A proposed power-generating waterwheel in the Platte River at RiNo. (ClayDean Electric)
Piles of supplies were a sign that something was wrong at ClayDean Electric in the fall.
Copper wiring, outlet boxes, breaker boxes — all ordered by a recently fired project manager, all unneeded at ClayDean job sites, all increasingly pricy and easy to resell.
“That was our first clue,” said John Scarborough. “Then we got the anonymous tip.”
The man on the line said that $100,000 in supplies lifted from a ClayDean job site in August was being resold. A call to Thornton police launched an investigation that is ongoing.
John Scarborough is a co-owner of ClayDean Electric. (LinkedIn)
Scarborough and Jamie Walbert, the co-owners of ClayDean, believe a former project manager there embezzled at least $800,000 and likely $1 million from their electrical contracting company by ordering excess materials, stealing them and reselling them. The alleged scheme has forced ClayDean into Chapter 11 bankruptcy and required it to lay off 35 electricians.
“It’s not something that I would ever wish upon anyone,” Walbert said in an interview.
ClayDean is a decade old and headquartered at 5150 Havana St. in northeast Denver. It handles electrical design and installation work, primarily for multifamily and commercial buildings, along with installation of electric vehicle charging stations. Scarborough and Walbert bought it in 2021. Last year it acquired ElectriTech, a repair company.
ClayDean filed for Chapter 11 on Jan. 17. It has $1.6 million in its accounts receivable and $670,000 in materials on hand but owes $3.3 million to Sunflower Bank and another $6 million to other lenders, co-owners, contractors and suppliers, bankruptcy records show. The company’s gross revenue last year was $7 million, up from $4.7 million in 2022.
“We started getting behind with our distributors,” Scarborough said, “and it snowballed.”
He and Walbert declined to name the man they accuse of embezzlement and say he has not yet been charged with a crime. He was fired for mismanagement in August, before his scheme was discovered, according to his former bosses. They say that a recent call to his former employer in California revealed he took $750,000 through an identical ruse there.
“This is not a one-off deal,” Walberg said. “This was very much a con artist pulling a con.”
“We are the kind of guys cons prey upon,” Scarborough said. “Big enough to support their habit but small enough to not have all of the processes in place that we should.”
Walberg said that ClayDean has retooled its ordering system to add checks and balances. The previous project manager ordered his excess supplies in small amounts over 12 to 18 months and had them delivered directly to job sites to avoid detection, Walberg said.
“Don’t have the fox guarding the henhouse,” Scarborough said when asked what advice he has for other contractors. “You absolutely must have controls in place to manage this.”
In 2018, ClayDean sketched plans for a power-generating waterwheel in the Platte River at RiNo that it dubbed The Denver Icon, but that “went sideways during COVID,” Scarborough said. He and Walberg would still like to see it happen but have more immediate concerns.
“This has led to a lot of disappointment,” he said of the bankruptcy. “Our livelihoods are on the line. We’ve lost 35 of the absolute best electricians in Denver. They’ve lost their jobs.”
The co-owners take some solace in the fact that all 35 electricians have been able to find other work. They hope to restructure ClayDean and emerge from bankruptcy a success.
“It is not a pretty thing to do and there were a lot of upset people,” Scarborough said with a sigh as he recalled the layoffs, “but we are working through it.”
