City Utilities Probe: 24 Employees Cheated on Their Bills; $7,000 Loss

A three-year City Hall probe into billing irregularities by Seattle Public Utilities employees has turned up 24 SPU workers who manipulated their own electronic water, sewage and garbage bills, the department said today. Since the scandal broke in late 2010, eight workers have been fired and 15 others disciplined for entering false payment information, avoiding penalties and waving fees, SPU officials say, with one case yet to be concluded. A number of others were also verbally reprimanded.

Though an audit shows the actual dollar loss to the department was relatively small, $7,000, said SPU Director Ray Hoffman, the more-important issue of public trust was at stake. “We expect our employees to behave ethically and not use their positions to benefit themselves or family and friends,” he said, adding that “a thorough audit was an essential part of fixing our billing system.”

The irregularities by employees accessing their own computerized billing data in SPU’s customer service unit ranged from minor incidents of workers making past-due payment arrangements for themselves, to more serious violations of entering false payments on their accounts or those of others. One now-former supervisor, for example, who was later fined $2,000 by the Seattle Ethics and Elections Commission, removed $190 in late fees from her parents’ account and repeatedly made payment arrangements for herself and her parents, in violation of the city code.

One of the major offenders was city water engineer Joe Phan, who, in 2010, entered two fake, $500 payments on his own utility account. It was discovery of those false payments that became not only part of the internal probe but later led to the astonishing discovery of how Phan alone had pulled off a much bigger City Hall embezzlement in recent years – stealing more than $1 million in city funds by diverting and depositing customer checks into his own bank account.

It was the biggest heist in City Hall history, although all the money has since been recovered, half by seizing and selling Phan’s assets, the other half coming from the city’s insurance carrier. Phan, a onetime millionaire now flat broke and being divorced, is slated to be sentenced tomorrow.

As Seattle Weekly reported last month, SPU has been putting the finishing touches on its internal billing probe and since initially finding seven employees who’d tampered with their bills had turned up more than a dozen others. A final, detailed report on the probe that was set for release today won’t be completed until the end of the year, says department spokesperson Andy Ryan. “But the details we released today are the essence of what will be in the final report.”

Guillemette Regan, director of SPU’s Risk and Quality Assurance unit, says she only recently found out about another possible employee violation, causing her to delay the final report. She’s been slogging through ten years worth of data, she says, looking for violations.

“Some are minor – employees making their own payment arrangements. It’s something we do for customers, but employees can’t do for themselves.” The most egregious incidents, she says, were “employees removing charges, lowering account balances, and making transactions for family members and friends. I’ve found sometimes 20, 30, 40 actions that were not allowed, made by some employees.”

SPU Director Hoffman has instituted a number of reforms since the scandal broke. They include improved internal controls and increased monitoring of utility account transactions. SPU also is requiring employees with billing system access to sign a confidentiality and ethics agreement, and has reduced the number of staffers with billing access.

“Getting this right has been a priority for us,” says spokesperson Ryan. “And our improved oversight will help keep it right.”

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