Two San Francisco contractors on May 27 pleaded guilty in federal court to the charge of conspiracy to commit honest services wire fraud in a city public works bribery scandal.

The pleas follow the Sept. 17, 2020 federal complaint charging Alan Varela, 59, president of Oakland-based construction firm ProVen Management. and William Gilmartin II, 60, the firm's vice president, with bribery of a public official.

According to the complaint affidavit, Varela and Gilmartin provided gifts and benefits to Mohammed Nuru, then director of San Francisco’s Dept. of Public Works in exchange for inside information on a lucrative city contract.

Nuru resigned in Februrary 2020 after his arrest during a widening public corruption investigation stemming from federal criminal charges filed against him. At that time, San Francisco’s city attorney also issued subpoenas to northern California utility PG&E amd contractors Webcor, Pankow and Clark Construction, and others. 

“The investigation into San Francisco city government continues, and we believe there are even more city employees and contractors who may have pertinent first-hand knowledge of the insidious corruption plaguing San Francisco,” said FBI Special Agent in Charge Craig D. Fair in a news release. 

Varela and Gilmartin are the seventh and eighth defendants charged in a probe that has grown to a dozen. 

Varela admitted that between 2013 and the day of Nuru’s arrest on Jan. 28, 2020, he conspired with Gilmartin and others, along with Balmore Hernandez, CEO of contracting company AzulWorks Inc., to pay bribes and kickbacks to Nuru. Hernandez has also pleaded guilty and is cooperating with the FBI, say officials.

Documents reveal that Varela and his co-conspirators gave Nuru cash, equipment for his ranch, free meals and travel, entertainment and potential profits from city contracts.

Varela said he and his co-conspirators focused on winning a DPW contract and a related Port of San Francisco lease to operate an asphalt recycling plant and a concrete plant on Port property.. Varela told investigators that Nuru promised to help get contracts for himself and his co-conspirators in exchange for cash and other valuables. 

Nuru began sending drafts of San Francisco’s Request for Proposals for the asphalt recycling plant project as well as other inside information to Varela and his co-conspirators to help them win the contract, according to the affidavit.  During one discussion, Nuru asked for a tractor to use at his ranch. Varela admitted that, in February 2019, he worked with Gilmartin and Hernandez to deliver a new John Deere tractor to Nuru’s vacation home. 

In January 2020, while Nuru was finalizing the asphalt recycling plant agreements with DPW and the Port of San Francisco, he was arrested. After his arrest, DPW decided that the asphalt recycling plant didn’t make financial sense and the project never went out to bid, said department spokesperson Rachel Gordon. 

“Since the former director’s arrest more than a year ago, we have been intent on building back public trust in our organization,” says Gordon. “As for the investigations, public works staff continue to cooperate fully with all investigations regarding the former director.”

Gordon says after Nuru’s arrest, DPW implemented new policies and procedures to strengthen transparency in contracting. Staff now must: 

• Solicit the professional services of an external independent cost estimator to provide projected minimum and maximum costs for design and construction work
• Solicit bids from at least three qualified contractors for all procurements. At a minimum, two bids shall be required to move forward, unless approved  in writing by the Director of Public Works and the City Administrator
• Work with the city’s Contract Monitoring Division on outreach to ensure that Contract Monitoring Division-certified contractors are aware of bid opportunities
• Post all contract opportunities on the SF City Partners public website and on the DPW website
• Ensure a three-working day posting period between solicitation and acceptance of bids 

In addition, bids must be sent to the Public Works Contract Administration Section and not opened by the project manager or project team, says Gordon. The section will tabulate the bids received and review the information to ensure responsiveness. The project manager will ensure responsibility with a review of qualifications and experience. Once the review is complete, bid tabulations will be posted by the section to the SF City Partner and DPW websites.

Gilmartin also pleaded guilty to the charge of conspiracy to commit honest services wire fraud. The terms of his plea agreement require him to cooperate with the ongoing investigation and surrender assets acquired as a result of his illegal conduct.   

The charge of conspiracy to commit honest services wire fraud carries a maximum penalty of 20 years in prison and a fine of $250,000. Varela’s sentencing hearing is Sept. 16, and Gilmartin’s next hearing is set for Dec. 2.

ProVen Management and AzulWorks, Inc. could not be reached for comment.