'Bad Policies and Practices': Report Highlights Weak SF Laws That Enable Public Corruption

Former Public Works Director Mohammed Nuru, who was arrested by the FBI in January on public corruption charges. (Beth LaBerge/KQED)

The possibility for corruption is rife in San Francisco's Public Works and homelessness contract approval processes.

But, there's a fix.

That's according to a new report released Monday by the San Francisco City Controller's Office, which analyzed city laws and processes following the FBI's January arrest of former Public Works Director Mohammed Nuru on public corruption charges.

Nuru was charged in connection with a series of alleged schemes involving public agency contracts, including an attempt to bribe a San Francisco International Airport commissioner to obtain a favorable contract.

The FBI investigation has also widened, encompassing former director of the Mayor's Office of Neighborhood Services Sandra Zuniga and Balmore Hernandez, CEO of engineering firm Azul Works, Inc which holds large contracts with the city.

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The controller's report offers suggestions for closing the legal loopholes that allowed Nuru, and others, to allegedly award city contracts to close allies.

"Our job is to ensure the transparency, accountability, and ethical behavior that San Franciscans are owed when it comes to the delivery of city services and the use of their tax dollars," City Controller Ben Rosenfield said in a statement. "In simple terms, the Controller's Office is seeking to rectify bad policies and practices that undermine those goals."

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The report reveals sweeping vulnerabilities in city accountability provisions, and recommends a spate of changes, including stricter reporting requirements for financial gifts, greater transparency in how city contractors are hired and more competitive bidding processes.

Perhaps most glaring among the report's findings is that Nuru essentially had no direct oversight for spending millions of dollars in city money.

Many city departments have an oversight board, usually appointed by the mayor or board of supervisors, responsible for scrutinizing and approving often lucrative contracts.

But Public Works, the department Nuru led, which was once overseen by the mayor's office, has for years monitored itself.

"The mayor should reverse" that delegation, the report recommends.

Using that power, Nuru awarded roughly $25 million in homelessness contracts. Of those, the report found roughly $10 million were awarded "through no discernable selection process and are at the greatest risk of fraud or abuse in the award process."

Two of the contracts in that $10 million pool, the controller's office noted, were awarded by Nuru to Walter Wong, a permit-expediter who was arrested by the FBI just last week and charged with two counts of conspiracy to commit fraud and conspiracy to engage in money laundering, according to the U.S. Attorney's Office.

A $171,000 portable toilet contract also went to Nick Bovis, the Lefty O'Doul's restauranteur who was indicted alongside Nuru in January. The city canceled that contract, according to the report.

The report also recommends greater transparency for behest payments, in which contractors donate to nonprofits at the behest of a city official. Currently, only the board of supervisors and particular city officials are required to reveal such payments. But the report shows department heads and other staffers should reveal all donations they request from contractors, even if those donations are directed to third-party charities, as those payments can be used as workarounds for bribes.

On Monday, in response to the controller's report, Mayor London Breed announced a set of immediate fixes and legislation to address some of the many shortcomings identified.

Among those changes, Breed pledged to rescind the unusual authority of the Public Works director to award contracts with little oversight.

"I know these are the first in a series of recommendations, and we need to continue to identify problematic issues that erode public trust across our city," Breed said in a statement.

The mayor has made an effort to clean house in the wake of the Nuru scandal, one she became tied to in February after publicly admitting she had accepted $5,600 in car repairs from Nuru in 2019, a gift she did not report despite a legal requirement to do so.

Supervisor Matt Haney is also seeking fixes based on the controller's report, including limiting "insider contracting" — in which pre-qualified contractors do not have to competitively bid for new contracts — and revisiting the city's ethics code rule that bars officials from accepting gifts from contractors, but includes an exemption for friends.

"The controller's analysis makes it clear that we need sweeping structural reform in City Hall," Haney said in a statement. "We've let years of corruption waste taxpayer dollars, as city hall bureaucrats have awarded millions of dollars in contracts to their friends with no oversight. And in too many cases, they've gotten kickbacks for themselves or their friends under the table."