The City of Mobile lost $14.7 million in a single fraudulent transaction tied to the $300 million Regions Arena project, but Mayor Spiro Cheriogotis says a $15 million owner’s contingency built into the arena budget will absorb the hit without touching city services, the arena or any other capital project.
“This is bad, and there’s nothing I can say to make it good,” Cheriogotis said at a press conference last week, after the city disclosed the loss. “But it is our city’s intention and commitment to be as transparent about this issue as we possibly can.”
The transfer went out in early October, Cheriogotis said he was personally made aware of it on a Friday afternoon, and that federal partners were notified immediately. The FBI and the U.S. Secret Service are investigating. The city has retained Polsinelli, a national law firm that specializes in these incidents, hired a forensic firm to audit both its policies and its books, and notified its insurance carriers, which brought in a separate law firm for an independent review.
“We do have cyber insurance at a fairly standard rate. It will not be a rate that would make us whole from this incident,” Cheriogotis said.
The mayor said the fraud hit one payment in a larger series of arena transactions and that only that one was compromised. He credited the budget he inherited from the previous administration for the cushion.
“I’m thankful that the, you know, conservative budgeting that I inherited on this project contained that 15 million dollar contingency that just so happens to now be needed,” he said. “So the arena construction will continue; it will be completed, even with this incredibly painful dollar amount. We still expect it to be within budget.”
Cheriogotis said the arena carries two contingencies, one for construction and one for the owner, and the loss comes out of the owner’s side. He said the city has about a year to recover what it can before the gap is felt.
“The pain of this is most likely not to be felt until next year, and I can’t stand here and say it won’t affect future capital projects,” he said. “But the truth is, we have a year now to try and close this gap to recover every dollar that we can through the criminal investigations, through our insurance carriers, and every other means at our disposal.”
Cheriogotis would not say whether the scheme was phishing or vendor impersonation, whether existing controls were followed, or whether any employee has been disciplined. He ruled out one thing.
“The city is not being held hostage. We are not the victim of ransomware,” he said.
He did describe one new rule.
“If a check has two commas in it, it needs to be a check hand delivered,” Cheriogotis said. “It is no longer wired or electronically transmitted, as far as I am concerned and the city is concerned.”
FBI Assistant Special Agent in Charge Miles Beckner, who oversees the Mobile Division’s cyber squad, said the bureau is working with the Mobile Police Department and U.S. Attorney Sean Castillo’s office and urged anyone hit by fraud to file a report at ic3.gov.
“We will prosecute and investigate to the fullest extent possible any of these bad actors that are coming after our hard taxpayer money,” Beckner said.
The city’s week did not stop there. The Carnival Spirit returned to the Mobile Alabama Cruise Terminal on Saturday morning to begin seasonal Caribbean sailings through April, with the larger Carnival Valor set to restore year-round cruising from the Port City in May. The mayor also pointed to the relaunch of the downtown Riverwalk condo tower.
“Even a loss this great will not throw Mobile off its game,” Cheriogotis said. “This will not prevent the momentum of Mobile from growing and continuing. We are absolutely committed to bringing the actors, the bad actors, to justice.”
Grayson Everett is the editor in chief of Yellowhammer News. You can follow him on X @Grayson270.
