San Francisco public official and contractors charged with crimes related to public corruption and money laundering scheme

 

Date: June 8, 2020

Contact: newsroom@ci.irs.gov

SAN FRANCISCO — Three more people have been charged with crimes related to an investigation into corruption in San Francisco's City Hall, announced Internal Revenue Service, Criminal Investigation, Special Agent in Charge Kareem Carter. The three are San Francisco's Fix-It Director and Director of the Mayor's Office of Neighborhood Services, Sandra Zuniga; longtime employee of San Francisco's Department of Public Works and now Chief Executive Officer and Vice President of San Francisco-based construction engineering firm AzulWorks, Inc., Balmore Hernandez; and San Francisco-based construction company owner Florence Kong.

The criminal charges all relate to the arrest and charging in January of San Francisco's former Director of the Department of Public Works (DPW), Mohammed Nuru, on public corruption charges. Nuru was charged by criminal complaint for an alleged scheme to bribe a San Francisco Airport Commissioner. The complaint against Nuru also alleged he engaged in several additional schemes, including obtaining free and discounted labor and construction equipment from contractors to help him build a personal vacation home in Stonyford, Calif., while those contractors were also engaging in business with the City. The three complaints unsealed today provide numerous details of the charges leveled in the complaint against Nuru as well as a description of additional crimes that allegedly were committed.

The complaint against Zuniga of South San Francisco alleges that she both knew about and benefitted from Nuru's schemes. In addition, the complaint alleges Zuniga conspired for years with Nuru to launder the proceeds of his honest services wire fraud.

According to the complaint against Zuniga, she was Nuru's longtime romantic partner and he described to her some of the illegal actions he took in his official position. For example, Nuru allegedly described to Zuniga the actions he took to benefit a billionaire in China who was developing a large multi-million dollar mixed-use project in San Francisco, in exchange for travel and lodging, high-end liquor, and other gifts and benefits.

Further, the complaint against Zuniga charges that she laundered proceeds from Nuru's schemes in a variety of transactions over a period of several years. The complaint points out that from March 2014 to January 2020, Zuniga made over $135,000 in cash deposits, on top of her City of San Francisco paycheck. She also deposited over $8,000 in checks from associates of Nuru. During the same period, she then engaged in a variety of transactions that benefitted Nuru. For example, for more than three years, Zuniga paid the monthly mortgage on a portion of Nuru's Colusa County vacation home. She allegedly did so by depositing approximately $1,000 in cash into her checking account almost every month, and then immediately writing a check for $1,000 to Nuru's lender.

In another example of alleged money laundering, the complaint describes how Zuniga received a $5,000 check in September 2018 from a contractor who had extensive business with DPW and the City of San Francisco, and then used the funds to benefit Nuru. According to the complaint, Zuniga deposited the contractor's check into her personal checking account and then executed a series of transactions through multiple banks, which the complaint alleges was for the purpose of concealing the source and nature of the payment. In one set of transactions, Zuniga allegedly paid a $2,400 construction bill on Nuru's vacation home by writing a $2,500 check to herself, depositing it into another bank account, and then sending a check from that account to the contractor as soon as Nuru sent her the bill. Ultimately, according to the complaint, Zuniga sent an email to Nuru reporting to him how she had used the contractor's $5,000 payment.

Further, the complaint against Zuniga describes how she benefitted from some of Nuru's schemes. For example, Zuniga traveled with Nuru on a lavish two-week trip to South America in fall 2018, complete with business class flights and a stay at the Ritz-Carlton in Santiago, Chile, all paid for, or heavily subsidized by, a contractor doing business with the City.  

The criminal complaint filed against Hernandez of Burlingame describes how Hernandez used his relationship with Nuru to obtain advantages with the City for his construction engineering firm. Specifically, the complaint alleges that Hernandez established a continuing course of conduct in which tens of thousands of dollars in labor and materials were provided to Nuru in exchange for his assistance with public contracts and City approvals. In addition, the complaint alleges Hernandez sought Nuru's assistance to obtain a long term supply contract and lease agreement with the City to operate an asphalt plant on land owned by the Port of San Francisco.

According to the complaint against Hernandez, Nuru owned two adjacent 10-acre parcels of land in Stonyford, Calif., on which Hernandez built a home and made other improvements. Hernandez and Nuru referred to the property as "the ranch." Between late 2016 and the end of 2018, Hernandez allegedly supplied in excess of $250,000 in labor and materials to help Nuru build the home and make related improvements on the ranch. For example, the complaint describes how Hernandez supplied Nuru with more than $50,000 worth of tile and stone for the vacation home and then asked Nuru for help saving AzulWorks' bid for a multi-million dollar project for which it had submitted an unqualified proposal. AzulWorks ultimately won that contract and, based on publicly available data, received more than $1.9 million from the City in connection with the project. The complaint also describes how Hernandez sought help from Nuru so that he could appeal an adverse DPW order preventing Hernandez's company from removing trees at a job site on Van Ness Avenue.

With respect to Kong of Hillsborough the complaint filed against her charges that she lied to FBI investigators during the probe of Nuru's schemes. Kong owns two companies that do business with San Francisco: a construction company called Kwan Wo Ironworks and a construction debris recycling company called SFR Recovery Inc. The complaint describes recorded calls in which Kong sought to obtain business for her companies from DPW. In addition, the complaint alleges that Kong provided Nuru with cash, a Rolex watch worth more than $40,000, expensive meals, and the installation of a gate for his vacation home. Nevertheless, according to the complaint, Kong denied ever discussing business with Nuru. Kong also claimed that Nuru never helped her to obtain contracts with the City; this despite the fact that intercepted calls demonstrate that Nuru helped her with construction contracts for city facilities.

The charges contained in the criminal complaints against Zuniga, Hernandez, and Kong are mere allegations. As in any criminal case, each defendant is presumed innocent unless and until proven guilty in a court of law.

Zuniga is charged with one count of conspiracy to launder money, in violation of 18 U.S.C. § 1956(h). If convicted, she faces a maximum statutory penalty of 20 years in prison, a fine of $500,000 or twice the value of the property involved in the transactions, or both. Hernandez is charged with bribery, in violation of 18 U.S.C. § 666(a)(2). If convicted, the maximum statutory penalty is 10 years in prison and a fine of $250,000. Kong is charged with making false statements in violation of 18 U.S.C. § 1001(a)(2). If convicted, the maximum statutory penalty is five years in prison and a fine of $250,000. However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing imposition of a sentence, 18 U.S.C. § 3553.

Kong and Hernandez made their initial appearances in federal court today before U.S. Magistrate Judge Laurel Beeler, and are expected to make another appearance before the magistrate judge on June 15th for further proceedings to finalize the size and type of bond the magistrate judge will require to secure their release. Zuniga is scheduled to make her initial appearance before Magistrate Judge Beeler on June 10, 2020.

The case is being prosecuted by the Corporate Fraud Strike Force of the U.S. Attorney's Office. The case is being investigated by the IRS Criminal Investigation and FBI.