More City Hall Workers Caught in Billing Probe After $1 Million Heist

As the 19-month-old case of ex-city utilities worker Joe Phan winds down towards his sentencing next month for the $1.1 million heist of City Hall funds, Seattle Public Utilities officials are concluding an investigation into the misuse of SPU’s accounting system by other employees.

Department sources say as many as a dozen City Hall workers were found to have improperly used SPU’s computer billing system to post false water, sewer and garbage payments or to adjust charges on their own accounts. SPU spokesperson Andy Ryan says final figures are still being firmed up. “But we’ve actually gone back through ten years of records, meticulously searching for evidence of other people misusing the system.” Some employees have already been fired and a number of others face internal discipline, he said.

Five SPU employees were fired in 2011 after the department first discovered they were misusing the system to post false payments, waive late fees and create extended payment plans for themselves and others. Since then, at least two other SPU employees have been disciplined for billing improprieties, according to records of the Seattle Ethics and Elections Commission. One agreed to pay a $500 fine last November. The other agreed two weeks ago to a $900 fine.

(A third SPU worker was assessed a $1,000 fine for an unrelated cause - using city facilities to run her family’s business; similarly, a City Light worker was fined $500 for selling Avon products from her city desk and sending or receiving 1,800 city emails with the word Avon in them).

SEEC Executive Director Wayne Barnett says that, altogether since 2011, nine SPU employees have been disciplined and fined for bill tampering. All worked in SPU’s Customer Service Center. Three were fined $1,500 and one - a supervisor who made changes to her account and her parents’ account as well – was fined $2,000, says Barnett.

An employee who was fired in the 2011 actions tells us that “What’s different about this current crop is they are being spared their jobs and merely suspended.” Says SPU’s Ryan: “Several employees have been fired, and a couple others face internal discipline. One of the people that Ethics fined, we fired.”

Ryan couldn’t say whether the utility had conclusively solved its computer and accounting security issues. “We’re working to make lots and lots of changes to our internal control system that, we hope, will make it much more difficult for this sort of thing to happen again,” he said.

False utility payments proved to be the downfall of Phan, although the bill fixing fortuitously led to discovery of his astonishingly larger theft. The $81,000-a-year water hook-up engineer had become a rich man through his SPU embezzlement plot, yet greedily in 2011 entered two phony $500 utility computer payments on two of the three homes he owned. Confronted about that, Phan lied to his superiors, and was fired.

Going through his ledgers and receipts later, however, the department stumbled across Phan’s million-dollar caper in which he diverted customer water hook-up checks into his own personal account. He was trusted to accept the City of Seattle checks at construction sites or through the mail, then send them along to accounting. Some he did; others he kept.

At one point, he was stealing hook-up payments at the rate of $360,000 a year, depositing most checks without question through a Bank of America ATM machine into an account the bank had allowed him to name “City of Sea.”

“I was struck by how simple and easy it was,” King County Prosecutor Dan Satterberg told us, “and how few questions were asked. One of the deposited checks was three years old. I didn’t think banks accepted a check as old as that.”

Phan, 46, who is also going through a divorce and has been in jail on work release since last April, faces anywhere from four to eight years in prison when he is sentenced November 15. The city has recovered the $1 million through the $500,000 sale of Phan’s properties and a $500,000 insurance payoff. The insurance company is now attempting to collect their half million from the penniless Phan.

 
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