FBI probe results in another raid on DBI

The FBI descended upon The City’s Department of Building Inspection on Wednesday as part of a year-and-a-half-long corruption investigation of the troubled agency.

The early-morning seizure of documents marks the second time in less than a year that federal agents and those from the District Attorney’s Office raided the department tasked with making buildings safe.

In August 2006, the FBI arrested Augustine Fallay, then-head of the department’s one-stop permit program, on suspicion of bribery and perjury. On Wednesday, investigators went through files of Senior Building Inspector Leo McFadden and seized documents related to an Alabama Street property, officials said.

Officials from the FBI, San Francisco District Attorney’s Office and the City Attorney’s Office repeatedly refused to discuss the investigation Wednesday. No arrests have been made but a search warrant was issued for Wednesday’s office raid. The probe into those files stems from information gathered in the Fallay investigation, acting Director Amy Lee said. Last year, Fallay was hit with 26 criminal charges, including perjury. The trial is ongoing. Many of the allegations Fallay faces are connected with his tenure at the Planning Department.

McFadden, 41, was not in his office during the raid and remains employed by the agency, Lee said.

The eight-year employee of the department, reached at home by The Examiner on Wednesday afternoon, said he’s being persecuted for doing his job.

“They’re fishing,” McFadden said. “They’re trying to make a silk purse out of a sow’s ear.”

McFadden’s job as a senior inspector has him frequently dealing with property owners who fail to comply with various portions of the housing, building and construction codes.

The 12-year-old agency, created by voter mandate to help speed up the permit process for home improvements, has been plagued withaccusations of cronyism and bribery for a half-dozen years and has been investigated by the FBI for as many.

In 2001, an audit by The City’s Controller’s Office cited a culture of preferential treatment and called for reforms to overhaul the agency. In 2003, a grand jury report also slammed the department’s favoritism, calling it “deeply ingrained.”

Mayor Gavin Newsom, who campaigned on a platform that included cleaning up the DBI, said, “This is among a number of efforts through the FBI that I have embraced as we move forward to find those exceptions within that department that are not operating as they should.”

Fallay’s alleged bribes included a $50,000 loan and payments of cash and services for home improvements. Investigators in the Fallay case received information from Tony Dong Xing Fu, a contractor.

Fallay allegedly asked for and accepted these bribes in return for his assistance in matters over which he had influence as a manager at DBI, prosecutors say.

Troubled History of DBI

1994: DBI is created by Proposition G to speed up permitting process of construction and remodeling of homes and buildings. The measure was strongly supported by the politically powerful Residential Builders Association and its president, Joe O’Donoghue

2000: Allegation surfaces of cronyism and corruption. First rumors of FBI investigation surface.

2001: City Controller’s Office audit finds a culture of favoritism. Many suggested reforms are ignored.

2001: Measure that would limit access of permit expediters — hired consultants who fast-track permits for homeowners and builders — to city officials fails to garner support.

2003: Civil grand jury slams department, repeats allegation of favoritism and patronage, particularly with permit expediters.

2003: Information systems manager Marcus Armstrong pleads guilty to corruption charges for defrauding the agency and accepting kickbacks totaling more than $500,000.

2003: Then-Supervisor Gavin Newsom campaigns on a platform that includes cleaning up DBI. RBA and O’Donoghue failed to endorse Newsom for mayor.

2004: Mayor-elect Newsom calls for anti-corruption probe into the department.

2004: Supervisor Chris Daly attempts to revive legislation that would require permit expediters to register with the Ethics Commission.

2005: RBA and O’Donoghue attempt to block Newsom appointee Amy Lee from the post of acting director of the department. RBA members publicly question Lee’s ability to do the job, citing her pregnancy.

2006: FBI raids department and arrests Augustine Fallay, head of the department’s one-stop permit program, on charges of bribery and perjury.

mcarroll@examiner.comBay Area NewsLocal

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