DWP executive furloughed over questions about external bitcoin deal

The headquarters of the Los Angeles Department of Water and Power. (Richard Vogel/Associated Press)

An executive at the Los Angeles Department of Water and Energy has been furloughed while the utility investigates its involvement in the bitcoin mining industry and whether it has complied with ethics rules that require employees to obtain permits for outside work .

John Chen, who earns $320,688 as director of DWP’s Corporate Performance Office, owns a company that began mining bitcoin in Colorado in 2018, court and business filings show.

Chen, a 30-year DWP veteran, was also registered as a manager at a mining data center company in North Dakota in 2018, according to business records.

According to a source at the utility, Chen was put on leave last month after the Times asked DWP about Chen’s activities.

A DWP spokesman declined to comment on Chen’s administrative leave. Cynthia McClain-Hill, President of the DWP Commissioners Board, called the issue of Chen’s outside ventures a “concern”.

“I would expect DWP employees, and especially employees at his level, to give their full attention to the city and the city’s business,” McClain-Hill said.

Chen compared bitcoin deals to owning real estate or stocks in an interview with The Times, saying he doesn’t need the utility company’s permission to work on it.

“It’s an investment,” he said. “I don’t run it. There are external workers running it.”

Chen’s attorney, Michael Faber, said Chen is evaluating “all of his options, including the possibility of litigation” against the DWP.

Bob Stern, who helped draft the city’s ethics and campaign finance laws, said that Chen’s bitcoin work is only a problem when he can’t fulfill his DWP mandate.

β€œIs he giving LA what he deserves? Is he performing 40 hours a week?” Stern said.

Court documents, business records, and news of Chen’s belongings provide some details about the operation.

A company owned by Chen paid $13 million to buy a former Intel Corp plant in 2018. in Colorado Springs. Another company owned by Chen spent $6.5 million upgrading the property and increasing its power capacity, according to documents filed with federal bankruptcy court in Colorado in 2018. (In December 2020, one of Chen’s companies filed for bankruptcy. The case was dismissed a few months later.)

The story goes on

Chen confirmed that he worked with Chinese and Singaporean companies on the Colorado project.

Chen also entered into an economic development agreement in 2018 with Colorado Springs Utilities, a public electric, natural gas, water, and sewage utility, to receive a discounted electricity rate.

Chen said he decided to invest in Colorado Springs because he could get “a unique building.” He secured a “very low” electricity rate in Colorado Springs, he said.

In 2018, Aram Benyamin served as General Manager of Power Utilities for Colorado Springs Utilities. Benyamin and Chen worked together at the DWP before Benyamin was hired by Colorado Springs Utilities in 2015.

Benyamin returned to DWP last year as Chief Operating Officer, the No. 2 position at the utility.

Benyamin said in an interview that he was not involved in Chen’s company signing an economic development contract in 2018.

Chen said he flew to Colorado regularly but said he traveled “on my free time.”

Two employees who work for Chen’s Colorado Springs company told the Times that Chen sometimes visited the site up to twice a month.

Chen made no secret of his Colorado Springs store.

When neighbors there complained about the loud noise from the computer cooling fans at the bitcoin mining operation, he gave an interview to the Colorado Springs Independent and promised to plant pine trees to deaden the noise.

News outlets in North Dakota also reported a major fire in 2019 that burned down a warehouse in Grand Forks, North Dakota. The camp was operated by one of Chen’s companies, according to a report by the Grand Forks Fire Department verified by The Times. The report estimated that the building contained $6 million worth of Bitcoin mining equipment.

Chen joined the DWP in 1990. As Head of Corporate Performance at DWP, he is responsible for ensuring the utility is transparent and accountable in its work.

Times researcher David Shen contributed to this report.

This story originally appeared in the Los Angeles Times.


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