Ex-Seattle Public Utilities engineer gets 7 1/2-year prison term

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SEATTLE — A former Seattle Public Utilities engineer was sentenced Friday to 7 1/2 years in prison for stealing more than $1 million in one of the largest cases of public embezzlement in King County.

Joseph Phan, 47, pleaded guilty in September to 67 counts of first-degree theft for depositing checks made out to the utility into his personal account. Prosecutors said he used the money to buy houses, rental properties and undeveloped lots.

King County prosecutors argued that the duration of the crime, Phan's abuse of public trust and the amount of money involved warranted an exceptionally long sentence. He sobbed and apologized at his sentencing hearing in King County Superior Court, saying he was "heartbroken" by what he had done.

Phan was a civil engineer hired by Seattle Public Utilities (SPU) in 1995 and was responsible for issuing water-access certificates to property owners and developers and accepted payments, prosecutors said in charging documents.

According to prosecutors, Phan began to divert money from the utility at the beginning of 2008 when he opened an account naming himself and the "City of Sea" at Bank of America.

Over the next three years, he deposited 70 of the utility's checks in his private account, prosecutors said. By the time he was caught, police and prosecutors say, he had stolen nearly $1.1 million.

He was fired after a 2010 audit of the utility's financial controls was conducted and Phan, and five other employees, were discovered to have improperly accessed and credited their own utility accounts.

His larger deception was discovered when a developer called a supervisor at SPU to ask whether a previously paid deposit on a defunct project could be applied to a new development, but there was no record of the check in the city's accounts, according to prosecutors.

SPU investigators eventually found copies of dozens of checks in Phan's project files, and police ultimately established that all the checks had been deposited in Phan's private account, according to prosecutors.

After Phan was arrested and charged with 70 counts of first- and second-degree theft in 2012, police seized $220,000 from his bank account, according to court documents. He also turned over his pension, the college credits in the GET program that he'd bought for his young daughters and the titles to a number of houses and rental properties that prosecutors say he acquired with the stolen funds.

In all, Phan has made restitution for about half of what he took, according to prosecutors. The city’s insurance company made good on the other half so the city has been fully reimbursed financially, according to head of SPU Ray Hoffman, who spoke at the hearing.

Nevertheless, he said, the toll on employees and the public trust was extensive.

A restitution hearing, at which the court will determine what Phan still owes the insurance company and the city, is scheduled for Feb. 7.

In a statement, City Attorney Pete Holmes said, “I’m proud of the hard work of our assistant city attorneys in recovering ratepayer assets, which wouldn’t have been possible without the full cooperation and assistance of SPU and Director Ray Hoffman.”

Phan’s attorney said his client’s crime came from fear and insecurity that had its roots in his childhood in war-torn Vietnam. Defense attorney James Bible said Phan knew the trauma of “losing everything.”

King County Superior Court Judge Catherine Shaffer said that while she was sympathetic to Phan’s early troubles, she did not believe he had ever owned up to the real motive, which she said was greed.

Shaffer said the exceptionally lengthy sentence was justified as the case was the largest theft case she’d ever seen in her courtroom and was, “indeed, a major economic crime.”

After the discovery of Phan’s theft, SPU implemented changes in how invoicing and payments are made. No employees, except cashiers, can accept payments now, according to the utility company.