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Originally published January 22, 2010 at 10:01 PM | Page modified January 22, 2010 at 11:50 PM

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Investigation of Port of Seattle fraud ends without indictments

A two-year federal corruption and fraud investigation into the Port of Seattle has concluded without any indictments.

Seattle Times staff reporter

A two-year federal corruption and fraud investigation into the Port of Seattle, launched after a blistering state audit accused officials of squandering up to $97 million in public money, has concluded without any indictments.

Calling it an end to "one of the bleaker moments" in the Port's history, Chief Executive Officer Tay Yoshitani made the announcement this week in an e-mail to Port employees, and it was later confirmed by the U.S. Attorney's Office in Seattle.

"This has been a long and difficult process," Yoshitani wrote in an e-mail on Wednesday. "I would like to thank the many employees that assisted in providing timely and complete responses to the many requests for information received during the course of this investigation."

The investigation was launched in late 2007 after a state audit that accused the Port of squandering as much as $97 million and raised the possibility of fraud in the bidding process.

Port spokeswoman Charla Skaggs said Friday that the Port has been focused for the past two years on reform. The criminal probe has been a distraction, she said, and Port officials are glad that it's over.

"This is what you hope for in these cases, that it just goes quietly away," she said.

The investigation was secret until state Auditor Brian Sonntag in January 2008 released a letter signed by then-U.S. Attorney Jeff Sullivan urging the auditor to cooperate with investigators by not revealing the sources of information contained in his audit for several months, and not releasing any additional information until federal investigators had seen it.

The Port responded by hiring a former federal prosecutor to conduct its own investigation into the audit's findings, as well as funding attorneys to represent Port employees pulled into the probe.

Former U.S. Attorney Mike McKay later identified 10 instances of fraud in the Port's bidding practices, leading to the resignations of two managers involved in the Seattle-Tacoma International Airport's giant third-runway project. Seven other Port employees were disciplined.

In the most serious violation, McKay said a Port employee leaked sensitive documents to a major contractor who later made what the former prosecutor called an "astonishing" 30 percent profit on a $125 million construction job that was part of the third-runway project.

McKay said the standard profit on a construction contract is 7 to 15 percent.

He also found a culture that tolerated withholding information from elected Port commissioners and that sidestepped financial safeguards.

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However, McKay did not find evidence of embezzlement for personal gain that would constitute a crime.

McKay said his search for criminal fraud was hampered by his inability, as a consultant, to subpoena personal financial records of Port employees and a lack of cooperation from contractors such as TTI Constructors, who made the 30 percent profit on the third runway.

McKay's report also found former Port CEO Mic Dinsmore inappropriately asked the Port's Washington, D.C., lobbying firm to help secure Dinsmore's daughter a paid internship with Congressman Norm Dicks of Bremerton.

McKay said Dinsmore violated the Port ethics policy when he used the firm, McBee Strategic Consulting, for personal benefit. McKay said "the only reason the service was provided was because it was the Port CEO who asked for it."

Dinsmore, who was in charge for most of the period examined by the audit, retired as Port CEO in 2007.

The Port, which runs the airport and owns the Elliott Bay cargo terminals, spent well over $1 million in attorneys' fees defending itself, according to public records.

Sonntag's office did not return a call for comment Friday. Emily Langlie, a spokeswoman for the U.S. Attorney's Office in Seattle, said she could say only that the investigation was concluded and no charges filed.

Mike Carter: 206-464-3706 or mcarter@seattletimes.com

Information from Seattle Times archives is included in this report.

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