Two new contractors charged with bribery in Nuru scandal

Two construction executives are facing federal bribery charges for allegedly giving former Public Works Director Mohammed Nuru a $40,000 tractor in exchange for his help opening an asphalt plant on the waterfront.

Alan Varela, 59, the president of the Oakland-based construction firm ProVen Management, and his Vice President William Gilmartin III, 60, are the latest defendants named in an FBI investigation into corruption at City Hall.

The widening scandal has ensnared more than a half dozen city officials and contractors since Nuru was first arrested alongside restaurateur Nick Bovis in January, spurring outrage and inspiring anti-corruption initiatives.

Varela and Gilmartin allegedly worked with contractor Balmore Hernandez to buy and deliver a John Deere tractor to Nuru’s under-construction vacation home in Colusa County in February 2019 as part of a years-long scheme to build and operate the asphalt plant on Port of San Francisco property.

The duo had allegedly leveraged Hernandez’s relationship with Nuru to obtain insider information about the project as far back as 2013 to gain a competitive edge over other contractors in the bidding process. Hernandez, 55, is a former Public Works employee and the CEO of the company AzulWorks, Inc.

Gilmartin is also alleged to have spent more than $20,000 on lavish meals to bribe Nuru over the years using a company credit card. Gilmartin allegedly spent more than $700 on a dinner with Hernandez and Nuru to discuss the asphalt project in the days after the tractor was delivered, for example.

Varela and Gilmartin “emphatically” denied the allegations in a statement Thursday to the San Francisco Examiner.

“We are confident that the quality of our work for the past 30 years speaks for itself,” the statement read. “We look forward to the opportunity to demonstrate our innocence in a court of law and protect our good names.”

U.S. Attorney for the Northern District of California David Anderson said Public Works contracts are “supposed to be awarded on a merit system.”

“Instead of awarding public works contracts on the basis of merit, the defendants allegedly sought to secure significant profits on the basis of bribes and backroom deals,” Anderson said in a statement.

Hernandez, who was previously charged with bribery in June, is expected to plead guilty to honest services wire fraud and cooperate with the ongoing investigation in exchange for leniency, authorities said Thursday.

Hernandez alone is accused of spending more than $200,000 on materials and labor for Nuru’s vacation home, which they referred to as the “ranch.”

A rendering of the proposed asphalt plant by ProVen Management (Courtesy photo)

The proposed asphalt plant at issue never came to fruition.

Public Works began to solicit bids for the project in 2015 with assistance from the Port of San Francisco. The project called for a private company building the plant at Seawall Lot 352/Pier 94 to manufacture asphalt that would be purchased by Public Works to perform road work and pothole repairs.

The project would have helped San Francisco meet its “zero waste” goals by using asphalt produced with a higher percentage of recycled materials and reducing the amount of asphalt trucked-in from outside The City. Public Works spends about $2.5 million a year on asphalt.

A joint venture that included ProVen Management and two other contractors won the project in 2015, having scored much higher in the competition than the other three companies. The joint venture scored 426 points in the competitive process, while the second highest bidder scored just 278.

Federal authorities say Nuru had given Hernandez, Varela and Gilmartin sensitive information about a draft Request for Proposals for the project as far back as late 2013, when he forwarded an internal Public Works email from his personal account to Hernandez about the carbon impact of the project.

“This may interest you,” Nuru allegedly wrote.

A Port staff memo from September 2015 praised the joint venture for the “comprehensiveness, specificity and insight” of its proposal. The memo noted that the proposal was 650-pages long, “whereas the combined total of the other three proposals was approximately 220 pages.”

DeSilva Gates Construction was among the companies in the joint-venture with ProVen Management. Company President Jim Summers defended the integrity of the selection process in an interview Wednesday ahead of the charges being announced against Varela and Gilmartin.

Summers said that it was a “a very public process” involving interview panels and competing bids.

“There were no bribes that I was involved in,” said Summers, whose company has not been named in the criminal cases. “I never had dinners.”

The Port Commission voted to approve the project in 2015, but the plans were tied up in negotiations and the environmental review process.

After Nuru was arrested, acting Public Works Director Alaric Degrafinried cancelled the plans in March. A spokesperson for Degrafinried explained that he made a “business decision” in a statement to the Examiner.

“After being briefed on the risks of using a non-standard asphalt concrete mix plus the higher cost to produce such mix, Acting Director Degrafinried decided not to pursue the asphalt plant project,” the spokesperson said in July.

The City had spent more than $375,000 on a consultant and an uncalculated amount of staff time on the project by the time it was canceled, according to Public Works.

Like Hernandez, another contractor caught up in the scandal has also agreed to enter a guilty plea, prosecutors announced Thursday.

Florence Kong allegedly gave Nuru a gold Rolex watch worth nearly $37,000 to steer business toward her recycling plant, SFR Recovery Inc.

She is expected to plead guilty to bribery as well as making false statements for allegedly telling the FBI she did not discuss business with Nuru.

While Hernandez has agreed to cooperate with the government in the ongoing investigation as part of his plea, Kong has not.

The allegations against Varela and Gilmartin bring the total number of defendants charged in the FBI corruption investigation to eight.

Hernandez and Kong are the third and fourth defendants to reach plea deals, after Bovis and permit expeditor Walter Wong.

Charges are still pending against Nuru and former Fix-it Team Director Sandra Zuniga, his girlfriend.

The investigation is ongoing.

This story has been updated to include additional information.

mbarba@sfexaminer.com

jsabatini@sfexaminer.com

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