UPDATE: The City of Ocala responded with the following statement: “City leadership recently learned that the City of Ocala was the victim of a fraudulent scheme that resulted in the theft of $277,799.81. Upon learning of the incident, City leadership immediately initiated a comprehensive response. Steps were taken to evaluate the City’s systems and security measures, and investigations were initiated to determine the facts surrounding the incident. No city systems were compromised as this was a business email compromise. Those investigations are currently being conducted by the City’s Internal Auditor, the City’s insurance providers, and other appropriate agencies. The City of Ocala is committed to transparency and accountability. However, because the investigations remain active, we are limited in the information we can release at this time. Releasing additional details before the investigations are complete could compromise the investigative process and any potential recovery efforts. The City of Ocala will provide additional information as appropriate once the investigations have been completed and the underlying facts have been verified.”
OCALA, FL (352Today.com) – At the end of the Ocala City Council meeting on Tuesday, Aug. 4, 2026, Councilman Jim Hilty pressed City Manager Pete Lee on the city’s handling of a nearly $500,000 fraud case that officials said began in April and came to light in late July.
“There was some interesting comment here tonight about different things that seem to be happening with citizens, and of course, we all heard this week that the city was fleeced out of almost $500,000,” Hilty said. “I would have thought tonight would have been the night that you would be transparent to the public, rather than us having to ask that. I realize the investigation is still going on, but I think that the public needs to know that we had a fraud case dating back to May, which obviously was covered up for whatever reasons. But again, I think it’s time for that to come public.”
“It wasn’t covered up. I told you that the investigation was ongoing, and I told you on, I think yesterday, that I wasn’t going to bring it up today, and you said ‘okay,'” Lee responded.
Hilty argued that waiting for the investigation to finish before informing residents created the appearance of a cover-up and reflected a developing culture of selective transparency.
Lee responded that the investigation was still active and that he had already informed the council privately. He said he learned of the fraud in late July, immediately asked the city’s internal auditor to investigate on the council’s behalf, and directed concurrent reviews by the finance department, chief financial officer, IT staff, procurement and risk management. Lee noted that one employee involved on the front end of the transactions no longer works for the city, that partial recovery has already occurred, and that insurance claims have been filed.
“We have one employee who was on the front end of this, who no longer works for us,” Lee said. “We got partial payment back. We have insurance claims that have been filed by our risk management department, and I’m certainly not trying to not be transparent. I’ve been transparent with every one of you.”
Lee emphasized that the threat actor was operating inside a vendor’s system rather than the city’s own network. He said he had told at least one council member the previous day that he would not raise the issue at the Aug. 4 meeting precisely because the probe remained incomplete. Making it public before the internal auditor and IT finished their work, he argued, would have been premature.
Hilty said that Lee owed it to the public to make the fraud known at the meeting.
“There was fraud committed against the city. You should have taken the opportunity to make it public and say it’s under investigation. You’re hiding behind that until the report comes back. I don’t think that’s fair to our citizens,” Hilty said.
“I’m not hiding behind anything. I acknowledge to my five bosses what happened. I think that it was premature to make it public. Now, it’s public,” Lee said.
Councilmember Jay Musleh said that after speaking with Lee and learning an internal audit had been launched, it made sense to wait for a full report that included a clear timeline, corrective actions and the final insurance outcome.
“Originally, I was for full transparency, but after talking to Pete and initiating an internal auditor review, I think it would have been prudent to wait until the internal auditor review report had come out, and then have a plan as to any corrective action that would be taken at that time. At this point, I don’t think the public is served either way, you know, by us bringing it up tonight without having a full and comprehensive report from our internal auditor, and also a full report on exactly what happened, timeline, and everything,” Musleh said.
At the July 21, 2026, Ocala City Council meeting, city officials discussed scheduling interviews for four internal auditor applicants, agreeing to follow a format similar to the city attorney selection process. After reviewing calendars and noting a budget workshop that day, they settled on Tuesday, August 11, 2026, starting at 9 a.m.
“I think this discussion wasn’t going to wasn’t going to take anything away from the public by keeping this discussion off for another two weeks,” said Musleh. “I’m all for full transparency. This should never have happened, but mistakes were made on certain employees, both on our end and on the other end, and I also want to know, you know, the resolution with the insurance carriers. Will this claim be paid? What’s the final loss? At that time? A full report should be made and available to us in an open meeting, i.e., so the citizens will know.”
Hilty maintained that the length of time the scheme had gone undetected and the decision not to mention it publicly earlier left the impression something had been hidden. Lee rejected any suggestion of a cover-up, saying he had been transparent with the five council members who oversee him and that the city intends to present a complete accounting once the internal reviews and insurance process are finished.
Neither the former employee’s name nor the vendor’s was disclosed during the exchange. Officials indicated a fuller report, including the status of recovery efforts and any personnel or process changes, is expected at a future meeting.
352Today.com has reached out to the city for a statement on the nature of the fraud and what is involved. As of 1:30 p.m., no statement has been made by city officials. If we receive a response, we will update this story.