Case in Point 

Liquid Embezzlement

Earthquake Reveals Bogus Water Rights Rip-off

By Alexander J. McLeod Jr., Ph.D. and John R. Mills, Ph.D., CPA

July/August 2010

When Washoe County Water Resources implemented new business software replacing its legacy system, a trusted employee of nearly 20 years managed to override the controls in the new software and embezzled more than $2.2 million in just one year. Here’s how his scheme was uncovered.

On April 25, 2008, a 4.7-magnitude earthquake struck the Highland Canal, northwest of Reno, Nev., substantially damaging the old wooden water Flume 14 and cutting off the area’s water supply to the regional Chalk Bluff Water Treatment Plant.

After the water was flowing again, the county conducted an audit of water rights and resources, which revealed a multimillion-dollar fraud that had been craftily executed by Paul Orphan, a longtime water engineer who worked in the Washoe County (Nevada) Water Resources (WCWR) department.

Jaclyn O’Malley of the Reno Gazette Journal reported on Oct. 14, 2008 that Orphan had successfully embezzled more than $2.2 million in just one year.