San Francisco has canceled an up to $3 million government contract that was awarded earlier this year to a company named in the City Hall corruption scandal, severing ties with a businesswoman who admitted to bribing former Public Works head Mohammed Nuru with a nearly $37,000 Rolex watch.
The termination of the three-year contract with businesswoman Florence Kong’s debris recycling company is The City’s latest effort to prevent taxpayer dollars from enriching those implicated in the FBI probe.
The Office of Contract Administration awarded the contract to SFR Recovery Inc. through a competitive-bidding process in January for Public Works to dispose of roadwork materials like asphalt at the company’s facility in the Bayview, records obtained by the San Francisco Examiner show.
Kong, 62, was the owner and CEO of the company at the time. She pleaded guilty last week to bribery and lying to the FBI about her relationship with Nuru, admitting to giving him the watch she purchased last December as a reward for his influence “directing business to SFR Recovery Inc.”
Sailaja Kurella, acting director and purchaser for the Office of Contract Administration, sent a letter obtained by the Examiner to Kong and SFR Recovery Inc. on Friday officially canceling the contract. “This termination is based on the plea agreement,” Kurella wrote.
In the complaint against Kong, prosecutors alleged Nuru helped her with a “debris recycling contract,” but it is unclear whether that is the same contract awarded to SFR Recovery Inc. in January or a reference to a pre-existing arrangement between Public Works and the company.
Kong was recorded by the FBI complaining to Nuru about not getting enough shipments of solid waste to her recycling center on at least three phone calls between 2018 and 2019, according to the complaint.
City records show Public Works has paid the company for work since the 2018-19 fiscal year — before the contract in question was issued.
SFR Recovery Inc. also obtained permits to operate from the Department of Public Health in 2018.
In her plea agreement, Kong acknowledged that Nuru had “great influence over city business, public contracts and permits, and the directing [of] expenditures of DPW funds to contractors and others.”
“Nuru’s power and influence extended not only to contracts and business with DPW, but also with numerous other city departments and agencies,” Kong admitted. “I believed Nuru to be one of the most powerful public officials in The City.”
Kong has since transferred ownership of the company to her husband Eric Mao, according to her attorney. When reached by phone Friday and asked whether the contract was obtained through bribery, Mao said “of course not.”
Mao emphasized that the contract was awarded through the open-bidding process but acknowledged that The City may be entitled to cancel it.
“We wanted the business, we wanted to be able to service The City,” Mao said. “If they feel that we cannot service them, what does a business do?”
He declined to answer further questions and hung up the phone.
“I really don’t think there is a story,” Mao said.
His name appears on the company’s application for the contract as a manager for SFR Recovery Inc.
John Runfola, an attorney for Kong, said prosecutors did not allege SFR Recovery Inc. obtained the contract through bribery.
“The U.S. Attorney Office did not make that allegation because it’s untrue,” Runfola said. “This was not a quid pro quo situation. Mr. Nuru let it be known that he could make things very difficult for any contractors if they did not accede to his demands and suggestions.”
Kong is the fourth contractor and defendant who The City has sought to end its relationship with as a result of the scandal.
City officials previously canceled a portable toilet contract with restaurateur Nick Bovis and chose not to renew a trash can contract with a company tied to permit expediter Walter Wong. They also have temporarily blocked contracts from issuing to a company owned by Balmore Hernandez.
Bovis, Wong and Hernandez have each pleaded guilty to fraud-related charges and agreed to cooperate with the ongoing FBI investigation.
The City appears to have waited until Kong pleaded guilty to take action on the contract with SFR Recovery Inc., even though the bribery allegations against Kong became public in June when the complaint was unsealed in her case.
John Cote, a spokesperson for City Attorney Dennis Herrera, said The City needs legal justification to cancel a contract.
“Legally you can’t cancel a contract with someone just because they’re accused of a crime,” Cote said. “Oftentimes you have to wait for a conviction.”
Public records show The City awarded the contract to SFR Recovery Inc. after issuing a request for bids last September.
Only two companies — SFR Recovery Inc. and Recology — responded with bids a month later in October, and both were awarded a piece of the business.
The City has paid out $168,992 of the up to $3 million contract to SFR Recovery Inc. and $476,060 of an up to $2 million contract to Recology, records show.
The contract with Recology has not been canceled, officials said.
Runfola defended the integrity of the contract issued to SFR Recovery Inc. and said the company has “legitimately obtained contracts as the lowest bidder.”
“If The City wants to spend more for the services provided by SFR Recovery, that’s up to the City and County,” Runfola said.
Kong was born into poverty in Hong Kong and immigrated to the U.S. with her family in 1990, according to her attorney.
“She learned how to be successful from local leaders who advised her ‘how things worked in San Francisco,’” Runfola said in a statement. “Unfortunately, some of this advice she received led to her conduct in this case.”
Kong has served on boards including the Immigrant Rights Commission and the Chinese Chamber of Commerce.
In addition to turning over SFR Recovery Inc. to her husband, Kong gave her sons control of a construction business also tied up in the scandal, Kwan Wo Ironworks.
“Florence has stepped away from her businesses and is prepared to deal with her legal situation and begin a new chapter in her life,” Runfola said.
Kong is scheduled to be sentenced Feb. 11. The case against Nuru is pending.