nicole MacStay.

“There was never an expectation that the losses would be 100% covered,” MacStay said. “We were working with Primex (the New Hampshire Public Risk Management Exchange) all along obviously, and going back and forth with them.”

The town administration received the final answer on coverage just before Thanksgiving.

Primex will also be covering all expenses related to work done by ATOM Group, a cybersecurity firm that handled parts of the investigation alongside the Secret Service. MacStay said that although she never saw the resulting bill from their work, the insurance coverage of this expense was “significant.”

The scam was discovered in August when a total of $2.3 million was taken by criminals who posed as the ConVal School District and Main Street Bridge contractor Beck & Bellucci and persuaded town finance officials by email to send vendor payments to bank accounts set up by the scammers. The Secret Service initially recovered about $600,000 of the stolen money intended for the contractor, and according to MacStay, it recovered another $3,500 in early November.

“Every little bit helps,” she said, speaking of the insurance coverage as well.

The town received state approval to overspend its budget by $1.7 million from the unassigned fund balance to cover the losses the Secret Service couldn’t recover, and the $125,000 insurance payout will be used to simply “go toward losses,” according to MacStay, to help recoup from what she characterized as a “significant cash loss” as a result of the scam. The fund balance was at $3 million when the town dipped into it, and is expected to still have over $1 million at the end of this fiscal year.

“We’re just using (the insurance money) for regular business,” she said. “It becomes part of our cash balance and it’ll go toward whatever regular bills come up.”

Although the approval is for $1.7 million, MacStay said the amount of money the town needs to pay from the unrestricted fund balance will be known at the end of the fiscal year on June 30. The insurance money, along with other unanticipated revenues and cost savings, could be used to offset some of that amount.

“We’ll have a much better idea late spring,” she said.

The fund is often used to reduce property taxes, but MacStay previously said that because of the withdrawal, that option was unlikely. Due to a revaluation that increased many residential property values by 30% to 40%, the tax rate ended up falling to $25.76 per $1,000 of assessed value from last year’s rate of $30.84, but a home assessed at $200,000 in 2020 would have seen a 12.8% tax increase if the property increased in value by 35%.

“We need to be careful with our spending to try to rebuild that unrestricted fund balance,” she said. “We’re not in any kind of financial distress; we’re still in a very solid position. But it does mean that we’re going to try to be careful – it’s going to take some time.”

MacStay added that the insurance was capped at $125,000 because unlike some cybercrimes, which result in damage to servers or something similar, there was no property damaged as a result of the scam.

As of this week, the town is caught up with its extra payments to ConVal of $125,000 a month – an agreement reached in September. The town has already repaid the balance owed to Beck & Bellucci.

“To our residents, to our vendors, to any of our partners like ConVal, any of the contractors we’ve worked with, it’s going to look like regular business,” MacStay said. “We’re going to continue to do work, continue to pay our bills, continue to pay our staff, and continue to provide the services we always have.”