In an unusual case that has city officials perplexed, the city of Hastings announced Tuesday that it may have been the victim of a document forgery crime.

Bonds delivered to the city for a riverfront revitalization project may have been altered or forged, rendering them invalid and causing the city to suspend a construction project.

RSI Associates Inc., the general contractor for a portion of Hastings’ Riverfront Renaissance project, delivered bonds after being awarded the contract in the fall. But within the past few weeks, the city learned from Western Surety Co. — which purportedly issued the bonds — that they aren’t valid.

Now the city is figuring out how best to move forward both with legal action and with the riverfront project.

“It’s a bit of unpacking the many layers of this right now,” said City Administrator Melanie Mesko Lee.

RSI, of Prior Lake, filed for Chapter 11 bankruptcy on Feb. 19. Hastings terminated its contract with RSI and suspended work on the project Feb. 23. The case has been referred to the Dakota County attorney for consideration of criminal charges.

Mesko Lee said the city had not worked with RSI before. The company was the lowest of several bidders for the first phase of the riverfront project, receiving a nearly $420,000 contract. The work, which began in the fall, was to include a veterans memorial, a park and landscaping.

A call to a number associated with RSI was answered by a woman who declined to identify herself. She confirmed that the company did work on the project in Hastings but that it was no longer involved. “This is something I’d rather not make a comment on,” she said. “We thought our bonds were legitimate and they’re not, and anything further than that I won’t discuss.”

Two types of bonds are at issue in this case: One ensuring that the contractor will complete the project per the contract, and one ensuring that it will pay subcontractors, suppliers and workers. Surety companies issue bonds to contractors after an application process, conducted through an agent, that determines whether the contractor is financially capable of completing the project.

Hastings City Attorney Daniel Fluegel said Western Surety — which changed its name to CNA Surety but still writes bonds on Western Surety paper — maintains that it didn’t issue the bonds.

It’s unclear how often bond fraud affects cities, although Fluegel said he isn’t aware of any other cases in the public sector. “We’ve asked around just informally, and from what I can tell, it’s never been a problem in the state of Minnesota,” he said.

Bond fraud is rare and can take a variety of forms. Fraudulent companies might take a name similar to that of a licensed company, such as Western Surety. Sometimes the contractor is in on the scheme; sometimes they’ve simply been duped.

Robert Duke, corporate counsel at the Surety & Fidelity Association of America, said these schemes are largely avoidable if contractors verify the legitimacy of the surety company up front. “I would say a contractor should deal with a reputable insurance agent, one that’s known in the community, one that’s known by the insurers,” he said, “as opposed to a fly-by agent they’ve never heard of or found on the Internet.”