San Francisco, California - A federal indictment filed Tuesday charges Harlan Kelly, the former General Manager of the San Francisco Public Utilities Commission (PUC), and Victor Makras, a locally prominent San Francisco real estate investor, with bank fraud and conspiracy to commit bank fraud, announced Acting United States Attorney Stephanie M. Hinds, Federal Bureau of Investigation Special Agent in Charge Craig D. Fair, and Internal Revenue Service-Criminal Investigation Special Agent in Charge Mark H. Pearson. The indictment also charges honest services wire fraud and conspiracy to commit honest services wire fraud in connection to a bribery scheme that was first leveled against Kelly in a November 2020 federal complaint. That complaint is superseded by today’s federal indictment.
Tuesday’s indictment alleges, as did the November 2020 complaint, that Kelly, 59, engaged in a long-running bribery scheme and corrupt partnership with an individual identified in the indictment as “Contractor #1.” Kelly was appointed General Manager of the San Francisco PUC in 2012 and held that position until November 30, 2020, when he resigned upon the filing of criminal charges in the federal complaint. Contractor #1 is a San Francisco construction company executive and permit expediting consultant who ran or controlled multiple entities doing business with the City of San Francisco. Today’s indictment alleges that Kelly provided confidential internal PUC documents and information to Contractor #1 to give Contractor #1 competitive advantages during public contract bidding competitions. In exchange, Contractor #1 lavished Kelly with personal financial benefits, including discounted construction work on Kelly’s residence and an international vacation for Kelly and his family that included Contractor #1 paying for hotel charges, hundreds of dollars for meals, and jewelry.
The indictment’s further allegations, made public for the first time today, describe the conduct leading to the indictment’s bank fraud and bank fraud conspiracy charges against Kelly and Victor Makras. Makras, 63, who resides in San Francisco, is a San Francisco real estate broker and the principal of Makras Real Estate. He also brokered a consortium of individual real estate investors (here referred to as Makras Investors) that collectively made residential real estate loans secured by San Francisco Bay Area real property and real property elsewhere. Makras sat on a number of San Francisco public agency 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’s allegations, Kelly and Makras conspired to defraud Quicken Loans, the financial lending institution, in a $1.3 million dollar real estate loan to Kelly. The indictment describes that in applying for the $1.3 million loan, Kelly and Makras represented to Quicken Loans a falsely inflated debt amount that Kelly owed on his existing real estate loan to Makras Investors. That falsely inflated amount allowed Kelly to obtain an increased amount of loan funds from Quicken Loans and at a lower loan rate. The alleged conspiracy also involved concealing from Quicken Loans the other outstanding debts of Kelly, including thousands of dollars owed to Contractor #1 for extensive remodel work on Kelly’s residence and a $70,000 personal loan made earlier by Makras to Kelly. The scheme further included repaying Kelly’s undisclosed debts using the loan proceeds from Quicken Loans. The undisclosed debts are alleged to have been paid, with the assistance of Makras, in a method designed to conceal that Quicken Loans’ loan proceeds were used to repay these other debts.
Kelly will make his initial appearance on the indictment tomorrow, October 20, in San Francisco federal court at 10:30 a.m. before United States Magistrate Judge Thomas S. Hixson.
The court date for the initial appearance of Makras on today’s indictment has not yet been set.
Kelly is charged with one count of honest services wire fraud and one count of conspiracy to commit honest services wire fraud, in violation of 18 U.S.C. §§ 1343, 1346, and 1349. If convicted, each count carries a maximum statutory penalty of 20 years in prison and a fine of $250,000, or the greater of twice the gross gain or gross loss. Kelly and Makras are both charged in one count of bank fraud and one count of conspiracy to commit bank fraud, in violation of 18 U.S.C. §§ 1344(1),(2) and 1349. If convicted, each count carries a maximum statutory penalty of 30 years imprisonment and a fine of $1,000,000, or not more than the greater of twice the gross gain or 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 imposition of a sentence, 18 U.S.C. § 3553.
The charges contained in the criminal indictment are mere allegations. As in any criminal case, the defendant is presumed innocent unless and until proven guilty in a court of law.
This case is part of a larger federal investigation targeting public corruption in the City and County of San Francisco. To date, twelve individuals have been charged, including two high-ranking San Francisco public officials, Mohammed Nuru and Harlan Kelly. Multiple city contractors and facilitators have been charged. According to the charges earlier filed against Mohammed Nuru and others, Nuru allegedly took hundreds of thousands of dollars in bribes in cash, meals, and work on his vacation home from contractors who obtained San Francisco public contracts.
The case is being prosecuted by the Corporate And Securities Fraud Team of the U.S. Attorney’s Office. The case is being investigated by the FBI and the Internal Revenue Service-Criminal Investigation (IRS-CI).