City Attorney seeks to recoup ‘illegal profits’ gained by Walter Wong through city contracts

San Francisco will seek to recover “illegal profits” gained by well-known permit expeditor Walter Wong through government contracts and bar...

San Francisco will seek to recover “illegal profits” gained by well-known permit expeditor Walter Wong through government contracts and bar his affiliated companies from ever doing business with The City again, a deputy city attorney said Thursday.

As a result of an FBI probe, Wong agreed to plead guilty last month to conspiracy to commit fraud and money laundering for his alleged involvement in a public corruption scandal that has ensnared former Public Works head Mohammed Nuru.

“In light of the announcement that Walter Wong is pleading guilty to conspiracy to defraud The City, we’ve begun reviewing every contract Walter Wong and his affiliated companies had with the city,” Deputy City Attorney Anne Pearson told a Board of Supervisors committee Thursday. “We will determine the amount of his illegal profits and seek to recoup that money for The City and bar those entities from doing further business with The City.”

Nuru is alleged in a federal complaint and other court documents to have traded favors and accepted gifts from Wong and city contractors.

The City Controller’s Office reviewed the Public Works’ contacting practices as result of the corruption probe and issued a report this week finding a lack of oversight that Nuru exploited.

The report noted that 11 of the 15 contracts awarded for homeless services under an emergency fast-tracking provision totaled $14 million and “had no discernible selection process.” Two of these contracts were awarded to W Wong Construction Co Inc., of which Wong is the president. One of the contracts was for $110,595 for construction at Fifth and Bryant streets and another was $907,247 for renovation work of the Jelani House.

Supervisor Aaron Peskin said Thursday he planned to introduce legislation to rescind the fast-tracking provision for homeless services in light of the allegations and City Controller’s findings. The board had approved it last year.

Pearson said that they are also looking to change city law to prohibit contractors caught up in alleged criminal activity from bidding on city contracts.

“To prevent contractors from obtaining any future contracts or subcontracts, they would have to be debarred. The City Attorney is looking at the debarment process for a number of contractors but in the absence of a criminal conviction it can be very difficult for The City to develop the evidence necessary to show willful misconduct,” Pearson said. “Where we can act without a criminal conviction we will. We will also explore changes in the law to allow for suspension from the contracting process while criminal charges are pending.”

Pearson, however, said they have moved to block AzulWorks from pursuing a subcontract under the San Francisco Public Utilities Commission after its CEO Balmore Hernandez was implicated in the alleged Nuru schemes.

Hernandez, who is a former Public Works employee, is facing a bribery charge for allegedly providing more than $250,000 in labor and materials to help Nuru build a home on 10 acres of land in Stonyford between 2016 and 2018. He later asked Nuru for help with AzulWorks’ bid on a multi-million dollar project after it was deemed an unqualified proposal and later won the $1.9 million city contract, according to federal court documents.

“The PUC with the City Attorney’s help has deemed AzulWorks, which is run by Balmore Hernandez, non-responsible for a subcontract it is now seeking,” Pearson said. “AzulWorks will be entitled to a hearing to challenge that determination.”

Pearson also said that, like in the case of Wong, “To the extent other contractors are proven to have received contracts in exchange for gifts or favors we will seek recovery of those profits as well.”

The federal investigation into City Hall corruption is ongoing. More charges are expected. The City Attorney’s Office is also continuing its investigation, prompted by the federal charges brought against Nuru in January, to uncover employee misconduct.

Pearson said its investigation was hindered by the shelter-in-place order that went into effect on March 17 to slow the spread of COVID-19, but has since picked up speed.

“Since [mid-March], we continued to review voluminous documents received in response to two dozen subpoenas issued to various contractors and nonprofits that do business with The City,” Pearson said. “Because of the pandemic, many of our interviews were delayed for about two months. But since the beginning of June, we have begun working with various departments to direct employees to participate in interviews by video.”

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