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San Francisco, California
FBI Probes Corruption and Reverse Discrimination
In Racial Set-Aside Programs
Calif. Repeatedly Sued for Violating Prop. 209
Last Updated
September 17, 2000

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FBI investigates San Francisco's illegal racial set-aside programs.  The Pacific Legal Foundation has sued the city (again) for illegally excluding white-owned businesses from contracting opportunities.

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(09) S.F. faces new lawsuit over racial set-asides (09/15/00)

          An Oregon contractor, Coral Corporation, submitted the low bid of $390,000 for work on San Francisco's International Airport.  But the city rejected Coral's bid in favor of a $479,000 bid from a firm which agreed to exclude white-males and white-male-owned subcontractors from a certain percentage of the contract in order to meet an illegal city requirement based on race and gender.

          Coral Corp. filed suit Wed. 9/13/00 in San Mateo County Superior Court.  The suit charges that an S.F. ordinance which grants extra preference to minority- and female-owned firms when bidding on city contracts violates Proposition 209.  Prop. 209 bars race and gender preferences in government contracting in California, and it became the law of the land in 1996, 2 years before San Francisco passed its discriminatory racial and gender preference ordinance.

          The San Jose Mercury News reports "According to the lawsuit, Coral was the lowest bidder on an airport project but was denied a contract because its proposal did not include minority- and women-owned subcontractors.

          ``Proposition 209 was intended to foreclose the use of any race-based preferences,'' said Stephen McCutcheon, an attorney for the Pacific Legal Foundation, which is handling the case. The Sacramento group has made a cause of making sure Proposition 209 is enforced. Just last week, the group argued before the state Supreme Court against a San Jose ordinance that it claims also violates Proposition 209.

          "The San Francisco Board of Supervisors approved the ordinance in question in 1998 [2 years after Proposition 209 became the law in California]. It extended an already existing affirmative action program until 2003 and was expanded to include Arab-Americans and American Indians.

          "Among other things, [San Francisco's] ordinance requires contractors to either hire a certain number of minority- and women-owned subcontractors or make a ``good faith effort'' to do so.  It also treats bids by minority- and woman-owned businesses as if they are 5 percent to 10 percent lower than the actual bid.

          "According to the suit, which also names the San Francisco Airport Commission as a defendant, Coral bid on a project for airport traffic signs earlier this year. On May 3, Coral received a letter from the airport's project manager saying his bid of $390,000 had been rejected.

          "The letter said ``Coral's bid failed to demonstrate compliance with subcontracting `goals' and also failed to demonstrate that Coral made sufficient `good faith efforts' to utilize minority and woman business enterprise subcontractors,'' the lawsuit says.

          "The contract eventually went to another contractor who had bid $479,000, the suit said.  ``In essence, the city is requiring the prime contractor to discriminate on the city's behalf,'' McCutcheon said. ``They are saying, you're going to do our bidding on discrimination.''

          "This is the second time in the past year that the city's ordinance has been challenged in court, both times by the Pacific Legal Foundation.  In July, the state Supreme Court refused to hear an appeal by a white contractor's salesman [See Tom Taber and Ford Graphics] who had argued that [Taber] was illegally barred from bidding on a city contract because it was limited to minority and female bidders.

          The related case of Tom Taber and Ford Graphics is also being handled by the Pacific Legal Foundation.  Taber is challenging a San Jose ordinance that requires contractors, such as his employer, Ford Graphics, to contact at least 4 minority- or woman-owned subcontractors in preparing their bids to the city.  The San Jose ordinance states that contractors must negotiate with the minority firms and accept their bids or prove to San Jose's satisfaction that the white-owned firm had "legitimate reasons" for rejecting the bids of the minority/woman-owned subcontractors. (Based on the San Jose Mercury News story 09/15/00 by Michael Bazeley)


(08) Mayor's Office to Recommend Minor Fixes to Racial Set-Aside Program (09/12/00)

          Following a year-long investigation by the FBI into corruption of San Francisco's racial set-aside program, black Mayor Willie Brown is attempting to save a little face by proposing some cosmetic changes to the program.

          Mayor Brown has determined that San Francisco's minority set-aside program has been suffering from a perception of inappropriate influence, i.e., he's saying it only looks like the program is a corrupt system of political and racial favoritism.  Therefore, in the manner of all good politicians, Brown has appointed a task force in the hope that this palliative will insulate him from voter backlash over his blatant use of the racial set-aside program as his own personal political payoff program.

          Brown's panel is supposed to come up with recommendations to "insulate" his racial quota program from political influence.  

          According to the San Francisco Examiner, "The panel, called the San Francisco Independent Task Force on Affirmative Action, issued a report Monday calling for the San Francisco Human Rights Commission to be stripped of responsibility for running the minority contracting program."  Mayor Brown's spokesperson, P.J. Johnston, said "First of all, he will have to get the findings and recommendations himself before responding.  He will be happy to take that report in hand and see what the task force has to say."

          "The task force said crucial decisions for certifying which companies were eligible to participate in the minority contracting program should shift to the controller's office, a relatively autonomous branch of municipal government that already tracks contracting dollars.

          "Several cities with affirmative action in contracting programs have faced allegations of manipulation of the contract awards process," the report added. "The value of insulation of the everyday operation of a program concerning high dollar amounts cannot reasonably be disputed."

          "San Francisco's Human Rights Commission is run by a director and overseen by commissioners who are appointed by and serve at the pleasure of the mayor.  The controller, though appointed by the mayor, serves a fixed, 10-year term, and can be removed only for cause.

          "San Francisco's minority contracting program came under intense scrutiny early last year in an FBI-led public corruption investigation.

          "Brown, who was running for re-election, formed the task force in August 1999 after The Examiner revealed that a company with more than $50 million in airport construction jobs meant for minority firms was managed and controlled by a large, white-owned firm from Alameda County.

          "In April, the construction company, Scott-Norman Mechanical Inc., the firm that controls it, the Scott Co. of San Leandro, four executives connected to the two companies, and a top Human Rights Commission official were all indicted by a U.S. grand jury on multiple felony charges for allegedly defrauding the minority contracting program.

          "All of the defendants have pleaded not guilty and face trial in U.S. District Court.

          "One of the companies scrutinized, copies of the subpoenas show, is Krystal Trucking, which had been repeatedly denied certification as a minority contractor until after Brown was elected and intervened on its behalf.

          "At the time, Krystal was leasing office space from a friend of the mayor, Charlie Walker, a Hunters Point trucker and activist, and had donated to Brown's 1995 mayoral campaign.

          "The task force that issued the report Monday is made up of Hernandez, the minority business advocate; Roberta Achtenberg, a San Francisco Chamber of Commerce vice president and former San Francisco Supervisor, and retired Judge Harry Low, the former Human Rights Commission president who was recently appointed state insurance commissioner.

          "Among some 50 recommendations also made in its report:  Companies should receive a site visit by city certification workers before being admitted to the program. [Another recommendation is that] A formal certification appeals process making use of administrative law judges should be established to hear challenges to certification decisions." (San Francisco Examiner, Sept. 12, 2000, by Chuck Finnie)
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(07) S.F. Mayor Willie Brown Attacked for Racial Quotas and Corruption (09/01/99)

          "Pointed, often angry charges flew last night as San Francisco Mayor Willie Brown and his two main challengers, former Mayor Frank Jordan and ex-political consultant Clint Reilly, met in their first debate. .... The main attack from Jordan and Reilly came over the FBI's probe of possible favoritism and fraud in the city's minority contracting program.

          "The two challengers assailed Brown for dragging his feet on reacting to the probe and in blaming the media for his administration's problems. ``If you really wanted to see an investigation in San Francisco, the time was in April,'' said Jordan, reacting to Brown's appointment this week of a three-person panel to recommend possible changes in the city's affirmative action programs. ``It's too little, too late. He might as well be taking the Fifth Amendment himself,'' he said. ``There is more corruption in City Hall under this mayor than at any time in my adult life,'' Reilly said.

          "[S.F. Mayor Willie] Brown said he has ordered complete cooperation with federal investigators. ``The FBI should investigate and prosecute to the full extent of the law,'' he said. ``These are serious allegations. . . . I have instructed everyone to be completely cooperative, period.'' .... The whole contracting issue is big trouble for the mayor, and both his opponents leaped to take advantage of it.

          "While Brown kept his cool, he didn't really say anything about the dispute other than that he was cooperating. Both Reilly and Jordan took their strongest whacks at the mayor on this issue and probably will continue to do so."  (San Francisco Chronicle 09/01/99)
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(06) Top [minority] contractor in SF is financed by [white] East Bay company (08/22/99)

          "A Hunters Point construction firm that has won $64 million in city contracts while claiming to be a minority business is actually financed and managed by a white-owned company from the East Bay, The Examiner has learned."  [Evil, evil! A white-owned firm tried to get business under San Francisco’s unconstitutional minority set-aside provisions! My, my.  Why didn’t I think of that?  Editor.]

          "Public records show that Scott-Norman Mechanical Inc., a tiny firm whose president is a Hunters Point plumber with a serious criminal record, has emerged since 1997 as one of San Francisco's top minority contractors, winning $56.4 million in contracts on The City's massive airport expansion project and millions more on other public works projects.

          "Federal agents probing possible corruption in San Francisco's affirmative action program for public works contractors have ordered the San Francisco Human Rights Commission to turn over all documents related to Scott-Norman Mechanical.

          "An Examiner investigation has found links between the federal focus on Scott-Norman's contracts today and a public contracting scandal 16 years ago that ended with a three-year prison term for Hunters Point trucking contractor Charlie Walker.

          "Almost all of Scott-Norman Mechanical's airport contracts were written under a program that requires a percentage of public works jobs in San Francisco go to economically disadvantaged local businesses that are owned and run by minorities or women.  [Editor’s Note: The "disadvantaged" business owners must have less than $750,000 net worth, exclusive of home ownership or business interest.  How disadvantaged is THAT?]

          "But, according to documents filed in a San Francisco lawsuit, virtually all of Scott-Norman Mechanical's business affairs - hiring and firing workers, supervising construction projects and financing the entire enterprise - are controlled by Scott Co. of San Leandro, a $199 million mechanical contracting firm owned by whites."  [Oh, gosh, whites should not be allowed to bid on San Francisco contracts!]  (Based on San Francisco Examiner, 08/22/99, by Lance Williams and Chuck Finnie.)
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(05) S.F. People-Mover Documents Subpoenaed (08/11/99)

          "Federal agents have subpoenaed all documents relating to a bitterly fought battle over the lucrative [minority set-aside quota guarantee] ``people mover'' contract at San Francisco International Airport as part of their investigation into possible City Hall corruption.

          "The subpoena, obtained by The Chronicle yesterday, also shows that federal agents' interest in Mayor Willie Brown's old friend Charlie Walker -- whose dealings with myriad city agencies are being investigated -- extends to a candy factory founded by the self-styled ``mayor of Hunters Point.''

          "The U.S. attorney's office ordered the commission to turn over any document, record, payment or memorandum connected to Mitsubishi Heavy Industries of America and ABB Daimler-Benz, better known as ADtranz, the subpoena shows.

          "Initially, Mitsubishi won the deal in December 1996 when the Airport Commission approved its low bid of under $137 million.

          "In the subpoena, federal agents told Bamba's commission to turn over documents on at least one of those subcontractors, Aladdin Builders of San Francisco.

          "Airport commissioners awarded the contract to Mitsubishi despite Bamba's report, believing that the Human Rights Commission had only advisory power.

          "ADtranz sued, and a judge told the city to start over. When ADtranz then won the contract for $116 million, some Mitsubishi supporters alleged that ADtranz had enlisted the help of unqualified minority contractors.

          "One of those who benefited from the award to ADtranz was Jim Jefferson, whose Jefferson Co. won a $15 million subcontract on the people mover. The FBI has been looking into allegations by a former Human Rights Commission secretary, Donna Rice Mason, that her boss, Zula Jones, ordered her to change dates on documents certifying Jefferson as a minority contractor."   (San Francisco Chronicle page A15 Wednesday, August 11, 1999 by Yumi Wilson)
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(04) Minority Contracts for SFO a focus of FBI probe (08/07/99)

          "An FBI probe of suspected [minority] contracting abuses in The City has zeroed in on a giant construction firm that is directing the $2.4 billion San Francisco International Airport expansion and on firms that have obtained millions in minority set-aside contracts there, The Examiner has learned.

          "In the past week, according to the information, the agents demanded extensive city records regarding:

          "The giant Tutor-Saliba Corp. The Sylmar-based firm is lead contractor on the SFO expansion and also is directing BART's $1.5 billion extension from Colma to SFO.

          "In 1985, a state appeals court decision said that Ron Tutor, the firm's CEO, participated in a scheme to subvert The City's minority-contracting program by steering business to a phony "front" corporation. Tutor was not charged with a crime in the affair, which involved construction of a post office in India Basin.

Two companies run by Charlie Walker, controversial trucking contractor.

          "In the 1980s, Walker served three years in state prison on a conviction for abusing city minority-contracting programs in a scheme that in part involved Tutor and the post office project, court records show.

          "Walker's firm has obtained an $825,000 trucking subcontract on the airport reconstruction, and a $10 million trucking subcontract on the BART airport extension. Both subcontracts were allocated under programs to benefit minority-owned businesses, public records show.

          "The Jefferson Co., owned by San Francisco businessman and affirmative-action consultant James Jefferson.

          "The Jefferson Co. holds a $10 million management subcontract on a $116 million automated people-mover system now being built at the airport.

          "Agents also sought extensive city documents regarding the lead contractor, ABB Daimler-Benz Transportation, also known as Adtranz, The Examiner learned.

Relationships with Mayor Brown.

          "The information, provided to The Examiner by a confidential news source, gives new detail about the scope and focus of the FBI probe, which involves alleged abuses in awarding public contracts, particularly in the area of minority set-asides.

Walker, Tutor and Jefferson all are political supporters of Mayor Willie Brown.

          "Walker has testified he has been friends with Brown for more than 25 years and was formerly the mayor's law client. He heads the Third Street Economic Development Corp., which has hosted lavish parties honoring Brown.

          "Tutor has made political donations to Brown. Earlier this year, amid reports that the proposed stadium-mall project for the 49ers football team was facing cost overruns, Brown at a City Hall news conference declared that Tutor had offered to do the job $75 million under budget.

          "Jefferson, a contractor and political figure in The City for 20 years, has raised campaign contributions for Brown. In 1996, Brown offered to reappoint Jefferson to The City's Public Transportation Commission, where he had originally been appointed by Mayor Frank Jordan, but Jefferson declined."  (San Francisco Examiner 08/07/99 by Chuck Finnie and Lance Williams)
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(03) Rights agency's critics sound off (08/06/99)

          "Some minority business owners and a city official say the Human Rights Commission, the agency responsible for carrying out San Francisco's affirmative action program, has been a disaster and embarrassment since long before the FBI started its current probe.

          "Not only is the commission poorly managed and ill-equipped to deal with the task of monitoring contract compliance, they say, the City's commitment to affirmative action is superficial at best.

          "The FBI has been looking into possible improprieties at the commission in the awarding of city contracts. It sealed off the office over the weekend and questioned staff members Monday.

          "The commission's responsibilities in the affirmative action program include certifying businesses as minority- or women-owned, setting hiring and contracting goals, and monitoring how city departments spend their contracting dollars.

          "Supervisor Michael Yaki worries about what impact the allegations of improprieties at the agency will have on legal challenges to San Francisco's affirmative action efforts.  'We have to have confidence in the integrity of the process, that it is working in a way that does not run afoul of constitutional due process,' he said.  'I'm very concerned ... that it would taint what we've asserted in court, (that we're using) neutral, fact-based criteria (in awarding contracts).'"  (San Francisco Examiner 08/06/99 by Julie Chao)
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(02) FBI probes human rights panel in set-aside contracting controversy (08/01/99)

          "FBI agents probing San Francisco [minority set-aside] contracting practices had the City's affirmative action agency sealed off Saturday [July 31, 1999] after it was ordered in a subpoena to turn over documents to investigators.

          "Several FBI agents appeared unannounced at the Van Ness Avenue offices of the San Francisco Human Rights Commission at about 4:30 p.m. Friday, according to a commission staffer and a security guard on duty at the time.

          "The extraordinary developments follow revelations over the past several weeks that the FBI was looking into the award of a hotly contested train contract at San Francisco International Airport and into the role played by the affirmative action agency in city contracting decisions.

          "The Examiner reported June 27 that one person under investigation is Charlie Walker, a friend and former law client of Mayor Willie Brown who once served three years in prison for fraud in programs to aid minority contractors.

          "People interviewed by the FBI told The Examiner that agents asked about Walker's relationship to the mayor, and about Brown's role in a contracting-related decision by the commission involving a trucking company represented by Walker.

          "The San Francisco investigation comes at an inopportune time, as Brown seeks re-election to a second term on Nov. 2 amid voter frustration over homelessness and the condition of the Muni. "They [the FBI] should do their duties," the mayor said during a visit Saturday at the Polk Street fair.

          "The affirmative action agency apparently is not the only focus of the probe. Late last week, when The Examiner made a request under the California Public Records Act to San Francisco airport Director John Martin for a copy of a subpoena from the FBI, the airport notified the newspaper it would have no response.

          "The Examiner first reported on April 13 that FBI agents were questioning city contractors and past and current officials [regarding San Francisco’s racial quota and set-aside programs]. They included employees at the affirmative action agency and at the airport.

          "The questioning, according to people interviewed, touched on the 1998 award of a $116.6 million contract for an automated light-rail system at SFO and their role in that process.

          "Under the City's affirmative action program, the commission enforces rules that require lead contractors on big public projects to give a certain percentage of the work to businesses owned by economically disadvantaged minorities and women.

          "The commission certifies which minority companies qualify for the program and whether lead contractors are meeting goals for sharing the work with minority businesses.

          "Gail Roberts, a former commission staffer, testified about a 1996 meeting in the mayor's office during which Brown questioned the then director of the agency, Edwin Lee, about a decision he made to rule Krystal Trucking ineligible for the affirmative action program.

          "Though Brown never explicitly told Lee to reverse himself, Roberts told The Examiner, Krystal Trucking was later admitted to the program.

          "Since 1996, Krystal has been awarded subcontracts worth $684,000 for work on the airport's massive expansion project, city records show."  (The San Francisco Examiner 08/01/99, page A1, by Chuck Finnie)
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(01) FBI probing S.F. agency, paper reports (08/02/99 - dead link)

          "SAN FRANCISCO -- The Human Rights Commission was sealed off to employees over the weekend by FBI agents investigating the city's contracting practices, the San Francisco Examiner reported.

          "The agents arrived about 4:30 p.m. Friday and staffers for the affirmative action agency were told not to report for work until 9 a.m. today, the newspaper reported yesterday.

          "Under the city's affirmative action program, the Human Rights Commission oversees requirements that major contractors on public projects give a certain percentage of work to minorities and women. The commission approves companies for the program.

          "The FBI probe apparently includes a high-speed rail contract at San Francisco International Airport, as well as the commission's role in contracting decisions, the newspaper reported.

          "Gail Roberts, a former employee, testified [before a grand jury investigating the matter] about a 1996 meeting during which Mayor Brown questioned the then-commission director Edwin Lee about ruling Krystal Trucking ineligible for the affirmative action program.

          "Although Brown never asked for the decision to be changed, Krystal Trucking was later admitted. At the time, the trucking company was represented by Charlie Walker, a close friend and former law client of the mayor's.

          "Since 1996, Krystal Trucking has been awarded subcontracts worth $684,000 for work on the airport expansion project.

          "According to people questioned in connection with the probe, agents were interested in the $116.6 million contract for an automated light-rail system at the airport, the newspaper reported.   (Associated Press via the Union Tribune 08/02/99)
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*  We use the term reverse discrimination reluctantly and only because it is so widely understood.  In our opinion there really is only one kind of discrimination.