Former SFPUC Chief Harlan Kelly Sentenced to 4-Year Prison Term Following Fraud Conviction ​​— Here Are 5 Takeaways

Update, Monday, March 18, 2024:
Harlan Kelly, the former chief of the San Francisco Public Utilities Commission, was sentenced to four years in prison on Monday, March 18, and ordered to pay a $10,000 fine after being found guilty last year of various federal fraud and conspiracy crimes.

Kelly “betrayed the public trust and made a mockery of his oath to serve the community in his high public office,” U.S. District Judge Richard Seeborg said in court Monday.

Although federal prosecutors sought a 6 1/2 year prison sentence, Seeborg said Kelly had done enough for the community — as evidenced by the many letters of support sent on his behalf — to warrant a more lenient punishment.

His sentencing is the latest development in the FBI’s expansive, six-year investigation into city government corruption that has now ensnared more than a dozen individuals and two corporations.

Kelly is expected to begin serving his four-year prison term on June 19, and is ordered to serve three years of supervised release after that, according to the U.S. Attorney’s Office.

Original story, July 14, 2023
Yet another San Francisco city leader has been found guilty on charges related to bribery.

After less than two days of deliberation, a San Francisco jury Friday convicted the former head of a powerful agency on six of eight charges stemming from a federal investigation into corruption in the city’s government.

Harlan Kelly, the former general manager of the San Francisco Public Utilities Commission, was charged with wire fraud in 2020, charges that were later expanded to include bank fraud in late 2021.

Kelly was accused of taking bribes for years from a construction contractor, Walter Wong, who sought to win a contract to update city streetlights. The separate bank fraud charges allege Kelly conspired with real estate investor Victor Makras to make false statements to Quicken Loans to obtain a $1.3 million loan.

Chief U.S. District Judge Richard Seeborg has yet to sentence Kelly, but the former SFPUC chief faces a possible 20 to 30 years on each count against him. Wong pleaded guilty for his role in multiple alleged bribery schemes in 2021. Makras was convicted late last year.

The wide-ranging corruption scandal started in 2020 with a federal indictment of former San Francisco Public Works director Mohammed Nuru, who accepted bribes like a John Deere tractor, a $37,000 Rolex watch, and construction work on his Colusa County ranch.

But the corruption scandal didn’t stop at Nuru.

A slew of city officials and contractors have been ensnared in the corruption probe, including Mayor’s Office Fix-It team head Sandra Zuniga and former Department of Building Inspection director Tom Hui. Former senior building inspector Bernie Curran also was convicted in a related corruption case, and was sentenced Friday to a year and one day in federal prison.

Kelly’s wife, Naomi Kelly, did not face indictment, but stepped down from her role as city administrator after evidence against her husband implicated her, as well.

While most of the city leaders who found themselves under the FBI’s microscope pleaded guilty, Kelly fought his charges in court.

During the three-week trial, a jury heard testimony and closing arguments from the U.S. Attorney’s Office and Kelly’s defense attorneys.

Here are five key takeaways from the trial.

Wong didn’t just admit to bribing Kelly once. He spent years trying to influence him

The owner of several construction companies, Wong was a politically-connected San Francisco insider with ties to past mayoral admirations going as far back as Mayor Art Agnos. He used his largesse to help host banquets in Chinatown and bolster annual Lunar New Year parade celebrations. He also featured prominently in the case against Nuru.

Prosecutors argued Wong’s attempts to influence Kelly started as early as 2013.
Wong allegedly gifted home repair work to Kelly at a heavy discount, from installing iron hand-rails in his home to fixing water damage, and even installing wine-cellar shelving.

“I owe you big time!!!” Kelly wrote to Wong after the 2013 installation of the wine cellar.

He also spent lavishly on Kelly’s family during a 2016 China vacation, including a trip to a zoo, sightseeing tours, a meal between Wong and Kelly that topped $600, and freebie stays in five-star hotels.

And Kelly did pay Wong back, prosecutors argued, on two key projects he had control over: putting up holiday lights in San Francisco’s downtown, and a contract to convert existing city streetlights to use LED bulbs.

Kelly pushed his staffers to expedite the purchase of holiday lights from one of Wong’s companies, a claim prosecutors punctuated in court. Emails sent at the behest of Kelly egged on employees to hurry on the purchase. Kelly also allegedly handed Wong insider-information to help edge-out other contractors bidding to win the city streetlight contract.

In closing arguments to jurors on July 12, prosecutor Kristina Green, from the U.S. Attorney’s Office, said text messages tell the tale.

“How do you know Harlan Kelly was receiving gifts intended to influence city business? Because Harlan Kelly shows that link himself,” Green said.

Prosecutors then showed jurors a 2014 text message from Kelly to Wong, “My loan was approved. We need to get together to chat how to reimburse you and rfp (request for proposal). I should get the money in three weeks.” Essentially, in one message, prosecutors argued, Kelly both told Wong he would use a loan to pay him back for the discounted housework, while also saying he would share information about an RFP. That’s a request for proposal, essentially the guidelines the city would use for bidders.

Importantly, that information is supposed to be confidential, so all companies bidding on a contract have an even playing field.

Wong’s son, Washington Wong, who worked with him on those contracts, said on the witness stand, “we used that information to, I guess, tweak our next proposal [to the city].”

Kelly’s defense attorney sought to sow doubt about Wong’s statements

Wong’s testimony was undoubtedly the biggest pillar of the U.S. attorneys’ arguments, which is likely why the defense had a laser focus on challenging his credibility.

Kelly’s defense attorneys, Jonathan Baum and Brian Getz, cast the China trip and discounted home repair in a far rosier and more innocuous light, saying that Kelly and Wong enjoyed years of friendship that naturally resulted in exchanged gifts, dinners, and favorable treatment. At the same time, they described Wong as a shark on the hunt for new bribery marks.

“Was Harlan naive? He should’ve been more careful. He should’ve suspected what Walter was doing, but didn’t,” Baum told the jury.

To punctuate his point, Baum flashed the dictionary definition of “naive” in large-font text on screens in court.

Kelly’s lawyers also argued that Wong’s actual bribes to city officials – like Nuru – came in the form of thousands of dollars of cash stuffed into envelopes. If he were truly bribing Kelly, why not do that, instead of offering construction work on his home?

That home construction work was also shoddy, and even over-charged, an expert witness brought by the defense said on the witness stand. While Wong tried to fix a water leak, photos showed water stains streaking Kelly’s Inner Sunset-home.

“If this was a complex elaborate bribery scheme, would [Walter Wong] have done that?” Baum said.

Perhaps most pointedly, however, the defense made sure to remind the jury that Wong stands to see his own bribery-related sentence reduced for cooperating as a witness, an idea they argued influences everything he said.

Judge Seeborg instructed jurors to treat Wong’s testimony with “greater caution” than that of the other witnesses for that same reason.

Despite alleged bribes, Kelly’s influence didn’t always help Wong. But that doesn’t mean a crime wasn’t committed

Prosecutors showed reams of evidence highlighting how Kelly inappropriately aided Wong in navigating an LED streetlight contract with the city. Kelly even went so far as to stuff confidential documents into a manila folder, later handing them to Wong out on the street, they said.

But that didn’t mean Wong had any luck winning his bid.

When ranking companies who had thrown their hat in the ring for the city contract, Wong’s company ranked 47th out of 51 total bidders.

“Can we say that was dead last?” Baum, the defense attorney, said. “The most important thing to think about is, what happened? [Prosecutors would] argue this information was very valuable. But what were the results?”

Even on the witness stand, Wong’s son, Washington Wong, admitted their attempts to game the system were fruitless.

“In the grand scheme of things, no, it didn’t seem to help,” Washington Wong said.

But in his instructions to the jury, Judge Seeborg reminded them that Kelly need only have agreed to commit an act to have acted corruptly. And Green, one of the prosecutors, underscored that to the jury.

“Walter Wong didn’t win the LED lights contract. Under the law, that doesn’t matter,” she said. What matters is if jurors decide they corrupted the process.

Kelly allegedly flouted the rules, but emails and text messages showed he knew the law

Kelly hoped to keep much of his communications with Wong and other co-conspirators outside of the spotlight.

He wrote in a 2018 email “I’m not the only one who sees my email at work – I have some staff with access because I get a lot of emails and can’t be reading, and responding, to every one. Also emails sent to me are public record.”

Subsequently, many of his emailed communications with Wong are from Kelly’s personal Yahoo email. It’s a problem known to happen in the city writ large – citizen journalist “Anonymoose” found plenty of city officials trying to hide their communications by skirting the city’s open records law.

Kelly also, at one point, emailed a city ethics rulebook to his San Francisco Public Utilities Commission staff. That rulebook contained explanations of city regulations that bar gifts from contractors with bids before the commission, much like Wong did.

Prosecutors asked Mary Tienken, a project manager at the SFPUC, to take the witness stand in June. She wrote many of the bidding documents that – unbeknownst to her – Kelly eventually passed to Wong.

When asked about her duty under the law, Tienken said, “I was obligated not to provide any advantage to any bidders.”

The city is as connected as can be

Testimony and documents submitted for evidence during the trial revealed guest-star appearances from various city politicos.

The 2016 trip to China where Wong allegedly bribed Kelly included a visit to an ailing Rose Pak, a well-known Chinatown community leader, who was hospitalized, and later died after returning to San Francisco.

“Rose Pak was a friend of the family. I met her and she became a friend,” Maria Little, Kelly’s mother-in-law, said.

Kelly and Makras also dined with Mohammed Nuru, the former Public Works director who pleaded guilty to bribery charges in 2021. And Wong and Kelly planned a dinner with the late Mayor Ed Lee by writing their text messages in code, referring to Lee only as “35” — his initials on a phone keypad.

While it’s not a surprise that these folks would rub shoulders with other city leaders, the extent to which others have been mentioned in FBI documents, and the court record, has fueled speculation as to who in city government, if anyone, was also under federal investigation.

The conviction is a milestone in San Francisco political history.

With no other major indictments pending, Kelly’s conviction may snip the final thread in the tapestry of the San Francisco corruption scandal that has ensnared so many, giving a glimpse into a system of influence many have heard whispers of, but few had seen before in such full view.