March 02–A former Seattle Public Utilities employee was arrested Thursday for allegedly stealing more than $1 million over five years by diverting customer payments for water-main extension projects into a private bank account.
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Chau Phan, 44, a civil engineer, was fired in February by SPU for adjusting his own utilities accounts. He was arrested Thursday by Seattle police for investigation of first-degree theft and expected to make his first court appearance this afternoon.
He will be formally charged next week.
Phan is believed to have bought a house and a car as part of the scheme and paid off credit card debt, according to two sources familiar with the investigation. The city recovered $220,000 Wednesday from a bank account controlled by Phan, a source said.
SPU went to the Seattle Police Department in January, after it discovered the alleged thefts as part of its separate investigation into utility employees — including Phan — who had improperly accessed, and in some cases, credited their own utility accounts.
In the current case, utility officials say that Phan diverted checks written by developers for water main extension projects to a private bank account.
“The legal process still needs to determine the guilt or innocence of this individual, but obviously this kind of alleged misconduct is unacceptable and reprehensible,” said SPU Director Ray Hoffman.
Police say they are still pursuing leads in the case.
“We knew we had to act quickly in order to recover as much of the stolen monies as possible. Those efforts are an immediate priority and remain active and ongoing, ” said Detective Keith Savas of the SPD Fraud, Forgery and Financial Exploitation Unit, who worked closely with SPU’s Risk and Quality Assurance Division.
City council members also reacted with alarm.
“I’m outraged. Immediate steps must be taken to ensure this doesn’t happen again,” said Jean Godden, chair of the committee which oversees the utility.
Hoffman said the utility has hired an independent consultant to work on issues identified during the Phan probe and to review all of the utilities financial practices.
Godden said her committee will monitor the ongoing work.
Five SPU employees, including Phan, have been fired since the initial investigation began in November 2010. A sixth was suspended.
City records show that Phan earned $77,488 in 2010 as a civil engineer. He had worked for the city since 1995 and was promoted to associate engineer in 2000. As part of his job, Phan had access to customer service accounts so he could research and issue water availability certifications to property owners and developers, according to the utility.
That access allowed him to access his own utility account to show payment had been made when it hadn’t. Hoffman notified Phan in February 2011 that he was being fired for improperly accessing his own account.
“Your actions in creating the fraudulent payments, your attempts to cover up your actions, and your lack of honesty throughout this process indicate either an inability or an unwillingness to meet the City’s requirements for employees,” Hoffman wrote in a letter notifying Phan of his termination.
Phan had been working since last summer for the City of Bothell as a project inspector in the utilities department, but was fired Thursday after Seattle police informed the city they planned to arrest him, Steve Anderson, Bothell’s deputy city manager, said Friday.
Anderson said Bothell officials did not know that Phan had left his Seattle job under a cloud in February 2011.
“We do comprehensive reference checks and there was no red flag on Mr. Phan,” Anderson said.
Bothell officials also evidently were unaware of a Seattle Times story in December that reported Phan had signed a settlement agreement with the Seattle Ethics and Elections Commission, acknowledging he had fixed his own residential utility account and that of a rental property to record payments of more than $1,000 when none were made.
In his Bothell job, Phan worked in the surface-water section, inspecting capital and residential projects to ensure developments were following code and approved plans, Anderson said.
