Public Corruption Scandal

San Francisco Public Utilities Commission GM Harlan Kelly Charged With Fraud

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In the latest twist in the city’s public corruption scandal, San Francisco Public Utilities Commission General Manager Harlan Kelly was charged by the federal government Monday with wire fraud for allegedly taking bribes and free trips from an implicated local businessman who is cooperating with federal officials.

“I live in San Francisco, I’m a ratepayer and I really care about how we spend our money,” Harlan Kelly said back in 2012, the same year he became manager of the SFPUC.

But in a statement Monday, Northern California U.S. Attorney David Anderson said Kelly, 58, was “engaged in a long-running bribery scheme and corrupt partnership” with Walter Wong, a notorious city permit expediter who is already charged in the corruption probe and is cooperating with investigators.

Anderson called the allegations “extremely troubling,” saying “bribery scams undermine our faith in City government. Our investigation into City Hall corruption will continue.”

A total of ten individuals, including former Public Works Director Mohammed Nuru, have been implicated in the scandal.

In a written statement released through his attorney, Kelly said he was innocent of the charges but said would be stepping down from his position as General Manager.

“I am not guilty of these allegations. I have devoted my entire career to public service. As many of my colleagues at the San Francisco Public Utilities Commission are aware, I had intended to retire in the next 18 months. Unfortunately, I need to leave my position now in order to defend myself, my legacy and my family. It is painful for me to end a 35-year career as a result of false allegations, but it is simply not possible for me to do my job to the best of my ability while also defending myself. I know that stepping aside now is in the best interests of the City, the SFPUC, and my family.”

Mayor London Breed released a statement Monday stating she accepted Kelly’s resignation.

“The allegations detailed in the Federal Investigation conducted by the US Attorney’s Office are disturbing and unacceptable for anyone serving in our government, let alone the leader of one of our largest departments,” the statement said in part.

Breed said SFPUC Deputy General Manager Michael Carlin would replace Kelly in the interim as the city searched for his replacement.

According to the complaint, Kelly, who became SFPUC general manager in 2012, relied on coded text messages to communicate with Wong, who allegedly paid Kelly cash, meals, travel and even a personal car service in exchange for insider information on bidding contracts and other favors.

“This is corruption 101, bribery 101,” San Francisco Supervisor Matt Haney said. “This is the type of behavior that should never be acceptable in government.”

The complaint alleges that Wong paid for Kelly and his family – including, according to the criminal complaint, his wife, City Administrator Naomi Kelly – to travel to Hong Kong and China in March of 2016. Wong paid for meals, hotels, and jewelry purchases, according to the complaint.

“These are the most powerful people in city government in San Francisco that are not elected,” Haney said. “They control literally billions of dollars in public spending and public resources.”

The complaint alleges that while Kelly’s airfare was purchased with a credit card, Wong deposited a like amount of cash into Kelly’s bank account. Kelly allegedly acknowledged the gifts he received in China in an encrypted message app, by writing: “Thank you for the best family vacation ever! A little something for everyone!”

The complaint alleges that the trip occurred as Wong sought a multi-million dollar contract with the SFPUC to provide city streetlights with LED technology. Wong ran the bidder, Green Source Trading, LLC, with his son, but did not get the contract.

After the contract bidding ended, however, Wong allegedly did discounted repairs on Kelly’s home in the Inner Sunset.

Wong has already admitted fraud and money laundering in a deal with federal prosecutors. Prosecutors say Wong provided them evidence to back up his claims of having provided cash, discounted labor and gifts with the hope that Kelly would help him get contracts.

Wong’s attorney did not return a call from NBC Bay Area Monday.

Prosecutors say Kelly provided Wong insider documents about the LED contract, thus providing him with an unfair advantage. He also allegedly engineered a delay to help Wong prepare his bid, but in the end, Wong withdrew his bid after the contract provisions changed.

Brian Getz, Kelly’s attorney, said federal agents searched his client’s home on Monday morning but found nothing incriminating.

“That’s because Harlan Kelly has never done anything untoward in his entire professional life,” Getz said. “He has been a dutiful and loyal public servant. No jury is going to convict him based on this evidence.’’

He said the evidence is simply “inconsistent with what Walter Wong has said.”

Kelly faces a maximum 20 year term in federal prison if convicted. He is expected to appear before a federal magistrate on Dec. 8.

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