Two City Contractors Plead Guilty To Charge Of Seven Year Conspiracy To Bribe San Francisco City Hall Official

SAN FRANCISCO – Alan Varela and William Gilmartin III appeared in federal court today and each pleaded guilty to the charge of conspiracy to commit honest services wire fraud, announced Acting United States Attorney Stephanie M. Hinds and Federal Bureau of Investigation Special Agent in Charge Craig D. Fair.  Gilmartin further agreed in his plea agreement to cooperate with federal investigators in the San Francisco City Hall corruption investigation. 

“Contractors with San Francisco like Alan Varela, William Gilmartin, and their ilk are not off the radar of our San Francisco City Hall corruption investigation just because they are not public officials,” said Acting United States Attorney Stephanie M. Hinds.  “If you bribe a public official and our investigation uncovers it, you will face justice.  Involved individuals who come to the FBI with what they know about bribes and kickbacks will be treated differently than those who don’t and get caught.”

“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. “Instead of waiting for the FBI to knock on your door, we encourage others who have knowledge of this corruption to reach out to us and cooperate with our investigation.”

Today’s developments follow the September 17, 2020, federal complaint charging Varela, 59, of Orinda, and Gilmartin, 60, of San Mateo, with bribery of a public official.  According to that complaint affidavit, Varela and Gilmartin, the president and vice-president of a Bay Area civil engineering and construction firm, respectively, provided gifts and benefits to Mohammed Nuru, then Director of San Francisco’s Department of Public Works (DPW), in exchange for inside information about an upcoming lucrative San Francisco public contract.  Varela and Gilmartin were the seventh and eighth defendants charged in the federal San Francisco City Hall graft probe that has to this date charged a dozen defendants.

Varela’s plea agreement expounds on those complaint allegations.  Varela admitted in his plea agreement that from 2013 until January 28, 2020 (the day of Nuru’s arrest), he conspired with his co-defendant Gilmartin, Balmore Hernandez – a construction company CEO who earlier pled guilty and is cooperating with the FBI – and others to pay bribes and kickbacks to Nuru.  Nuru’s position as DPW Director provided him great influence over San Francisco public contracts, permits, and construction projects as well as other City departments and private companies requiring contracts from DPW.  The bribes and kickbacks to Nuru were intended to influence his conduct in official actions.  The items of value Varela and his co-conspirators provided to Nuru included cash, equipment for Nuru’s ranch, free meals and entertainment, and the prospect of portions of the proceeds from the expected awards of City contracts.

Varela further admitted that 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 the Port of San Francisco’s land.  According to Varela’s plea agreement, Nuru agreed in exchange for cash and other valuables to use his official position to get Varela and his co-conspirators’ bid selected.  Nuru began sending early 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 better position them to have their bid selected.  Nuru also regularly met with Gilmartin and Hernandez to discuss the plans over expensive restaurant dinners, always paid for by Gilmartin. 

According to Varela’s plea agreement, Gilmartin arranged to compensate Nuru by asking an unnamed company to award a $100,000 contract to Balmore Hernandez.  The proceeds of that contract were intended to pay Nuru, and Hernandez used the proceeds to benefit Nuru.  Once the co-conspirators’ bid was selected in September 2015, Nuru continued to meet with Varela and the co-conspirators and supply additional inside information, all over meals paid for by Gilmartin that ultimately totaled approximately $20,000.  At one point during discussions, Nuru requested a tractor for his ranch.  Varela admitted that in February 2019 he coordinated with Gilmartin and Hernandez to deliver the tractor to Nuru. 

In January 2020, while the asphalt recycling plant agreements with DPW and the Port of San Francisco were still being finalized, Nuru was arrested.

Gilmartin also pleaded guilty today to the charge of conspiracy to commit honest services wire fraud.  The terms of his plea agreement require Gilmartin to cooperate with the ongoing investigation and surrender assets acquired as a result of his illegal conduct.  The criminal conduct Gilmartin admits was submitted to the Court in a separate “Exhibit A” that is filed under seal and thus unavailable to the public at this time.  

Varela and Gilmartin both entered their guilty pleas before United States District Judge William H. Orrick. Judge Orrick set Varela’s sentencing hearing for September 16, 2021, at 1:30 p.m.  Gilmartin’s next hearing date is a status conference set for December 2, 2021, at 1:30 p.m.

Varela and Gilmartin each pleaded guilty to one count of conspiracy to commit honest services wire fraud, in violation of 18 U.S.C. §§ 1343, 1346 and 1349.  The charge carries a maximum statutory penalty of 20 years in prison and a fine of $250,000 or not more than the greater of twice the gross gain or twice the gross loss.  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 the imposition of a sentence, 18 U.S.C. § 3553. 

The prosecution is being handled by the Corporate Fraud Strike Force in the Office of the U.S. Attorney for the Northern District of California and is the result of an investigation by the FBI.