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A sign is seen on the York University campus is seen in Toronto in 2009.

MARK BLINCH/REUTERS

Police have arrested three York University employees over an alleged $1.6-million fraud – the second seven-figure theft uncovered at the school in the past four years.

The alleged scheme involved fraudulent billing over seven years – from November, 2005 to October, 2012 – when York officials were alerted by a whistle-blower and contacted police. Vittoria Caparello, 51, and Yossi Zaidfeld, 38, are both charged with fraud. Melissa Caparello, 27, is charged with possession of property obtained by crime.

All three were arrested on Wednesday, and Toronto police detective Gail Regan said "further arrests and charges are anticipated" as the investigation continues. But she stressed there is no connection between the new allegations and a previous $1.2-million fraud uncovered at York in 2010, also thanks to a tip.

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Surveys suggest some degree of fraud occurs regularly at most universities, but thefts of more than a million dollars are very rare, raising questions about why York has been vulnerable to such large-scale misappropriations. After administrators discovered the earlier fraud, the school put tighter controls in place and introduced a formal whistle-blower policy. That prompted someone to point out "suspicious activity" and led to the new accusations, said a university spokesperson.

York's general counsel, Harriet Lewis, said in a statement that the university has recovered the defrauded money, plus costs, after an internal forensic audit, and that the school "takes its fiduciary responsibilities very seriously as an institution entrusted with monies from our students and public."

Vittoria Caparello, who also goes by Victoria, was a business manager in Continuing Education, and Mr. Zaidfeld was an IT operations manager, but neither still works at York. Melissa Caparello is an administrative assistant in the Faculty of Environmental Studies.

A person answering a call to a home belonging to Vittoria Caparello told a reporter, "No comment," while a person at Mr. Zaidfeld's apparent residence said he was "not interested" in commenting.

York's lawyers are still trying to recover the $1.2-million from a fraud that it says was masterminded by two senior managers in its campus services and business operations division between 2007 and 2010. In 2012, Toronto police charged Michael Markicevic and Phil Brown with fraud and money laundering, alleging they led a scheme that York officials described as "very complex."

Both men were cleared of criminal wrongdoing in 2013 after prosecutors deemed a pair of key witnesses – also York employees implicated in the ‎fraud but never charged after they agreed to provide evidence – unreliable.

But Mr. Markicevic and Mr. Brown are still fighting a $3-million civil suit launched by York, which alleges the two men devised an intricate web of kickbacks ‎and billing for work that wasn't done at the school, and maintain their innocence. In court documents, York describes bundles of cash changing hands through other York employees and middlemen and companies set up solely to issue false invoices.

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After allegations against Mr. Markicevic came to light, York tightened its controls in areas like work orders and institutional purchasing cards and set up a process to re-verify the more than 6,000 outside vendors it currently uses.

The school in northern Toronto is among Canada's largest universities, with 55,000 students, 7,000 faculty and staff and a budget of nearly $1-billion.

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