Phishing scam costs City of Memphis $773K

MEMPHIS, Tenn. — The City of Memphis lost $773,000 in a phishing scam in 2022 that was not disclosed until this year.

The scam allegedly took place in February 2022, when someone pretended to be Zellner Construction on an existing city contract where invoices were paid.

A city spokesperson explained, “they changed the account details and wired $773K to an account that was, indeed, not Zellner.”

The total amount lost on Feb. 19, 2022, was $773,695.45, according to a city document.

They were outside the window to retrieve funds when the mistake was realized, the city’s spokesperson said.

The financial loss apparently was never acknowledged during former Mayor Jim Strickland’s administration.

The incident first came to public light when it was mentioned by City Councilman Chase Carlisle in a June 4 council meeting. City officials confirmed details to WREG Wednesday.

“My understanding is that we wired $800k to a vendor in a phishing scam last term. Never disclosed,” Carlisle said at the time. “This stuff has to stop.”

City Councilman Jeff Warren says this isn’t a good reflection on any city leaders who were in office at the time.

“I think it was a blemish on all of us who were there when it occurred, but if you think about it, this is a crime. This is is someone who intentionally deceived people,” Warren said.

City Councilwoman Jerri Green, who was not on council in 2022, calls this incredibly alarming.

“I mean, we have to make sure we are taking care of the taxpayers dollars. That’s our number one job, is to be good stewards of their funds,” Green said. “To learn we’ve been taken advantage of in some way is very disturbing.”

A city official tells WREG the alleged scam happened when the city was operating under COVID-era policies that relaxed protocols and procedures for wire transactions.

“These scams are very sophisticated and ever evolving,” said Walter Person, financial officer under Mayor Paul Young’s administration. “After discovery of this incident in early 2022, we returned to our pre-COVID protocols, including verifying the proper notary indicia, telephonic verification of multiple data points for all wire transfers, and periodic phishing scam training sessions with our I-T security team. “

We reached out to former Mayor Strickland for a comment, but so far, haven’t heard back.

We did hear from Zellner Construction. Jesse Zellner, the vice president of the company said, “We acknowledge that this incident did occur and the city was prudent in their response.”

Warren said he thinks the issue will come up at the next City Council meeting, and hopes Young’s administration can shed some light on what they’ve found.

What could $773,000 have paid for?

WREG dug up some recent city contracts and found several purchases that could’ve been covered by the missing money. Among them: