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Muni cuts ties with contractor who pleaded guilty to bid-rigging, federal fraud

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Derf Butler, president of Butler Enterprise Group, stands outside the Phillip Burton Federal Building in San Francisco before his arraignment on April 17, 2017. (Jessica Christian/S.F. Examiner)

San Francisco’s transportation agency is severing ties with Derf Butler, a city contractor who pleaded guilty to bid-rigging and federal fraud last week.

Butler, named in a federal indictment as the owner and president of Butler Enterprise Group, was also named in the federal trial of Raymond “Shrimp Boy” Chow when court documents revealed transcripts of FBI wiretaps where a colleague claimed Butler bribed a San Francisco official.

The San Francisco Municipal Transportation Agency told the San Francisco Examiner Monday it has terminated its outstanding contracts with Butler Enterprise Group following Butler’s guilty plea in U.S. District Court last week. The company was awarded two $1.6 million public outreach contracts by the SFMTA in August last year, even after Butler himself was federally indicted in April 2017 for an alleged bid-rigging scheme to defraud the U.S. Department of Energy. The company also previously was a subcontractor on the Central Subway project.

Since 2012 Butler Enterprise Group has won contracts with the San Francisco Public Utilities Commission, Port of San Francisco and the SFMTA and received payments from city agencies totaling more than $240,000, according to the City Controller’s Office.

SEE RELATED: SF awards $3.2M in contracts to company connected to alleged bid-rigging, federal indictment

Butler Enterprise Group assists small business enterprises, including minority-owned businesses, in obtaining construction and other contracts with public entities, according to a federal indictment.

Federal prosecutors said Butler’s “illegal scheme” to ensure one particular developer earned a contract to renovate a Dept. of Energy building took place from at least July 17, 2013, through at least Jan. 30, 2014.

An undercover FBI source known as “Individual A” represented himself to Butler and three defendants as a developer who was “colluding with a [Department of Energy] contracting officer responsible for reviewing contracting bids,” according to the indictment. Butler and the other defendants allegedly agreed to submit fraudulent bids to the Department of Energy to renovate a building at the Lawrence Berkeley National Laboratory “knowing they were not genuine bids” for amounts higher than Individual A’s bid, “for the sole purpose of artificially ensuring” Individual A’s low bid was won. Butler and the other defendants would then have been awarded other contracting work and money from Individual A.

Butler pleaded guilty last Friday to conspiracy to defraud the United States in connection with a federal construction contract and making false statements to federal investigators, United States Attorney’s Office announced last week.

U.S. Judge Charles R. Breyer scheduled Butler’s sentencing for January 23, 2019. Butler faces a maximum penalty of five years imprisonment, a three-year term of supervised release and a $250,000 fine for the conspiracy charge, according to the U.S. Attorneys Office. Butler also faces a maximum penalty of ten years imprisonment, a three-year term of supervised release, and a $250,000 fine for the false statement count.

SFMTA sent a letter severing connections with Butler Enterprise Group to Anita Butler, who the agency addressed as its current CEO.

In 2017 Derf Butler told the Examiner he had not owned the company “for years.” However, he still maintained ties and handled relations with SFMTA, and The Examiner saw him at multiple SFMTA Board of Directors meetings for years previous to his claim, including at an April 19, 2016 meeting.

“Good afternoon, commissioners, director, my name is Derf Butler of Butler Enterprise Group, a 19-year-old [disadvantaged business] firm in San Francisco,” he told the SFMTA Board of Directors at that meeting. “I’m here today on behalf of the San Francisco African American Chamber of Commerce Construction Committee Chair.”

He went on to praise the SFMTA’s disadvantaged business contracting processes, the Examiner previously reported, and said “We think the process was outstanding, the team assembled was excellent, and we believe the work the staff has done has led the way citywide.”

A separate court filing related to “Shrimp Boy” revealed FBI undercover sources’ wiretapped conversations, wherein one connected businessman who was later arrested, Keith Jackson, told an FBI source that Butler “pays Supervisor [London] Breed with untraceable debit cards for clothing and trips in exchange for advantages on contracts in San Francisco.”

Butler and Breed, who is now mayor, have denied those allegations.

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