DWP leader furloughed amid questions about bitcoin’s outside activities

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

A senior executive with the Los Angeles Department of Water and Power has been placed on administrative leave while the utility reviews its involvement in the bitcoin mining industry and whether it followed ethical rules that require employees to obtain permission to work outside.

John Chen, who earns $320,688 as director of the DWP’s Office of Business Performance, owns a company that began mining bitcoin in Colorado in 2018, according to court and business records.

Chen, a 30-year DWP veteran, also registered as a director of a mining data center company in North Dakota in 2018, trade records show.

Chen was placed on leave last month after The Times asked the DWP about Chen’s plans, according to a public service source.

A DWP spokesperson declined to comment on Chen’s administrative leave. Cynthia McClain-Hill, chairwoman of the DWP board of commissioners, called the issue of Chen’s outside businesses a “concern.”

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

Chen, in an interview with The Times, compared bitcoin businesses to owning real estate or stocks and said he didn’t need permission from the public service to work there.

It’s an investment, he says. I don’t direct it. There are outside staff taking care of it.”

Chen’s attorney, Michael Faber, said Chen was 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 Chen’s bitcoin job is only a problem if he can’t perform. his DWP work.

Does he give LA what he earns? Does he work 40 hours a week?” Stern said.

Court documents, business records and news reports on Chen’s holdings provide details of the operation.

A Chen-owned company paid $13 million to buy a former Intel Corp factory. in Colorado Springs in 2018. Another Chen-owned company 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.)

The story continues

Chen confirmed that he has partnered with Chinese and Singaporean companies as part of the Colorado venture.

Chen also entered into an economic development agreement with Colorado Springs Utilities, an electric, natural gas, water and wastewater utility, in 2018 to obtain a reduced electricity rate.

Chen said he chose to invest in Colorado Springs because he was able to secure a one-of-a-kind building. He got a very low electricity rate in Colorado Springs, he said.

In 2018, the general manager of energy supplies for Colorado Springs Utilities was Aram Benyamin. Benyamin and Chen worked together at DWP before Benyamin was hired by Colorado Springs Utilities in 2015.

Benyamin joined DWP last year as chief operating officer, the company’s No. 2 job.

Benyamin, in an interview, said he had no involvement with Chen’s company to secure an economic development contract in 2018.

Chen said he flew to Colorado regularly, but said he traveled in my spare 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 complained about the loud noise of the bitcoin mining computer cooling fans, he gave an interview to the Colorado Springs Independent, promising to plant pine trees to drown out the sound.

North Dakota news organizations also covered a massive fire in 2019 that burned down a warehouse in Grand Forks, ND. 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 contained $6 million worth of Bitcoin mining equipment inside.

Chen joined the DWP in 1990. As the DWP’s Corporate Performance Manager, 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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