SAN FRANCISCO – Charges were filed today in a criminal complaint alleging that Alan Varela and Bill Gilmartin, the president and vice president, respectively, of a Bay Area civil engineering and construction firm, bribed Mohammed Nuru, formerly San Francisco’s Director of Public Works, announced United States Attorney David L. Anderson, and Siddhartha Patel, Assistant Special Agent in Charge of the Federal Bureau of Investigation.  Additional facts regarding the investigation and charges can be found here: https://youtu.be/J1EJRrM0k3g

According to an affidavit filed in connection with the complaint, Varela and Gilmartin provided gifts and benefits to Nuru since at least as early as 2013, including, among other things, $20,000 in meals and a tractor worth $40,000 for Nuru to use at his personal vacation home.  In exchange for these benefits, Nuru allegedly provided Varela and Gilmartin with a steady stream of illegal inside information about a lucrative San Francisco public contract to build and operate an asphalt recycling plant that Varela and Gilmartin sought.

Additional documents filed today in court indicate that two other contractors previously charged in the ongoing public corruption probe intend to plead guilty. In one case, a filed plea agreement indicates that Balmore Hernandez, the CEO of a local construction company, will plead guilty and has agreed to cooperate in the government’s investigation.  In the other case, local contractor Florence Kong will also plead guilty, and will admit that she bribed Nuru with, among other things, a Rolex watch worth more than $35,000, in return for which Nuru corruptly helped Kong obtain San Francisco public contracts, including work at her recycling facility.  Kong will also admit lying to the FBI about her interactions with Nuru.  Kong’s guilty plea is not a cooperation plea.

Varela and Gilmartin are the seventh and eighth defendants to be charged as part of the graft probe.  Hernandez and Kong are the third and fourth defendants to plead guilty.  Charges were previously filed against Nuru and local restaurateur Nick Bovis on January 28, 2020.  In June of this year, charges were filed against Hernandez and Kong, as well as against Sandra Zuniga, the Mayor’s Fix-It Director.  Charges were also filed in June against Walter Wong, a local contractor and permit expediter.  Hernandez joins Wong and Bovis in agreeing to cooperate with the government’s investigation.

“Public works contracts in San Francisco are supposed to be awarded on a merit system in San Francisco for the benefit of the residents and taxpayers of San Francisco,” said U.S. Attorney Anderson.  “The complaint filed today alleges that this merit system was undermined with insider information and favorable treatment.  Instead of awarding public works contracts on the basis of merit, the defendants allegedly sought to secure significant profits on the basis of bribes and backroom deals.”

“While our investigation is ongoing, I hope the resolutions in the Hernandez and Kong cases will help restore confidence in our city governments for Bay Area residents,” said assistant SAC Patel.  “San Francisco City Hall can and will function without the influence of the corruption we have seen unravel in this case.”

Varela and Gilmartin face a maximum statutory penalty of up to 10 years in prison, as well as fines that could go as high as $250,000 or twice the gross gain or loss from the alleged bribery scheme.  In addition, the court may order additional terms of supervised release and restitution.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553

The prosecution is being handled by the Office of the U.S. Attorney, Northern District of California’s new Corporate Fraud Strike Force and is the result of an investigation by the FBI.

 

SAN FRANCISCO – Charges were unsealed today alleging that Walter Wing Lok Wong conspired for over 15 years to defraud the public of their right to the honest services of San Francisco city officials, including Mohammed Nuru, the former head of the San Francisco Department of Public Works, announced United States Attorney David L. Anderson, John F. Bennett, Special Agent in Charge of the Federal Bureau of Investigation, and Kareem Carter, IRS Criminal Investigation Special Agent in Charge.

According to the information, Wong, 70, of San Francisco, is alleged to have conspired with NURU and other unnamed City officials since as early as 2004 to defraud the public through a scheme involving bribery, kickbacks, and the concealment of material information.  A second count in the information alleges that Wong also conspired with Nuru and others to engage in money laundering, to disguise and conceal the proceeds of fraud. 

A document filed in court along with the information indicates that Wong intends to change his plea to guilty on both counts as early as July 6.  As part of that guilty plea, according to the terms of a plea agreement filed on the docket, Wong will provide information, documents, and testimony to the ongoing federal investigation into corruption in San Francisco city government, in exchange for the possibility of reducing his sentence.  The conduct underlying the crimes to which Wong was charged were submitted to the court in a separate “Exhibit A” to the plea agreement that was filed under seal and thus is not available to the public.  However, government officials have confirmed that Wong is the person previously described as “Contractor 2” in the 75-page complaint affidavit filed earlier this year against Nuru. 

Wong is the sixth defendant to be charged as part of the graft probe, and the second to plead guilty.  Charges were previously filed against Nuru and local restaurateur Nick Bovis on January 28, 2020.  Earlier this month, additional charges were filed against Sandra Zuniga, the Mayor’s Fix-It Director, and contractors Balmore Hernandez and Florence Kong.  Bovis has since pleaded guilty and agreed to cooperate with the government. 

“The charged conspiracy that we announce today is breathtaking in its duration and scope, alleging more than a decade of fraud and money laundering involving one of San Francisco’s highest ranking public employees, one of its most well-known permit expediters, and other city officials,” said U.S. Attorney Anderson.  He added, “As this investigation continues, the breadth and depth of the identified misconduct is widening.  To everyone with a piece of public corruption in San Francisco, please understand that here in federal court we will distinguish sharply between those who cooperate and those who do not.  If you love San Francisco, and regret your misconduct, you still have an opportunity to do the right thing.  Run, don’t walk, to the FBI, before it is too late for you to cooperate.” 

“Today’s announcement is part of a complex, ongoing FBI investigation into public corruption in San Francisco city government,” said FBI’s Special Agent in Charge John F. Bennett. “This type of unscrupulous behavior erodes trust in our municipal departments and will not be tolerated.  The FBI is committed to investigating any individual or company involved and hold them accountable.”

“Pay-to-play schemes destroy the public’s confidence in government,” said Kareem Carter, Special Agent in Charge IRS Criminal Investigation.   “And as we follow the money we are discovering all the players in this scheme, and how this game was played.  IRS CI will continue to work with our law enforcement partners to ensure that any individual or company involved in this scheme shall be held accountable for their actions and not go unpunished.”

Wong faces a maximum statutory penalty of up to 20 years in prison on each count, as well as fines that could go as high as $500,000 or twice the amount of funds involved in the money laundering conspiracy.  In addition, the court may order additional terms of supervised release and restitution.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553

The prosecution is being handled by the Office of the U.S. Attorney, Northern District of California’s new Corporate Fraud Strike Force and is the result of an investigation by the FBI.

SAN FRANCISCO – Three more people have been charged with crimes related to an investigation into corruption in San Francisco’s City Hall, announced United States Attorney David L. Anderson; Federal Bureau of Investigation Special Agent in Charge John F. Bennett of the San Francisco Division; and Internal Revenue Service, Criminal Investigation, Special Agent in Charge Kareem Carter.  The three are San Francisco’s Fix-It Director and Director of the Mayor’s Office of Neighborhood Services, Sandra Zuniga; longtime employee of San Francisco’s Department of Public Works and now Chief Executive Officer and Vice President of San Francisco-based construction engineering firm AzulWorks, Inc., Balmore Hernandez; and San Francisco-based construction company owner Florence Kong.

The criminal charges all relate to the arrest and charging in January of San Francisco’s former Director of the Department of Public Works (DPW), Mohammed Nuru, on public corruption charges.  Nuru was charged by criminal complaint for an alleged scheme to bribe a San Francisco Airport Commissioner.  The complaint against Nuru also alleged he engaged in several additional schemes, including obtaining free and discounted labor and construction equipment from contractors to help him build a personal vacation home in Stonyford, Calif., while those contractors were also engaging in business with the City.  The three complaints unsealed today provide numerous details of the charges leveled in the complaint against Nuru as well as a description of additional crimes that allegedly were committed.

“The federal investigation into City Hall corruption has not been sidetracked by Covid-19 or other recent traumatic events,” said U.S. Attorney Anderson.  “Today’s criminal complaints will not be the last.  To everyone with a piece of this corruption, again I urge you to help make things right for San Francisco.  Run, don’t walk to the FBI, before it is too late for you to cooperate.” 

The complaint against Zuniga, 44, of South San Francisco, alleges that she both knew about and benefitted from Nuru’s schemes.  In addition, the complaint alleges Zuniga conspired for years with Nuru to launder the proceeds of his honest services wire fraud. 

According to the complaint against Zuniga, she was Nuru’s longtime romantic partner and he described to her some of the illegal actions he took in his official position.  For example, Nuru allegedly described to Zuniga the actions he took to benefit a billionaire in China who was developing a large multi-million dollar mixed-use project in San Francisco, in exchange for travel and lodging, high-end liquor, and other gifts and benefits. 

Further, the complaint against Zuniga charges that she laundered proceeds from Nuru’s schemes in a variety of transactions over a period of several years.  The complaint points out that from March 2014 to January 2020, Zuniga made over $135,000 in cash deposits, on top of her City of San Francisco paycheck.  She also deposited over $8,000 in checks from associates of Nuru.  During the same period, she then engaged in a variety of transactions that benefitted Nuru.  For example, for more than three years, Zuniga paid the monthly mortgage on a portion of Nuru’s Colusa County vacation home.  She allegedly did so by depositing approximately $1,000 in cash into her checking account almost every month, and then immediately writing a check for $1,000 to Nuru’s lender. 

In another example of alleged money laundering, the complaint describes how Zuniga received a $5,000 check in September 2018 from a contractor who had extensive business with DPW and the City of San Francisco, and then used the funds to benefit Nuru.  According to the complaint, Zuniga deposited the contractor’s check into her personal checking account and then executed a series of transactions through multiple banks, which the complaint alleges was for the purpose of concealing the source and nature of the payment.  In one set of transactions, Zuniga allegedly paid a $2,400 construction bill on Nuru’s vacation home by writing a $2,500 check to herself, depositing it into another bank account, and then sending a check from that account to the contractor as soon as Nuru sent her the bill.  Ultimately, according to the complaint, Zuniga sent an email to Nuru reporting to him how she had used the contractor’s $5,000 payment. 

Further, the complaint against Zuniga describes how she benefitted from some of Nuru’s schemes.  For example, Zuniga traveled with Nuru on a lavish two-week trip to South America in fall 2018, complete with business class flights and a stay at the Ritz-Carlton in Santiago, Chile, all paid for, or heavily subsidized by, a contractor doing business with the City.    

The criminal complaint filed against Hernandez, 55, of Burlingame, describes how Hernandez used his relationship with Nuru to obtain advantages with the City for his construction engineering firm.  Specifically, the complaint alleges that Hernandez established a continuing course of conduct in which tens of thousands of dollars in labor and materials were provided to Nuru in exchange for his assistance with public contracts and City approvals.  In addition, the complaint alleges Hernandez sought Nuru’s assistance to obtain a long term supply contract and lease agreement with the City to operate an asphalt plant on land owned by the Port of San Francisco. 

According to the complaint against Hernandez, Nuru owned two adjacent 10-acre parcels of land in Stonyford, Calif., on which Hernandez built a home and made other improvements.  Hernandez and Nuru referred to the property as “the ranch.”  Between late 2016 and the end of 2018, Hernandez allegedly supplied in excess of $250,000 in labor and materials to help Nuru build the home and make related improvements on the ranch.  For example, the complaint describes how Hernandez supplied Nuru with more than $50,000 worth of tile and stone for the vacation home and then asked Nuru for help saving AzulWorks’ bid for a multi-million dollar project for which it had submitted an unqualified proposal.  AzulWorks ultimately won that contract and, based on publicly available data, received more than $1.9 million from the City in connection with the project.  The complaint also describes how Hernandez sought help from Nuru so that he could appeal an adverse DPW order preventing Hernandez’s company from removing trees at a job site on Van Ness Avenue. 

With respect to Kong, 62, of Hillsborough, the complaint filed against her charges that she lied to FBI investigators during the probe of Nuru’s schemes.  Kong owns two companies that do business with San Francisco: a construction company called Kwan Wo Ironworks and a construction debris recycling company called SFR Recovery Inc.  The complaint describes recorded calls in which Kong sought to obtain business for her companies from DPW.  In addition, the complaint alleges that Kong provided Nuru with cash, a Rolex watch worth more than $40,000, expensive meals, and the installation of a gate for his vacation home.  Nevertheless, according to the complaint, Kong denied ever discussing business with Nuru.  Kong also claimed that Nuru never helped her to obtain contracts with the City; this despite the fact that intercepted calls demonstrate that Nuru helped her with construction contracts for city facilities. 

The charges contained in the criminal complaints against Zuniga, Hernandez, and Kong are mere allegations.  As in any criminal case, each defendant is presumed innocent unless and until proven guilty in a court of law.

Zuniga is charged with one count of conspiracy to launder money, in violation of 18 U.S.C. § 1956(h).  If convicted, she faces a maximum statutory penalty of 20 years in prison, a fine of $500,000 or twice the value of the property involved in the transactions, or both.  Hernandez is charged with bribery, in violation of 18 U.S.C. § 666(a)(2).  If convicted, the maximum statutory penalty is 10 years in prison and a fine of $250,000.  Kong is charged with making false statements in violation of 18 U.S.C. § 1001(a)(2).  If convicted, the maximum statutory penalty is five years in prison and a fine of $250,000.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553.

Kong and Hernandez made their initial appearances in federal court today before U.S. Magistrate Judge Laurel Beeler, and are expected to make another appearance before the magistrate judge on June 15th for further proceedings to finalize the size and type of bond the magistrate judge will require to secure their release. Zuniga is scheduled to make her initial appearance before Magistrate Judge Beeler on June 10, 2020.

The case is being prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney’s Office.  The case is being investigated by the FBI and IRS Criminal Investigation.