Harlan Kelly, head of the SFPUC and husband to City Administrator Naomi Kelly (right), faces federal charges for allegedly trading inside information on a city contract in return for a paid family vacation. (Courtesy photo)

Harlan Kelly, head of the SFPUC and husband to City Administrator Naomi Kelly (right), faces federal charges for allegedly trading inside information on a city contract in return for a paid family vacation. (Courtesy photo)

Harlan Kelly, head of SFPUC, charged with fraud in widening Nuru scandal

Kelly accused of engaging in corrupt partnership with permit expediter

Harlan Kelly, the general manager of the San Francisco Public Utilities Commission, stepped down from his role Monday after being charged with fraud for allegedly trading insider information about a lucrative city contract for a paid family vacation.

The March 2016 trip to China is just one of the bribes Kelly is alleged to have accepted from permit expediter Walter Wong, who agreed to cooperate with the FBI investigation into City Hall corruption when the U.S. Attorney’s Office charged him in June.

Kelly is also alleged to have underpaid for repair work done by Wong’s construction company on his Inner Sunset home, according to the newly filed complaint against him.

Kelly is the latest defendant named in the growing scandal that began in January with charges against ex-Public Works head Mohammed Nuru and restaurateur Nick Bovis. His wife, City Administrator Naomi Kelly, is the most powerful non-elected official in The City.

In a statement, Kelly disputed the allegations but said he would immediately vacate his position instead of retiring in the next 18 months as previously planned “in order to defend myself, my legacy and my family.”

“I am not guilty of these allegations,” Kelly said. “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.”

Kelly allegedly took his wife, mother-in-law and two children to China on Wong’s dime at a time when the permit expediter was seeking a contract from the SFPUC to upgrade city streetlights, according to the complaint against him.

Kelly is alleged to have paid for their flights with a credit card, but the FBI said he was reimbursed by Wong in cash. Wong also told the FBI he paid thousands for the Kellys during their trip including their hotel stay and a $615 meal.

“Thank you for the best family vacation ever! A little something for everyone!” Kelly allegedly wrote to Wong after the trip using the messaging application WeChat.

At the time, Wong was seeking the streetlight contract for a company he “ran through his son” called Green Source Trading LLC, the FBI said. Kelly allegedly gave Wong confidential documents during the bidding process and also delayed a deadline for him.

While Wong did not ultimately win the contract, the FBI said Kelly helped him “obtain a competitive advantage.”

Naomi Kelly allegedly told FBI agents during a June interview that she paid Wong “a lot of money for the trip, and brought lots of cash on the trip to give to Rose Pak” — the now-deceased Chinatown power broker.

But the FBI said the Kellys had not withdrawn a significant amount of cash from their accounts leading up to the trip and “incurred almost no significant expenses on their own known credit or debit cards” during the trip.

Naomi Kelly has not been charged with a crime.

Brian Getz, an attorney for Harlan Kelly, strongly disputed the charges in an interview with the San Francisco Examiner.

“The charges are false and we are going to show that in court,” Getz said. “Harlan Kelly has been a loyal public servant for 35 years and he has served the people of San Francisco with honor and distinction.”

Getz said Kelly paid for “every penny” of the trip to China.

“There has always been an overlap between business and social relationships in San Francisco politics,” Getz said. “He has never done anything close to what they are charging.”

Getz confirmed that the FBI raided the Kellys’ Inner Sunset home on Monday morning.

“There was nothing in his house that supports their case,” Getz said.

Kelly was appointed as general manager of the SFPUC by former Mayor Ed Lee in 2012.

Kelly is out of custody pending trial on one count of honest services wire fraud. He is due in court Dec. 8.

A spokesperson for the SFPUC declined to answer questions regarding its bidding process citing the ongoing investigation.

mbarba@sfexaminer.com

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