Federal Costs In opposition to Former San Francisco PUC Normal Supervisor Expanded To Embrace Financial institution Fraud Conspiracy | USAO-NDCA
SAN FRANCISCO – A federal indictment filed today charges Harlan Kelly, former general manager of the San Francisco Public Utilities Commission (PUC), and Victor Makras, a locally known San Francisco real estate investor, of bank fraud and bank fraud conspiracy. announced Acting US Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Envoy Craig D. Fair, and Internal Revenue Service Special Envoy Mark H. Pearson. The indictment also alleges honest wire fraud and honest wire fraud conspiracy in connection with a bribery program first brought against Kelly in a November 2020 federal complaint. This lawsuit is being replaced by today’s federal prosecution.
Today’s indictment, like the November 2020 complaint, alleges that Kelly, 59, was involved in a longstanding bribery program and corrupt partnership with someone named “Contractor No. 1” in the indictment. Kelly was named general manager of the San Francisco PUC in 2012 and held that position until November 30, 2020 when he resigned after filing a criminal complaint in the federal complaint. Contractor # 1 is a senior construction company officer in San Francisco and a permit expediting consultant who directed or controlled several companies doing business with the city of San Francisco. Today’s indictment alleges that Kelly provided the # 1 contractor with confidential PUC internal documents and information in order to give the # 1 contractor a competitive edge in public procurement competitions. In turn, # 1 Contractor showered Kelly with personal financial benefits, including discounted construction work for Kelly’s residence and an international vacation for Kelly and his family, with # 1 Contractor paying hotel fees, hundreds of dollars for meals, and jewelry.
The other charges in the indictment, first made public today, describe the conduct that led to the bank fraud and bank fraud charges against Kelly and Victor Makras. Makras, 63, a San Francisco resident, is a San Francisco real estate agent and the director of Makras Real Estate. He also brokered a consortium of individual real estate investors (referred to here as Makras investors) who jointly issued residential real estate loans backed by real estate in the San Francisco Bay Area and real estate elsewhere. Makras has served on a number of San Francisco commissions and boards, including the San Francisco PUC, the San Francisco Port Commission, and the San Francisco Employees Retirement System Board.
According to the indictment allegations, Kelly and Makras have conspired to defraud Quicken Loans, the financial institution, with a $ 1.3 million real estate loan to Kelly. The indictment describes that when Kelly and Makras applied for the $ 1.3 million loan to Quicken Loans, they falsely represented an excessive amount of debt that Kelly owed Makras Investors on his existing home loan. This falsely inflated amount enabled Kelly to obtain a larger loan amount from Quicken Loans at a lower loan rate. The alleged conspiracy also included hiding Kelly’s other outstanding debts from Quicken Loans, including thousands of dollars given to Contractor No. The program also included the repayment of Kelly’s undisclosed debt with the loan proceeds from Quicken Loans. The undisclosed debt is believed to have been paid by Makras in a method designed to hide the fact that Quicken Loans’ loan proceeds were used to repay those other debts.
Kelly is out of custody and will appear for the first time on the indictment tomorrow, October 20, at 10:30 am in the United States Federal Court of Justice, Thomas S. Hixson.
Makras is out of custody and his first appearance in today’s indictment has not yet been determined.
Kelly is charged with honest service fraud and conspiracy to commit honest service bank fraud in violation of 18 USC Sections 1343, 1346 and 1349. If convicted, each charge carries a maximum statutory 20 year sentence in prison and a fine of $ 250,000 or double gross profit or loss. Kelly and Makras are both charged on bank fraud charges and bank fraud conspiracy charges in violation of 18 USC §§ 1344 (1), (2) and 1349. If convicted, each charge has a maximum statutory penalty of 30 years imprisonment and a fine of $ 1,000,000 or no more than double gross profit or loss. However, a post-conviction penalty would be imposed by the court only after taking into account the US Sentencing Guidelines and the Federal Act on the Imposing of a Penalty, 18 USC § 3553.
The allegations in the indictment are mere allegations. As in any criminal proceeding, the accused is presumed innocent unless proven guilty in court.
This case is part of a larger state investigation aimed at public corruption in the city and county of San Francisco. Twelve people have been charged so far, including two senior San Francisco officials, Mohammed Nuru and Harlan Kelly. Several city contractors and mediators were charged. According to charges against Mohammed Nuru and others, Nuru allegedly accepted hundreds of thousands of dollars in bribes in cash, meals and work in his vacation home from contractors who received public contracts in San Francisco.
The case is being pursued by the US Attorney’s Corporate and Securities Fraud Team. The case is being investigated by the FBI and the Internal Revenue Service-Criminal Investigation (IRS-CI).
