Thrall can see one of these using Far Sight on an inaccessible island near the boarder of Chasing Visions, chapter 1 of the Warcraft III prologue campaign, Exodus of the Horde. It is on the ground by a ruined ship, and guarded by two Scurvy Pirates. It can never actually be obtained in-game in the singleplayer campaign.
In practice, Phat Lewt is used throughout the campaign as an "inventory slot filler" for non-player heroes. Phat Lewt is flagged as the most powerful item in the game despite not actually doing anything, thus AI heroes will never drop the item. Many heroes have 1 to 6 Phat Lewts in their inventories throughout the campaign, but they are always invisible to players.