Alas. Los Angeles has bested San Francisco not only in baseball, but also in municipal corruption.
Despite San Francisco’s promising start — the January, 2020, federal arrest and charging of ex-Public Works boss Mohammed Nuru — Los Angeles has caught and passed us.
The City of Angels now features three federally indicted and/or convicted elected officials: Former L.A. City Councilman Mitch Englander; Former L.A. City Councilman Jose Huizar; and suspended L.A. City Councilman Mark Ridley-Thomas.
San Francisco, to date, has zero indicted or convicted elected officials. They’re shutting us out.
Considering Nuru’s close relationship with so many elected officials, and considering he was arrested nearly two years ago, that zero looms large. So the feds’ Oct. 19 announcement that they’d arrested longtime city real estate broker, uber-connected politic and fund-raiser Victor Makras, and charged him and ex-PUC boss Harlan Kelly with orchestrating a bank fraud conspiracy, was fascinating.
Makras doesn’t fit the pattern of San Francisco’s ongoing corruption probes. To date, a number of dodgy department heads have been indicted and/or drummed out of public life: Think Nuru, Kelly, Tom Hui. And a handful of businessmen, the dodgy sort who depended on those department heads, and needed to ply them with meals and gifts, have been swept up as well.
Well, that’s not Makras: “He’s the guy in every room for every mayor,” says one longstanding city politico. Adds another: “Victor is tied into the inner sanctums of San Francisco politics. Much like “Chinatown” was about water, in San Francisco it’s about real estate.”
Let the record show that Makras, who has sold homes to much of the so-called “City Family,” and whose most recent Statement of Economic Interest was 40 pages long and listed ownership of more than a dozen properties, knows from real estate.
He’s the elegant investor, the dead ringer for Stanley Tucci, depicted with his elegant wife in magazine photoshoots in his elegant Marina Boulevard home; he’s known in the city’s power circles for doling out dollars and sage advice — and, if the feds’ detailed allegations are even remotely true, something a bit more nefarious than that.
It’s not difficult to explain the federal allegations regarding the “corrupt partnership” between Harlan Kelly and Walter Wong, which was re-upped in last week’s charging documents. Wong purportedly bribed Kelly and did work on his house and gave him nice things and took him nice places in return for insider information on city contracts. That’s not hard to grasp.
The bank fraud charges facing Kelly and Makras are hard to grasp.They may perplex those of us who are simultaneously too smart and too dumb to ever be federally charged for masterminding an elaborate fraud scheme.
It all makes you want to reach for a glass of the Duckhorn Cabernet that Harlan Kelly texted Makras he’d buy with the remaining few thousand bucks of purportedly ill-gotten money sitting in his real estate trust account.
Anyhow, here, in a nutshell, are the allegations: Makras is accused of, essentially, teaching Kelly how to do bank fraud. He is accused of overstating the amount of money Kelly and his wife, former City Administrator Naomi Kelly, owed to Makras Investors — while, simultaneously, concealing the large amounts of money the Kellys owed to many others.
As a result of inflating the amount owed to Makras Investors, the Kellys received hundreds of thousands of additional dollars at an artificially low rate, and Makras and the Kellys could then turn around and disseminate that money to cover other debts, such as a $90,000 construction tab for Wong or $70,000 in credit card debt for the Kellys.
But Makras also made out from this alleged scheme: His firm’s $715,000 loan to the Kellys was expediently paid off, as was his $70,000 personal loan to the couple.
The potential prison term for bank fraud, incidentally, is 30 years. Makras, the guy in every room for every mayor, is 63. So, there’s the opportunity for leverage here. And it needn’t be applied elegantly.
Clearly, the feds don’t need Makras to bring down Harlan Kelly. So there is the possibility they may want to know more: Just what was going on behind all those closed doors? Or in the corner of all those cocktail parties? Or during all those jaunts to Paris Fashion Week?
Perhaps the feds have nabbed the San Francisco City Family’s answer to a mafia accountant, inducing a good number of current or former elected officials to sweat bullets.
Or perhaps it’s nothing like that at all. Perhaps the Oct. 19 announcement was the worst the feds could muster. Perhaps the feds couldn’t get what they wanted from Makras so they decided to muddy him up by adding “accused federal criminal” to his resume. Perhaps he’ll lawyer up with the best counsel money can buy, as is his wont, and the case will be resolved with an outcome light years from a long prison term.
Our current or former elected officials will not sweat into their nice clothes after all.
So, the arrest and charging of Makras really does feel like an inflection point. This could undo San Francisco’s political class, or undo the corruption probe preying upon it. Only time will tell which one it’s going to be.
It’s hard to know how big a deal this all is without understanding the genesis of these charges or the prosecutors’ aims.
Was Makras simply a byproduct of the ongoing investigation into Kelly? Was he simply caught in the net, so to speak, as the feds scoured Kelly’s doings? If so, perhaps the feds just figured they nabbed a big-time fund-raiser and man about town and decided to throw him into the mix. If they were going to expand the charges based on Kelly’s alleged bank fraud, they might as well toss Makras in there, too.
On the other hand, perhaps the feds are hoping to lean on someone who can unravel the cartel that runs this city. In theory, that could be Makras; he knows every star in the city’s constellation of politicos, and the feds have amassed a small trove of written communiques and financial transactions regarding his purported fraud scheme.
In practice, however, this may be a dicey play. Allegations such as these are something of the raison d’etre for high-powered white-collar crime defense attorneys, and Makras can foot the bill, or sell or borrow against his many properties to do so; he can afford to go a few rounds with Uncle Sam.
As is so often the case in San Francisco, corruption-related expenses can all be written off as a cost of doing business.
As for the humiliation of being federally charged — that card has been played. If the feds were hoping that alone would induce cooperation, it didn’t. And Nuru and Kelly remain uncooperative as well.
So will Makras’s arrest lead San Francisco’s ongoing corruption probe to a cataclysmic end? Or just a dead end?
If you’re wagering, the latter seems more likely at the moment. Inertia is always your best bet in San Francisco.
That’s because the allegations and convictions for hard corruption that, notably, required federal intervention are, themselves, a byproduct of San Francisco’s incestuous political culture. Makras, in many ways, embodies that. But that’s no crime. Nor is going to parties and laughing and posing alongside nearly every politician San Francisco has produced over the past 35 years for a shot by a Drew Alitzer photographer; if that was a crime, Makras would be Public Enemy No. 1.
But it’s not and he’s not.
But, yes, that was Victor Makras posing alongside every politician in the city at a political fund-raiser. In fact, it was at his house. There’s Ed Lee, who’d be dead in not quite 72 hours, tossing the city into an uncertain place that has, thus far, resisted introspection.
And there’s Harlan Kelly, of course. Did Makras break out some of the primo wines from his collection? We’re betting he did.
But that’s all strictly legal, even if federal allegations indicate that San Francisco’s clubbiness and workaday casual corruption leads to serious crime, as surely as smoking leads to cancer.
That’s San Francisco’s entrenched culture; the occasional FBI raid may, too, be chalked up as a cost of doing business. Just be sure to grab the Duckhorn cab when you run out the back door.