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Bribery and Fraud: Two Contractors Plead Guilty in SF Corruption Case

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

Two city contractors have pleaded guilty in an ongoing San Francisco government corruption scandal.

Balmore Hernandez pleaded guilty to one count of conspiring to commit fraud, and Florence Kong pleaded guilty to one count of bribery and one count of making false statements for lying to the FBI, according to plea agreements filed in federal court Thursday.

Both contractors committed those acts in connection with former San Francisco Public Works Director Mohammed Nuru, who was arrested by the FBI in January on corruption charges.

Two additional contractors, Alan Varela and William Gilmartin III have also been indicted by the FBI, alleging they also conspired with Hernandez to bribe Nuru.

Hernandez, CEO of contracting company AzulWorks, Inc., allegedly also performed more than $250,000 worth of work, labor and materials to build a vacation home on the then-Public Works director's ranch in Colusa County. The gifts allegedly helped secure a multimillion-dollar contract for Hernandez to operate an asphalt plant, according to the federal charging documents released in June.

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The U.S. Attorney's Office filed the specifics of the crimes Hernandez admitted under seal. Hernandez faces a maximum sentence of 20 years and a $250,000 fine. However, should he cooperate "fully and truthfully" with the ongoing corruption investigation, U.S. attorneys may seek a lesser sentence for Hernandez, they wrote.

Kong bribed Nuru with a Rolex watch worth roughly $36,000 that she bought in Hong Kong, and also helped install a gate on his vacation home, according to charging documents, which also detail intercepted phone calls demonstrating Nuru helped her obtain construction contracts for city facilities.

Kong gave Nuru the watch "as a reward for Nuru's influence" directing contracts from Public Works to dispose of construction debris at her recycling business, SFR Recovery, Inc., according to the plea agreement filed Thursday. Unlike Hernandez, Kong's plea agreement includes details of the crimes she admitted.

The bribery charge against Kong carries a maximum 10-year sentence and a $250,000 fine. A separate charge for lying to the FBI — she told them she had no communications with Nuru about her city contract — carries a maximum sentence of five years and a $250,000 fine.

Kong will face a sentence of "no more than" 18 months if she takes full responsibility for her crimes, cooperates with the investigation, pays full restitution for her ill-gotten gains, and agrees to not contact or intimidate victims or witnesses in the case, according to the plea agreement.

The filing also raises the possibility of deportation from the United States for Kong's crimes.

Above, U.S. Attorney David Anderson discusses the new charges and Thursday's guilty pleas.

In pleading guilty, Kong signed the following statement: "I believed Nuru to be one of the most powerful public officials in the city, and I believed that he wielded tremendous power and influence over city business, permitting and other city government approvals."

Kong initially lied to the FBI, according to court filings, telling them he did not help her with contracts, did not extend any contract application deadlines on her behalf, that she never gave him money or goods, and that she and Nuru did not talk about the debris contracts.

Since Nuru was first arrested, the unfolding San Francisco corruption scandal has expanded, touching on multiple departments throughout city government, including the Department of Building Inspection and the San Francisco Public Utilities Commission.

“The federal investigation into City Hall corruption has not been sidetracked by Covid-19 or other recent traumatic events,” U.S. Attorney David Anderson said in a June statement announcing charges against Hernandez and Kong. “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.”

Nuru was arrested by the FBI in January on public fraud charges. Lefty O'Doul's restaurant owner Nick Bovis was also arrested in January on related charges.

New indictments also revealed Thursday accuse Varela, founder of construction firm ProVen Management, and Gilmartin, the firm's vice president, of working with Hernandez to obtain a contract through Public Works to operate an asphalt plant on land owned by the Port of San Francisco.

The contractors allegedly bribed Nuru with a tractor worth $40,000 for preferential treatment in obtaining city contracts, according to the U.S. Attorney's Office. Mission Local first reported the alleged bribery. Hernandez also participated in the delivery of the tractor.

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Gilmartin allegedly paid for "extravagant dinners" in excess of $20,000 for Nuru and Hernandez, according to court filings. Hernandez was the "primary contact" between Valera, Gilmartin and Nuru.

Gilmartin even expressed appreciation to Hernandez for his efforts to make a deal with Nuru — in writing.

"I have used you to help negotiate this deal because of your ability to understand and present our proposal without making the other side nervous. For this you are entitled to ownership," Gilmartin wrote in an email.

Hernandez told the FBI agent he's known Nuru for 20 years, and that they talk several times a month. The scheme dates back to 2013, according to court filings.

Since Nuru's arrest, a cascade of subpoenas have been filed by City Attorney Dennis Herrera and the U.S. Attorney's Office in a widening investigation of corruption in San Francisco government.

The Department of Building Inspection's former director, Tom Hui, stepped down from his position in March after it was revealed he accepted gifts from a housing developer, among other accusations.

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City officials have tried to make forward-facing changes to prevent further corruption, including the City Controller's Office, Supervisor Aaron Peskin and Supervisor Matt Haney, who are reworking city ethics laws to prevent city officials and contractors from gaming the system.

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