A top executive at the Los Angeles Department of Water and Power has been placed on administrative leave while the utility looks into his involvement in the bitcoin mining industry and whether he complied with ethics rules that require employees to obtain permission for outside work.
John Chen, who earns $320,688 as director of the DWP’s corporate performance office, owns a company that began doing bitcoin mining in Colorado in 2018, court and business records show.
Chen, a 30-year veteran of the DWP, also registered as the manager of a mining data center company in North Dakota in 2018, business records show.
Chen was placed on leave last month after The Times asked the DWP about Chen’s ventures, according to a source at the utility.
A DWP spokesperson declined to comment on Chen’s administrative leave. Cynthia McClain-Hill, president of the DWP board of commissioner, called the issue of Chen’s outside ventures a “concern.”
“I would expect that employees at DWP and in particularly employees at his level, would be giving their full-time attention to the city and the city’s business,” McClain-Hill said.
Chen, in an interview with The Times, likened the bitcoin businesses to owning real estate or stock and said he didn’t need the utility’s permission to work on it.
“It’s an investment,” he said. “I’m not running it. There’s outside staff that are running it.”
Chen’s lawyer, Michael Faber, said Chen is “exploring all of his options, including the possibility of litigation” against the DWP.
Bob Stern, who helped draft the city’s ethics and public campaign finance laws, said that Chen’s bitcoin work is a problem only if he’s not able to perform his DWP job.
“Is he giving L.A. what he’s earning? Is he performing 40 hours a week?” Stern said.
Court documents, business records, and news stories about Chen’s holdings provide some details about the operation.
A company owned by Chen paid $13 million to purchase a former Intel Corp. plant in Colorado Springs in 2018. A different company owned by Chen spent $6.5 million to upgrade the property and increase its electrical capacity, according to documents filed in federal bankruptcy court in Colorado. (In December 2020, one of Chen’s companies filed for bankruptcy. The case was dismissed several months later.)
Chen confirmed that he partnered with Chinese and Singaporean companies on the Colorado venture.
Chen also secured an economic development deal with Colorado Springs Utilities, a publicly owned electricity, natural gas, water and wastewater services utility, in 2018, to get a reduced rate for electricity.
Chen said he chose to invest in Colorado Springs because he was able to get “a one-of-a-kind building.” He secured a “very low” rate in Colorado Springs for electricity, he said.
In 2018, the general manager of energy supplies at Colorado Springs Utilities was Aram Benyamin. Benyamin and Chen worked together at the DWP before Benyamin was hired by Colorado Springs Utilities in 2015.
Benyamin rejoined the DWP last year as its chief operating officer, the No. 2 position at the utility.
Benyamin, in an interview, said he had no involvement with Chen’s company securing an economic development contract in 2018.
Chen said he regularly flew to Colorado, but said that he traveled “on my own time.”
Two employees who worked for Chen’s company in Colorado Springs told The Times that Chen visited the site sometimes up to twice a month.
Chen made no secret of his business in Colorado Springs.
When neighbors there complained about the loud noise from computer cooling fans at the bitcoin mining operation, he gave an interview to the Colorado Springs Independent, promising to plant pine trees to muffle the sound.
North Dakota news outlets also covered a massive 2019 fire that burned down a Grand Forks, N.D., warehouse. The warehouse was operated by one of Chen’s companies, according to a Grand Forks Fire Department report that was reviewed by The Times. The report estimated that the building had $6 million worth of bitcoin mining equipment inside.
Chen joined the DWP in 1990. As director of DWP’s corporate performance, he is responsible for ensuring that the utility is transparent and accountable in its work.
Times researcher David Shen contributed to this report.
Source: LA Times