Phishing scam in 2022 cost Memphis taxpayers $773K
After the incident, the city mandated training for staff in the finance department and put back controls that had existed before the COVID-19 pandemic. (Patrick Lantrip/The Daily Memphian file)
An alleged 2022 phishing scam cost Memphis taxpayers $773,695.45, according to public records obtained by The Daily Memphian.
Rumors about the scam abounded in Memphis City Hall for years and earned a passing mention during a Memphis City Council budget hearing this spring.
The Daily Memphian requested all records associated with it. The city returned a document identifying a single $773,695.45 transaction Saturday, Feb. 19, 2022.
The transaction is described as a loss due to “ACH Fraud.” ACH stands for the Automated Clearing House, a network that allows transfers among U.S. banks.
The loss occurred more than two years ago and was not acknowledged at the time or at any time during former Memphis Mayor Jim Strickland’s administration. Memphis Mayor Paul Young’s administration returned a June 2024 records request referring to the alleged scam.
The alleged scam reportedly occurred when someone impersonated Zellner Construction, a local construction company, on an existing city contract where invoices were regularly paid.
The city said a city employee paid a company they believed to be Zellner. Instead, the payment went to the alleged scammer. When the city discovered the error, the money could not be recovered.
During early 2022, the city was operating under COVID-19-era protocols that had relaxed the controls on such wire transactions, a city official said.
After the incident, the city mandated training for staff in the finance department and put back controls that had existed before the COVID-19 pandemic.
Private companies often have multiple people review transactions before wiring any money.
Jesse Zellner, vice president of the company, said, “We acknowledge that this incident did occur, and the city was prudent in their response.”
The FBI routinely investigates such web-related fraud and asks for complaints to be submitted on its website. It is not clear if the FBI is investigating the loss. A spokesperson for the bureau was not immediately available.
The city said the matter had been referred to law enforcement.
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Samuel Hardiman
Samuel Hardiman is an enterprise and investigative reporter who focuses on local government and politics. He began his journalism career at the Tulsa World in Tulsa, Oklahoma, where he covered business and, later, K-12 education. Hardiman came to Memphis in 2018 to join the Memphis Business Journal, covering government and economic development. He then served as the Memphis Commercial Appeal’s city hall reporter and later joined The Daily Memphian in 2023. His current work focuses on Elon Musk’s xAI, regional energy needs and how Memphis and Shelby County government spend taxpayer dollars.
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