Harlan Kelly, right, and Mohammed Nuru in a 2017 tweeted photo by @mrcleansf, Nuru's account.

There is a cinematic element to the last few rounds of federally uncovered and prosecuted San Francisco corruption; the affidavits ought to be smeared with popcorn grease stains. 

The latest edition has its fair share of movie-ready moments, what with wiretaps of erstwhile Public Works boss Mohammed Nuru being feted in China with “some stone” and bottles of booze priced higher than a serviceable ’99 Toyota Camry, or former Public Utilities Commission head Harlan Kelly being utterly and totally offered up on a silver platter by former pal and running buddy Walter Wong. 

San Francisco corruption is multifaceted and complex, but the misdeeds recounted in these charging documents are, for the most part, straightforward and easy to understand. That’s no coincidence — this way, the loosely veiled but unnamed figures within can recognize themselves, realize the jig is up, and “run, don’t walk” to turn themselves in, as U.S. Attorney Dave Anderson put it. 

The crimes Nuru and Kelly are charged with are neither multifaceted nor complex. Nuru is accused of unsuccessfully attempting to bribe an airport commissioner — yes, an unsubtle envelope of cash was purportedly involved — to shoehorn an associate’s chicken shack into SFO. Kelly is charged with receiving bribes to favor Wong on a streetlight contract Wong didn’t even manage to land. 

Not exactly Bond-villain material here. But that’s fine for the feds. They can still hold 20-year prison sentences and $250,000 fines over the heads of the accused, and apply that as leverage to land what the feds always want: a bigger fish. 

But it’s less fine for San Franciscans who’d hope to be efficiently and honestly governed. 

A couple of players may be removed from the game. But we haven’t invalidated the playbook or the system. 

And, as of yet, we haven’t laid a finger on the coach. 

San Francisco Public Works clears a homeless encampment on 14th and Mission Streets, March 2017. Photo by Lola M. Chavez.

The San Francisco Public Utilities Commission is, as charismatic bank robber Willie Sutton would’ve put it, where the money is — and there are ever-so-many aspirational Willie Suttons in this town. 

On any given agenda, you’ll find a number of items affecting San Franciscans’ lives for generations and costing millions of dollars. Let’s take item 10e at the Dec. 8 meeting: approving two $9 million contracts for a pair of joint ventures to undertake, among other endeavors, “Construction Management Services for the East Bay Region, to provide construction management services and staff augmentation to manage multiple overlapping Regional Water Enterprise construction projects … ”

Sorry, everyone. It’s a bit complicated. Bear with us. 

At issue here is the concept of a “Local Business Enterprise.” 

The classification of Local Business Enterprises — or LBEs — sprang up after California voters kneecapped larger efforts at affirmative action. LBEs allowed for many of the same goals — the classification ensured that small, local companies employing local people got work and money, and not all the jobs went to the same big players. 

That’s the idea, in theory. In practice, however, longtime PUC sources tell us that — throughout the decades — often the only person at the so-called LBE doing any work was the guy processing the invoice. The actual work was passed through to other entities. Entities that were not necessarily local, nor small. 

See also: San Francisco’s chronicles of corruption

And this brings us back to the PUC Commission meeting of Dec. 8 and the awarding of those two $9 million contracts. The Public Utilities Commission heavily rewards bidders for its lucrative contracts who partner with LBEs — a bonus of 7.5 percent or even 10 percent of the scoring total. That’s a big deal. Especially because the top four finishers in this contract bid were separated by just 33 points — out of 1,000. 

It’s clear that getting that LBE bonus was pivotal if you wanted to land one of those PUC contracts. What’s decidedly not clear, however, is if the LBEs involved really were LBEs — and if those points should have been awarded, and if this process was wholly legitimate. 

Despite a slew of questions about just that, posed both in writing and orally during the meeting, the PUC Commission expediently awarded these two contracts and moved on to the next item.  

San Francisco Public Utilities Commission workers work on another flood apartment next door to Picaso’s. Photo taken Dec. 2, 2012.

Well, that was fascinating. Because, based upon the city’s own data, one company, MCK, appears to have grossed far more than the $2.5 million three-year average the city has set as a ceiling, by statute, for LBEs in its category. Over the past three complete fiscal years, it averaged $3.47 million —and that’s not even factoring in joint ventures, which nearly triples that figure. 

Another LBE, Dabri, had its certification lapse on Aug. 31. 

Mission Local inquired about this with the PUC. We were sent memos indicating that all is well — and that the City Administrator’s office has ruled that the lapsed certification was immaterial, as the company was certified “at the time of the proposal” in May. 

That’s fascinating, too: Because, in April, the PUC itself issued an addendum on this matter stating that the LBE bonus would be applied at “each phase of the selection process” including “written proposal” and “oral interview” — and only certified LBEs would be eligible for such a bonus.

The PUC’s own timeline notes a shortlisting of firms “to continue to participate in oral interviews” coming on Sept. 3, with additional steps in the selection process continuing into October and a vote being made in December. 

Of note, MCK’s certification lapsed on Sept. 30.

This item is slated to be revisited during today’s PUC Commission meeting. It would figure to be a fascinating discussion. 

San Francisco street scene, Feb. 2011.

Why does this matter? For one thing, minus federal agents running through unlimited money and time to make cases on splashy but ultimately inconsequential crimes, it indicates the level of scrutiny necessary to scour arcane and routine — but lucrative — contracts. If there were envelopes of cash involved, nobody has found them yet. Same goes for lavish overseas junkets, some stone, or expensive bottles of booze. 

But contracts such as these are far more consequential and costly — and commonplace — than most anything yet recounted in the bevy of affidavits and charging documents fluttering around San Francisco. Lurid alleged crimes provide leverage for G-men and could lead to the demise of accused bad actors. But contracts such as these, writ large, form the basis of a working government. Or a non-working one. 

In short, it’s the difference between the players and the game. Players come and go. The game endures. 

“The San Francisco Public Utilities Commission is, as charismatic bank robber Willie Sutton would’ve put it, where the money is — and there are ever so many aspirational Willie Suttons in this town. “

And, in San Francisco, the game is that contracts tend to go to insular groups of connected operators — and contractors unwilling to play this game do not find themselves on the winning end of bids, come what may. If an equity program intended to aid small and local businesses is debased, the obvious losers are honest small and local businesses. But that’s not all. 

“The cost of corruption is not measured in the money allegedly exchanged between, say, Walter Wong and Harlan Kelly,” says construction management executive Ali Altaha. “It can be measured in: how much more is it costing taxpayers to build a project?” 

Separate and apart from the competency and honesty of those receiving the contracts, in an artificially constrained pool of bidders, the cost of doing business goes up. “They’ll name their price,” Altaha says. 

Altaha contracted with the PUC and city for a decade, but now says he can no longer abide a system in which turning a blind eye to corruption and cronyism is a prerequisite for participation. And he has been saying this publicly for a while — since well before the erstwhile PUC director was arrested and charged by the feds. 

Altaha has relocated to Southern California, but continues to bird-dog the San Francisco PUC. “I truly believe public money is public money,” he said. “Someone had to say enough is enough.” 

If that someone doesn’t have authority, however, it remains to be seen how much will change. It remains to be seen if shame alone will compel San Francisco to change its ways. 

That, and an envelope of cash, won’t buy you a chicken shack here. 

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Joe Eskenazi

Joe was born in San Francisco, raised in the Bay Area, and attended U.C. Berkeley. He never left. “Your humble narrator” was a writer and columnist for SF Weekly from 2007 to 2015, and a senior...

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15 Comments

  1. Hrm, where else in government are contracts let to a small set of pre-approved and connected operators?

    Starting from the top, the DPH, MTA, DPW, SFO, Rec and Park, MOH is where the bulk of capital contracts are let. City Planning, MOEWD and DBI are where the entitlements are let, economic rents sought, licenses to print money stamped out onto plans.

    The sites where public action generates dollar streams are where to look for corruption.

    We’re starting to get to the point where people are beginning to agree that cops can’t punish someone summarily for failing to kiss that cop’s ass. That’s what we’ve got here, city potentates who are rotating through as players setting the terms of being eligible to a contract as kissing the potentate’s ass. Increased public costs for no public benefit. It is time to put the hired help back into their box.

  2. Good article Joe.

    Still haven’t seen anyone from BOS or Mayor’s offices address the rolling back the Rechology contract or addressing/revoking the monopoly on their services via a Proposition for an Ammendment to the 1932 City Charter.

  3. The even bigger scam is expecting these CM consultants to provide good representation to the SFPUC and not give away the farm on change orders to contractors or stay on top of the project and not allow a lot of delay due to not processing paperwork. Hey, it’s not their money and PUC has a Commission that will simply keep throwing more money at projects without holding the incompetent party responsible. The amount of money thrown away by CM consultants to “maintain a good working relationship with the contractor” should be criminal. But, as always, City staff and the Commission will not dish out or accept any accountability.

    This should be reviewed. Oh yeah, review the scam of the Central Subway while you are at it. Where is the accountability for that fiasco? Oh yeah, the responsible person left and had no accountability. Too bad they can’t take away some of that SF Employee Retirement System money.

    The current Commission is a joke, made up of mainly of ex-SFPUC GM’s. Keep it in the family. I always wondered when Harlan hired a defense attorney, why didn’t the Commission question him and make a determination of whether or not he was fit to continue to serve? Oh yeah, keep it in the family as long as you can.

    Great article Joe!

  4. This is why the PUC should not be allowed to sell San Francisco property such as the Balboa Reservoir to developers like Avalon Bay. It doesn’t take much to buy a commission vote in San Francisco. All sales of San Francisco property should be voted on by registered San Francisco voters not a appointed board that a bag of cash can by a vote.

    1. Given the Commission sat by while the GM easily made fools of the ratepayers under their supervision the organization should disband. They are figureheads lead by a figurehead with figurehead underlings. The Acting GM was watching the farce unfold the whole time, as were the AGMs. Power, Water, Sewer how do you justify your jobs? That’s over a million in yearly compensation for getting fleeced by 4 managers folks. Make the managers wear a camera and microphone streaming live while they are on the clock. No edits.

  5. the major reason why the member countries of the warsaw pact, with the soviet union leading, failed:
    the unbendable dominance of the nomenklatura.
    look up the word and you will find the exact description of SF gov.

  6. See SF Weekly, Dec 16-22 2009. “The worst run big city in the US”. The Worst-Run Big City in the U.S.
    Spend more. Get less. We’re the city that knows how.
    Benjamin Wachs • 12/16/2009 4:00 am What was true then is worse now

  7. I have a small auto body shop in the city. Signed up and try to get some business to fix damage city cars or police cars. Didn’t even get one job. After asking around we found out the work is going to only few vender. Our source told us we have to know someone in the system to get work and have to give a kick back. Growing up in the city for so long we just got accustomed to this type of political environment, pay to play. SF political system has been grandfathered in.
    Once these supervisors/mayors get voted in, their own agenda comes first. No confidence.

  8. About 40% of contracts are waste. Waste in the form of too much bureaucracy, some just to baffle applicants and put them in their place. Some bureaucracy also hides things like Harlan Kelly ordering three restaurant rehab jobs (bringing them to code) be added onto a YBE contract with help from Wong and McDaniels in 2013. The contract used was so big either the contractor would ‘eat it’ as the cost of working for the City or maybe some kind of change order. However it is easily hidden the taxpayer is paying.

    Another kind of waste is the sub-contractor 10-20% kick back for work-arounds with DPW or some other ‘subcontractor’ taking a 10% processing fee.

    To try to explain: Health Benefits – The 1998 BOS Equal Benefits Ordinance, also known as Chapter 12B of the SF Code, requires entities that enter into contracts or property contracts with the City of San Francisco to provide the same benefits to employees with domestic partners and employees with spouses, and agree to not discriminate against their own employees, employees of the City, members of the public and others who are members of protected classes.

    Lots of LBEs and small contractors cannot manage the bureaucracy 12B demands so they get a sub-contractor that can to pose as the contractor and fill the requirement. In some cases this is managed by DPW and they shuffle some papers and make it all look kosher. For a 10% cut.
    What is even worse is that both the City and State later legalized same sex marriage by 2006 AND later, the Federal Affordable Care Act made the 1998 BOS Code redundant. Same sex couple can marry to get the benefits and ACA also helps with health care. If a couple doesn’t want to marry to get the benefits I suppose 12B is still needed but why should the City Taxpayers have more of a commitment than such a couple? Yet, because all the lucrative kick backs the work-arounds and fake subcontractors still are somehow needed and required.

    All that is hard to follow. And worth a better explanation. Anyone who knows the system better than me willing to take a try?

  9. I had the house that was living in and part owner of fraudulently taken from us and over 5 years has passed and we need help exposing the people involved including a San Francisco receiver and corrupt lawyers etc the house is still in my name and want my property back ! I filed bankruptcy to protect my property and they violated that ! Where is the justice?

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