City of Surrey sues banks over $2.5m allegedly siphoned by former employee in seven-year fraud scheme

The City of Surrey has launched legal action against two major Canadian financial institutions to recover more than $2.5 million allegedly stolen by a former municipal employee in a sophisticated fraud scheme that spanned seven years. The civil lawsuit, filed last month in B.C. Supreme Court, alleges that funds were systematically diverted through accounts at Canadian Imperial Bank of Commerce and Coast Capital Savings by an accounting clerk who manipulated the city's financial processes.

Background and Context

The case highlights vulnerabilities in municipal financial controls, particularly concerning dormant development deposit accounts that can remain inactive for years before being claimed. Surrey city manager Rob Costanzo acknowledged in a May statement that the "irregular transactions" involved such accounts, adding that the city has since "enhanced its processes to prevent a similar occurrence." The alleged fraud took place between February 2017 and January 2024, during which time at least 183 fraudulent cheques were reportedly issued.

Key Figures and Entities

The notice of civil claim names Sunny Catlin, a former accounting clerk in Surrey's finance department, as the central figure in the alleged scheme. According to court documents, Catlin diverted funds to accounts held by herself, her mother, and ECS Inc., a company she allegedly controlled. The claim states Catlin operated under the alias "Yee" when receiving payments. Following the city's internal investigation, which began after "irregularities" were discovered in deposit release forms, Catlin now faces criminal charges including breach of trust by a public officer, theft, fraud, and forgery. The BC Prosecution Service approved the charges on November 18 after an investigation by the RCMP's economic crimes unit. Catlin is scheduled to appear in Surrey Provincial Court on January 30.

Legal and Financial Mechanisms

The lawsuit alleges that Catlin employed multiple methods to circumvent the city's financial controls. According to the claim, she "manipulated security deposit records" and altered supporting documentation to make illegitimate payments appear legitimate. The scheme involved falsifying engineering department forms by changing recipient names and "inserting the image of the signature of a member of the engineering staff taken from an unrelated document." This manipulation of official paperwork allegedly allowed her to redirect funds intended for legitimate security deposit payouts to accounts she controlled. Neither CIBC nor Coast Capital Savings have yet filed responses to the lawsuit.

International Implications and Policy Response

The case raises questions about banking oversight and the responsibility of financial institutions to monitor unusual transactions involving municipal accounts. While Canadian banks have enhanced anti-money laundering protocols in recent years, the alleged seven-year duration of this scheme suggests potential gaps in detecting suspicious patterns in government-related transactions. Municipal financial oversight across Canada has come under increased scrutiny following similar cases in other jurisdictions, prompting calls for standardized audit procedures and enhanced inter-agency information sharing between banks and government bodies.

Sources

This report draws on the notice of civil claim filed in B.C. Supreme Court, public statements from the City of Surrey, information from the BC Prosecution Service regarding criminal charges, and court records regarding upcoming proceedings. Additional context was provided by official statements from Canadian banking institutions and municipal governance protocols.