SF Real Estate Investor Joins Embattled Former Public Utilities Chief in Pleading Not Guilty to Federal Bank Fraud Charges

Updated 3:00 p.m. Thursday

San Francisco real estate investor Victor Makras pleaded not guilty in federal court on Thursday to two bank fraud charges.

The charges were unveiled by the U.S. Department of Justice last month against Makras and Harlan Kelly, the former San Francisco Public Utilities Commission general manager, who similarly pleaded not guilty two weeks ago.

Each charge carries a maximum sentence of 30 years in prison or a $1 million fine.

Kelly and Makras are accused of defrauding Quicken Loans by inflating the amount of money Kelly owed on his mortgage and lying about his level of debt.

Makras’s next court date is scheduled for Dec. 16,  the same day Kelly is set to appear.

During the hearing, U.S. Magistrate Judge Jacqueline Scott Corley
also placed travel restrictions on Makras, who must now obtain permission to leave the region.

Original post, Oct. 20: Harlan Kelly, a former general manager of San Francisco’s Public Utilities Commission already accused of accepting bribes from a city contractor, pleaded not guilty Wednesday to new bank fraud charges leveled against him by federal prosecutors.

Kelly was charged Tuesday with two new counts — bank fraud and conspiracy to commit bank fraud — alongside local real estate investor and former city commissioner Victor Makras.

According to the indictment, Kelly and Makras defrauded Quicken Loans by inflating the amount of money Kelly owed on his mortgage — to qualify for a lower-interest refinance loan. The complaint also alleges that Kelly and Makras lied to the lender about debt owed by Kelly.

The indictments are part of a wide-ranging public corruption investigation that has led to charges against 12 people and the resignation or ousting of four city department heads, including Kelly and Kelly’s wife, former City Administrator Naomi Kelly. Naomi Kelly has not been charged with any crimes.

First charged last year was Mohammed Nuru, the longtime director of San Francisco Public Works.

Nuru was arrested in January 2020. Federal prosecutors have accused him of taking more than $1 million in bribes from people doing business with the city, and of attempting, unsuccessfully, to bribe a San Francisco airport commissioner.

Kelly was arrested in November 2020 and stepped down from his role as head of the city’s PUC. The U.S. attorney’s office charged him with five counts related to an alleged bribery scheme, saying he accepted thousands of dollars in international trips, meals and other gifts from city contractor Walter Wong, in exchange for providing Wong with information meant to help him win a multimillion-dollar contract from the SFPUC for a citywide LED lighting contract. Wong’s son was bidding on the contract.

Wong, who is cooperating with federal investigators, is identified only as “Contractor #1” in court documents. In a statement this week, the U.S. attorney’s office wrote that the indictment against Kelly alleges “that Kelly provided confidential internal PUC documents and information to Contractor #1 to give Contractor #1 competitive advantages during public contract bidding competitions.”

“In exchange,” the statement continues, “Contractor #1 lavished Kelly with personal financial benefits, including discounted construction work on Kelly’s residence and an international vacation for Kelly and his family that included Contractor #1 paying for hotel charges, hundreds of dollars for meals, and jewelry.”

The latest charges stem from a complicated financial scheme federal prosecutors are accusing Kelly and Makras of conducting, to conceal the Kellys’ debt to secure a more favorable loan from Quicken Loans.

The complaint states that Kelly first took out a $715,000 loan in 2012 from Makras’s real estate company, Makras Investors, to pay for a home remodel — which was being done by Wong. Then, in 2013, Kelly allegedly asked Makras for a personal loan of $70,000.

According to the indictment, Makras then texted Kelly:

“After thinking about it a bit, I recommend that I pay your credit cards directly. This will avoid a large check going into your account, Then needing to explain it to the bank. Banks do not like seeing anything unusual about the flow of cash in and out of checking savings accounts. This will make the loan process go easy.”

Makras then allegedly paid off $70,000 in credit card debt owed by the Kellys.

The indictment goes on to allege that Makras and Kelly inflated the amount of the Makras Investors loan to secure a lower interest rate on a home refinance from Quicken Loans. That $1.3 million loan was used to pay off the Makras Investors loan as well as the Kellys’ first mortgage.

Federal prosecutors say Makras then paid Wong for the nearly $90,000 worth of construction work on the Kelly home conducted between 2013 and 2014.

If convicted of all seven counts, Kelly could face more than 160 years in prison.

KQED’s Joe Fitzgerald Rodriguez contributed reporting to this story.