Investigation finds fraud at Port of Seattle

SEATTLE – Two high-ranking managers resigned, four top officials were suspended and three others received written reprimands as the Port of Seattle responded to a scathing report that detailed fraud at the agency.

Port Chief Executive Officer Tay Yoshitani said Tuesday that he has accepted the resignations of John Rothnie, who managed the third runway expansion at Seattle-Tacoma International Airport; and Larry McFadden, port construction services general manager.

In his response to an independent investigation that found the staff steered contracts to preferred bidders, Yoshitani also announced a three-week suspension without pay for a chief engineer and one-week suspensions without pay for three senior managers. Three other officials received letters of reprimand.

Former U.S. Attorney Mike McKay was hired by the port early this year to look into its contracting practices, following a state audit that found them lax and vulnerable to fraud.

In a 57-page report released last week, McKay said his team’s $1.4 million, 10-month investigation did not uncover instances of embezzlement or personal gain by port employees. But it did find 10 instances of fraud, including a port employee’s decision to provide a potential bidder with internal cost estimates for a project related to the Sea-Tac third runway.

Rothnie and McFadden could not be reached for comment.

Yoshitani said he has “zero tolerance” for fraud. He added he’s implementing recommendations to make sure contracts are awarded through fair and open competition, including a better whistleblower policy that will make it easier for employees to report concerns.

Other policy changes include disclosure of financial conflicts of interest between port employees and contractors.

“Mr. McKay’s report reflects a ‘get it done at all costs’ culture – that day is over,” Yoshitani said in a statement. “We have tough competitors and big projects, but we have to deliver those projects with fair and open competition.”

Dedicated last month, the third runway cost more than $1 billion, nearly five times the original estimate.

John Creighton, president of the port commission that oversees port operations, said while he supports Yoshitani’s “first steps” in response to the fraud investigation, he thinks the commission and public would benefit “from more clarity as to what exactly a zero tolerance policy means.

“If it does not mean immediate termination for employees found to have committed fraud, what exactly does it mean,” Creighton asked.

The U.S. attorney’s office in Seattle launched its own investigation of the port following the state auditor’s report. That investigation is ongoing.

Yoshitani will take more disciplinary action if the federal investigation finds any further wrongdoing, port spokeswoman Charla Skaggs said.