A newly released report from the San Francisco’s controller’s office offers recommendations to improve compliance and prevent corruption after the latest city official was sentenced to prison last month for receiving bribes in exchange for contracts.
“We can have the most comprehensive and foolproof policies in place, but they’re only as infallible as the people entrusted to enforce them,” Greg Wagner, city controller, said in a March 28 press release. “Nobody is above the rules, regardless of seniority, degree of influence, or any other factor—and the courts have determined as much.”
Harlan Kelly, former general manager of the city’s public utility commission, was charged in 2020 with accepting gifts from Walter Wong—an entrepreneur and contractor—totaling at least $16,000, including flights, jewelry, lodging, meals, private transportation, and discounted construction services. In return, he provided preferential treatment and confidential bid information for utility commission contracts, according to the controller’s report.
The gifts were never reported, as required by law, and as they came from someone with a financial stake in the decisions being made were prohibited.
The controller noted the importance of leaders setting an example based on integrity.
“This case shows just how consequential tone at the top is, and how integral it is to foster workplace cultures where staff are empowered to speak up when they see red flags at any level,” he said.
The report noted that corruption at the top of an organization allows misdeeds to proliferate and creates a culture of impropriety.
“Compliance with ethics rules must start at the top,” the report concluded. “ Moreover, when a department head is ethically compromised, they are less able and willing to hold others in the organization accountable.”
Mr. Kelly was ultimately convicted in July 2023, sentenced to four years in prison March 18, and ordered to pay a $10,000 fine for conspiracy and bank fraud after investigations unveiled his role in the pay-to-play scheme.
Representatives for the city said the fraud damaged the local government’s reputation.
“This unlawful conduct erodes public trust and undermines the work done by thousands of San Francisco public servants every day,” David Chiu, city attorney, said in the same press release. “There is no place in City government for corruption or self-dealing.”
He vowed to work to restore the public’s faith in the government by focusing on punishing those who break the rules.
“Our offices remain committed to take any necessary action to eliminate corruption in our City and root out those who abuse public trust,” Mr. Chiu said.
In the report, the controller is recommending the utilities commission and its oversight body improve transparency and improve ethics policy compliance.
City policies mandate all conflicts of interest and personal relationships with individuals with financial stakes in contracts or proceedings must be disclosed, laws restricting the acceptance of gifts must be obeyed, and no suppliers should be given competitive advantages.
The commission is advised, in the report, to prevent senior management from overriding such policies and to encourage whistleblowers by guaranteeing anonymity for those who report misdoings.
Such guidance arose after investigators discovered Mr. Kelly had personal relationships and accepted gifts from vendors that ultimately received city contracts after he “was able to influence the decisions of his subordinates” on multiple occasions.
“When leaders of an organization engage in criminal conduct, it compromises their ability to enforce rules and procedures and hold others in the organization accountable,” the controller’s report reads.
While advising the agency to revise its culture, controllers determined that other employees were not aware Mr. Kelly was accepting bribes.
Rules were broken, the report says,“caused by [Mr.] Kelly’s corrupt conduct rather than inadequate controls or complicit [utility commission] employees.
Preventing so-called “order splitting”—where orders for goods and services are divided into multiple invoices to avoid oversight for contracts of at least $10,000—is essential to ensuring compliance with local laws, according to the controller’s report.
Recent investigations into some city leaders originated with the 2020 arrest and subsequent conviction of Mohammed Nuru, former San Francisco public works director, for corruption—with another 18 city employees and contractors charged since then.
