Corrupt SF Official Used Nonprofits to Funnel 'Pay to Play' Cash

It often pays to have friends in high places. In San Francisco, that goes double for nonprofits that call themselves "friends."

A new report from the San Francisco City Controller's Office, in conjunction with the City Attorney's Office, skewers a system where city departments — like Public Works — form relationships with nonprofit organizations that raise philanthropic dollars for issues related to that department, saying it's rife with opportunity for corruption.

Often these organizations are called "friends" organizations, like Friends of the Library, or Friends of City Planning. All told, the report found that 33 out of 56 San Francisco city departments benefit from these kinds of nonprofit organizations, which between them have 588 accounts spent on city activities.

Those nonprofits have looser transparency requirements, creating a "pay-to-play" environment where city department heads could potentially ask city contractors they oversee to donate to the nonprofit, creating a risk that department head would be influenced by that spending when deciding to award multi-million-dollar city contracts.

The nonprofit could then disburse those funds to be used for city staff appreciation parties in ways that would have otherwise violated city law — if done transparently — or on pet projects of that department head.

That may have already happened.

The Controller's Office found at least one of these organizations, the San Francisco Parks Alliance, took roughly $1 million in donations from a number of city contractors which were under investigation by the City Attorney's Office for funneling money to the Public Works department for lavish parties, at the behest of former Public Works Director Mohammed Nuru, who was arrested by the FBI in January on corruption charges.

Those city contractors include the SF Clean City Coalition, Recology, PG&E, Clark Construction, Webcor Construction and Pankow Construction. They collectively donated $966,000 to the Parks Alliance into a Public Works-specific account — funds Nuru was able to freely direct, and sometimes himself was paid from — according to the report. Those same contractors were awarded more than $570 million in city contracts by the Public Works Department, according to the report.

City Attorney Dennis Herrera issued subpoenas investigating those same city contractors in February, in connection with the ongoing corruption scandal that first ensnared Nuru, but has only grown in the following months.

Nuru and others would direct staff to pay for goods and services for staff appreciation, volunteer programs, merchandise, community support and events from specific vendors, "circumventing city purchasing controls," the report found. These purchases would then be reimbursed through Public Works accounts held by the Parks Alliance "outside of city purchasing rules." Nuru would solicit those funds from contractors whose city contracts Nuru oversaw.

“This report makes it clear that pay-to-play has been happening in our city. We are putting a stop to it,” City Attorney Dennis Herrera said, in a statement. “City officials cannot work behind the scenes with City contractors to benefit their departments and use other entities to cloak those efforts."

Drew Becher, CEO of the San Francisco Parks Alliance, expressed shock at the city's findings.

"Like everyone, we were outraged to learn of the public corruption in our local government,” Becher said, in a statement. “We did not benefit in any way nor had any control over the donations that Nuru and Public Works solicited and directed to the sub-account, as the report states. We are a trusted partner to many community groups and city departments and welcome any and all actions that bring more transparency and oversight to ensure the public’s trust.”

Nuru was arrested by the FBI in January and accused of attempting to bribe an airport official. Just last week, two city contractors pleaded guilty to bribing Nuru with the construction of his vacation home and a $36,000 gold Rolex watch in exchange for help in obtaining city contracts.

At the behest of Nuru, the Parks Alliance also directed $66,000 to entities whose figureheads were also arrested by the FBI in connection with Nuru's corruption scandal, permit expediter Walter Wong and Nick Bovis, the owner of Lefty O'Doul's.

When they're working as they're supposed to, these "friends of" organizations may help put on an outdoor movie night for the public or help build park trails.

But they're also rife with opportunity for abuse, the report found.

“While philanthropic organizations provide tangible benefits to all of our residents, abuses in these relationships undermine the important role they play," said Controller Ben Rosenfield, in a statement. "When gifts are solicited from those that do business with the City, it creates a risk to fair and transparent public processes. We have put forward actionable recommendations to correct loopholes that seemingly normalize unethical practices that undermine faith in public actions.”

Following the release of the report, Mayor London Breed announced an executive order to address the recommendations in the report.

City department heads will now be required to reveal when they solicit donations to nonprofits — like the "friends of" organizations — and for city departments to formalize their relationships with these nonprofits, which would legally require those groups to boast greater transparency.

Breed's order also requires more transparency from city officers in accepting gifts.

Supervisor Matt Haney also plans to introduce legislation next week that will go further than the mayor's order, explicitly banning department heads from asking any person or party doing business with their department for donations, among other changes.

Haney called Public Works actions "inappropriate behavior" and said the department "is clearly out of control." Haney argued this also showed a clear need for his ballot measure Proposition B in San Francisco, which would create an oversight body for Public Works, and place some of its street maintenance duties with a new Department of Sanitation and Streets.

The city's corruption scandal investigation is ongoing. The City Controller's Office and City Attorney's Office report into city ethics is the second to be released this year.

This story has been updated to include a statement provided by the San Francisco Parks Alliance on Sept. 25.