Newport Says $1.2 Million Missing in Embezzlement : Courts: Alleged loss to city at hands of ex-utilities director is now dwarfs original estimate. Officials vow to impose new safeguards.

As the estimate of city funds allegedly embezzled by its utilities director soared to $1.2 million, Newport Beach officials vowed Wednesday to alter departmental procedures to prevent future raids on municipal accounts.

The revelation that Utilities Director Robert J. Dixon had allegedly stolen far more than the $60,000 investigators originally believed missing has chastened top city officials. That estimate was raised to $500,000 on Tuesday.

“Shock has turned into anger,” said City Manager Robert L. Wynn, who hired Dixon as a supply clerk 17 years ago, and until this week considered him an “exemplary employee.”

Dixon, charged with one count of felony embezzlement, made a brief appearance Wednesday afternoon in Municipal Court in Newport Beach. Assistant Dist. Atty. Craig McKinnon said that more charges may be filed at Dixon’s scheduled arraignment Friday. Dixon allegedly cashed city checks that were written to fictitious property owners who were being paid so the city could put a water line through their land.

At the court proceeding, Municipal Judge Susanne S. Shaw lashed out at Dixon, but also criticized city officials, including Wynn, for elevating Dixon to a high post, knowing he had a prior embezzling conviction while employed at Georgetown University.

“It’s amazing to me that the city manager . . . would allow (Dixon) to be a in a position like that,” Shaw said. “. . . It is very unfortunate.”

Dixon, whose passport was ordered confiscated by the judge, was later returned to Newport Beach city jail, where he is being held on $500,000 bail.

“He is extremely depressed,” defense attorney Stephan A. De Sales said of his client, who looked haggard Wednesday afternoon when he appeared in court behind a glass partition. His clothes were disheveled, his hair unkempt.

De Sales said later that Dixon is “likely to enter a not-guilty plea” when he returns to court Friday morning.

De Sales also said that Dixon has cooperated with authorities who are sifting through hundreds of financial documents. He said his client has not signed a confession to any wrongdoing, despite rumors “floating around City Hall.”

“Whoever said that is dreaming,” he said.

Meanwhile, city officials and an outside auditing firm Wednesday night continued to pore over records to determine the extent of the financial loss. The auditors had reviewed records until midnight Tuesday.

Police Sgt. Andy Gonis said that at least three accounts appear to have been missing money: the $10-million water project, the city oil and oil royalties account, and a business licensing account.

Auditors have expanded their investigation to focus on records that date back to 1985, when Dixon became Utilities Department director and gained authority over various city accounts.

“I’m sure they’ll be looking at the whole scope of activities and funds he had access to,” Gonis said.

Dixon allegedly dipped into the water project fund by forging papers, Wynn said, including invoices and easement documents, then sending them to the Finance Department with a requisition for a check to a real or a fictitious property owner.

The checks were handed to him, with Finance Department officials believing Dixon was going to hand-carry them to the property owners, Wynn said.

At that point, Dixon allegedly forged signatures, endorsing the checks to himself, and then deposited them.

Dixon was arrested Monday in City Hall after a credit card company called police to tip them off that Dixon was depositing large checks drawn on city funds into his a personal credit card account, city officials said.

Wynn said he has ordered auditors to recommend safeguards that will make it harder for city personnel to embezzle funds.

“We’re looking into two things,” Wynn said. “First to find out the total amount missing, as embarrassing as it is, and then to find ways and means to protect the city in the future.”

An audit is also under way at the Newport Beach City Employees Federal Credit Union, where Dixon served on the board of trustees, Wynn said.

Also Wednesday, additional details emerged about the Georgetown conviction. In 1972, Dixon was convicted of embezzlement after university officials accused him of misusing $83,000 in funds while serving as student activities director at Georgetown University. Aside from submitting vouchers for gifts, plane travel and restaurant meals attended by guests not involved in university business, Dixon was also accused of using school funds to pay for an around-the-world trip, according to an account at the time in the Washington Post.

Wynn said Dixon was forthcoming about the episode throughout his career with the city, and the issue was brought up again before he was promoted to utilities director in 1985. Wynn said before promoting Dixon that he reviewed a copy of the court file from the 1972 case.

“We discussed it and he looked me right in the eye and said he had learned his lesson and hoped that stupid errors he had made years before would not be held against him for a lifetime,” Wynn recalled Wednesday. “He said he knew better than to repeat it. I believed him.”

Wynn said he was told by detectives that Dixon talked after his arrest about having a “success self-destruct syndrome” that had tragic results. As recently as last Friday, Dixon was among the finalists to become city manager when Wynn retires this month.

“He apparently suggested that he found it necessary to stimulate interest in his job by seeing if he could beat the system,” Wynn said. “In the past it had backfired on him. This time it backfired on him to the extent of destroying him.”

The city began efforts Wednesday to recoup some of the losses by suing Dixon in Orange County Superior Court, claiming he stole at least $1.2 million in city funds from Aug. 31, 1981, to Jan. 10, 1992.

The suit seeks to recover the missing funds, interest and $1 million in punitive damages. It also asks for a lien on property Dixon allegedly bought with the funds.

Gonis said auditors will total Dixon’s assets--including dozens of valuable photographs seized from his Huntington Beach home and City Hall office. In addition to attempting to seek liquidation of his personal belongings, Wynn said, the city may attempt to seize his retirement fund worth between $100,000 and $200,000.

“It is a surprise,” said Wynn, who until last week believed Dixon to be a capable administrator. Now, he said, “I think he’s a very dishonest, devious employee who took advantage of a situation.”

Times staff writers Robert W. Stewart and Lily Dizon, and correspondent Lisa Mascaro, contributed to this story.