Jury convicts former San Francisco PUC head of bank fraud, bribery

The verdict follows a two-week trial before United States Chief District Judge Richard Seeborg.

Kelly, 61, of San Francisco, was arrested on a criminal complaint in November 2020, and he was tried on charges contained in a May 31, 2022, superseding indictment that included charges of conspiracy to commit honest services wire fraud and honest services wire fraud. The superseding indictment also included charges of false statements to a bank, conspiracy to make false statements to a bank, bank fraud, and bank fraud conspiracy, related to a scheme to defraud Quicken Loans in connection with a $1.3 million mortgage refinance loan obtained by Kelly.

Kelly was convicted of one count of conspiracy to commit honest services wire fraud, one count of honest services wire fraud, and all four counts related to the bank fraud scheme. The jury found Kelly not guilty of two honest services wire fraud counts.

The charges against, and prosecution of, Kelly grew out of a years-long investigation into bribery and public corruption in San Francisco city government, led by the U.S. Attorney's Office, the FBI, and IRS-CI. To date, 13 individuals have been charged in connection that larger set of investigations, including Mohammed Nuru, former director of the San Francisco Public Works department, and multiple city contractors and other facilitators of bribes and corruption.

The evidence at trial showed that Kelly, appointed in 2012 as General Manager of the San Francisco PUC, had access to confidential information about city contract bidding processes, and the ability to influence the awarding of some city contracts. Documents and testimony showed that Kelly had a close personal and professional relationship with San Francisco business owner and contractor Walter Wong, and that during the time Wong both conducted business with the city and sought additional lucrative contracts to supply the PUC with LED streetlights. While he was doing business with the city and seeking contracts, Wong provided numerous gifts, benefits, and bribes to Kelly. These bribes including discounted construction work on Kelly's personal residence and a lavish international trip hosted by and in part paid for by Wong. Evidence showed that Wong paid travel and personal expenses for Kelly and his family during a March 2016 Kelly family vacation to Hong Kong, Macau, and China, and that Wong paid for hotel expenses and incidentals such as meals and luxury excursions. Wong has previously pleaded guilty to charges that he engaged in an honest services fraud conspiracy in connection with his interactions with Kelly and others.

The evidence at trial showed that as part of the bribery conspiracy, Kelly provided confidential information and documents about the details of bids submitted by other contractors, including proprietary pricing and cost information, and information and documents with internal notes about how city employees in the PUC were evaluating and rating the bidders. The evidence showed that Kelly delivered these documents to Wong and his associates in violation of Kelly's fiduciary obligations to the city and its residents, and that the confidential information assisted Wong and his company in improving Wong's chances to obtain the contract award.

Trial evidence also showed that Kelly defrauded Quicken Loans, a financial institution, in a $1.3 million dollar real estate mortgage loan provided to Kelly. The evidence at trial showed that Kelly worked with an associate, prominent city businessman and property manager Victor Makras, to mislead the bank. According to the evidence, in the application for the loan Kelly falsely represented that he had a $915,000 mortgage and concealed the true nature of his debts from Quicken. According to the trial evidence, these misrepresentations were material to the bank's evaluation of the borrower and the loan. The outstanding debts that Kelly concealed from Quicken included a construction debt owed to the contractor, Walter Wong that amounted to about $89,000. Another debt concealed from the company was a $70,000 unsecured personal loan made by Makras to Kelly, a result of Makras directly paying Kelly's credit card debt in order to conceal the fact that Kelly received this loan from Makras.

Co-defendant Makras, 64 of San Francisco, was also charged in the May 31, 2022 superseding indictment, and was convicted of making false statements to a bank and bank fraud at a separate trial in August 2022.

The federal jury today convicted Kelly of the following:

* One count of conspiracy to commit honest services wire fraud, in violation of 18 U.S.C. Sec.Sec. 1343, 1346, and 1349, which carries a maximum possible penalty of 20 years in prison and a fine of $250,000, or the greater of twice the gross gain or gross loss

* One count of honest services wire fraud, in violation of 18 U.S.C. Sec.Sec. 1343 and 1346, which carries a maximum possible penalty of 20 years in prison and a fine of $250,000, or the greater of twice the gross gain or gross loss

* One count of making false statements to a bank in violation of 18 U.S.C. Sec. 1014, which carries a maximum possible penalty of 30 years in prison and a $1,000,000 fine

* One count of conspiracy to make false statements to a bank in violation of 18 U.S.C. Sec. 371, which carries a maximum possible penalty of 5 years in prison and a fine of $250,000

* One count of bank fraud, in violation of 18 U.S.C. Sec.Sec. 1344(1),(2), which carries a maximum possible penalty of 30 years in prison and a fine of $1,000,000, or not more than the greater of twice the gross gain or gross loss

* One count of conspiracy to commit bank fraud, in violation of 18 U.S.C. Sec.Sec. 1344(1),(2) and 1349, which carries a maximum possible penalty of 30 years in prison and a fine of $1,000,000, or not more than the greater of twice the gross gain or gross loss

As part of any sentence, the court also may order the defendant to serve an additional period of supervised release to begin after any prison term, to pay additional penalties, and to pay restitution, if appropriate. However, any sentence will 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. Sec. 3553. Defendant Kelly remains out of custody pending sentencing. No future date has yet been set.

The case is being prosecuted by the Corporate and Securities Fraud Section of the U.S. Attorney's Office. Assistant U.S. Attorneys David Ward and Kristina Green prosecuted the case at trial with the assistance of Tina Rosenbaum. The case is being investigated by the FBI and the IRS-CI.

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Original text here: https://www.justice.gov/usao-ndca/pr/jury-convicts-former-san-francisco-public-utilities-commission-general-manager-0