Beware of Hidden Email Addresses: TN School Transferred $3M to Fake Account

A school district in Tennessee temporarily lost more than $3 million after a district employee was duped into sending funds to a fake vendor.

The finance director for the Johnson County Board of Education, in northeast Tennessee, in March wired $3.36 million to an account thought to be associated with Pearson, one of the largest educational companies in the country, which also provides online license exams for insurance agent applicants in several states.

The finance director had been contacted via email by someone believed to be with Pearson. It turned out that the sender was using a “pearson.quest” online address, rather than the legitimate pearson.com address, according to news reports and court records.

The fraudulent address was not noticed early on because it was was hidden in an email behind the name of the sender, as emails often are. The name of the sender was the same as a person known to work with Pearson, according to an affidavit in support of the federal complaint.

Two weeks later, the school district’s bank contacted Schools Director Mischelle Simcox about the apparent fraud.

The school district director told Insurance Journal on Tuesday that the district held a cyber security insurance policy through the Tennessee Risk Management Trust, “and they have worked diligently for us on this incident.”

The Sept. 5 complaint in U.S. District Court for Eastern Tennessee shows that the U.S. Secret Service has moved to seize the bank accounts where much of the money ended up.

“We have been informed that the majority of the money has been recovered,” Simcox said in an email.

The scheme used third-party “mules” who may have had no knowledge of the actual fraud, court papers show. The Secret Service traced some of the funds to a 76-year-old Texan. The man said that he had developed a relationship with a woman from Turkey who claimed she was unable to open U.S. bank accounts because of “a tax issue,” and needed someone to open accounts to receive a large inheritance.

A remarkably detailed diagram of how the alleged scheme worked can be seen here.

Similar schemes using online relationships and unsuspecting mules have become all too common across the country, according to news reports and first-hand accounts.