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

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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)

The City has awarded a new transportation contract to a company connected with a federal indictment and alleged bid-rigging scheme, the San Francisco Examiner has learned.

Butler Enterprise Group, LLC was awarded two $1.6 million public outreach contracts by the San Francisco Municipal Transportation Agency on Aug. 15. Meanwhile, the company’s controversial president, Derf Butler, is facing a federal indictment for an alleged bid-rigging scheme to defraud the U.S. Department of Energy.

San Francisco Friends of Ethics founder Larry Bush said that San Francisco government should temporarily suspend contracts awarded to those under investigation, including federal indictment.

“If people have already been criminally charged with rigging the system,” Bush said, “they should not be let back in that system until they’re cleared.”

SEE RELATED: Defendants accused of bid rigging plead not guilty in SF federal court

Butler’s indictment stems from the infamous Raymond “Shrimp Boy” Chow case, in which the FBI investigated politicians and contractors. In the case U.S. v. Worthen, et al, filed on April 6, federal prosecutors allege Butler’s “illegal scheme” 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,” which had amounts higher than Individual A’s bid “for the sole purpose of artificially ensuring” Individual A’s low bid was won — then, allegedly, Butler and the other defendants would be awarded other contracting work and money from Individual A.

Just this month, the SFMTA awarded its own contract to Butler, though it said the process was under “intense scrutiny.”

“We have taken another look at the contracts and have determined that there is no evidence of wrongdoing as part of the contract bidding process,” SFMTA spokesperson Paul Rose wrote in an email to the Examiner.

Butler told the Examiner that he no longer has ties to the company that bears his name.
“I don’t own the company,” Butler said. “I haven’t owned the company for years.”

When asked if he had any involvement with the company whatsoever, he said, “I do not.”

Anita Butler, the company’s CEO, did not immediately respond to requests for comment. Anita Butler is listed as manager of Butler Enterprise Group in state filings.

Though Derf Butler said he has no connection to the company, the allegations made in federal court allege he was a “business management consultant” and president of Butler Enterprise Group, a San Francisco LLC.

The Butler Enterprise Group website still lists Derf Butler as president, and Anita Butler as CEO.

Additionally, the Examiner has observed Derf Butler at SFMTA Board of Directors meetings in recent years, including an April 19, 2016, meeting where Butler publicly spoke in favor of a program to aid disadvantaged businesses.

“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 the April 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, 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.”

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

As the Examiner has previously reported, 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.”

Breed and Butler denied those allegations in 2015.

The recent SFMTA contract is not Butler Enterprise Group’s only dealing with the city of San Francisco.

Since 2012, Butler Enterprise Group has garnered contracts from the San Francisco Public Utilities Commission, Port of San Francisco and the SFMTA with payments of more than $240,000, not including the most recent million-dollar SFMTA contract, according to the City Controller’s Office OpenBook web tool. The Controller’s Office verified that amount.

The SFMTA said it would make decisions regarding contracts to Butler Enterprise Group after Butler’s indictment concludes — one way or the other.

“Our contracting regulations don’t prohibit work with contractors who are the subject of allegations, particularly in the context where there is a presumption of innocence,” Rose said.

“If a company is convicted of a crime,” Rose added, “we will address those issues at that time.”

Editor’s Note: This story has been updated from its original version.

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