Black-Owned Firms Say They Were Cheated

S.F. airport contractor Tutor-Saliba accused of creating minority fronts

Patrick Hoge / Chronicle 21nov00

San Francisco -- The largest builder at San Francisco's $2.9 billion airport expansion used two African American contractors as figureheads in bogus minority-owned companies to win contracts, the contractors told officials who oversee the city's affirmative action program.

Once the giant Tutor-Saliba Corp. won contracts that included work the city wanted to go to nonwhite builders, the company colluded with white subcontractors to sideline the two minority contractors, the men said. One of the men said a Tutor-Saliba official arranged for his company to get a $100, 000 payoff for dropping out of contracts worth nearly $11 million.

The FBI and the city attorney are investigating numerous companies for possible abuses of the city's affirmative action program. Most of them are smaller subcontractors. Tutor-Saliba, by contrast, is one of the biggest public works contractors in the state and won nearly $1 billion in work at the airport. It has not been charged with wrongdoing or named as a focus of direct inquiry.

Tutor-Saliba owner Ronald Tutor called the accusations against him "nauseating" and "a bunch of lies."

"Because we're big and successful, people snipe away at us," Tutor said. "Do you have to find something bad under every rock?"

The two contractors made their complaints against Tutor-Saliba in videotaped interviews in 1998 with the city's Human Rights Commission, which oversees the minority contract program. The commission apparently never investigated the charges fully, and the tapes were never played publicly. The Chronicle has obtained copies.

The charges by Hunters Point plumber Al Norman and Bayview drywaller August Sanford recall a San Francisco case in the 1980s in which an African American man went to prison in a public contract scandal. Prosecutors in that case said the contractor had acted as a minority front for Tutor and his white subcontractors -- two of whom also figure in the latest complaints.

The complaints also bear similarities to a lawsuit filed against Tutor- Saliba by the Los Angeles Metropolitan Transportation Authority, which accuses Tutor of using fake minority-owned firms to win hundreds of millions of dollars in subway construction contracts.

Tutor, who is now spearheading almost $2 billion in Bay Area projects, including BART's airport extension and the Richmond-San Rafael Bridge seismic retrofit, is fighting that lawsuit. If he loses, Tutor-Saliba could be liable for tens of millions of dollars in damages, and government agencies could try to bar the company and its partners from bidding on public projects.

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Strikingly similar in key details, Norman's and Sanford's charges were lodged before the FBI started investigating possible corruption in city contracting in late 1998.

Their stories were recorded that summer by the Human Rights Commission as part of a series of statements from minority- and female-owned firms. The commission wanted evidence to support updating the city law that requires companies to try to hire percentages of minority- and female-owned businesses on city jobs. The tapes were filed with the Board of Supervisors.

"We're aware of these allegations, but it's our policy not to comment about ongoing investigations," said city attorney spokesman Nathan Ballard.

The FBI, the U.S. attorney's office, and the Human Rights Commission declined to comment on the tapes.

In his statement, Sanford did not identify Tutor-Saliba or any company officials by name, saying he feared for his family's safety.

His allegations focused, however, on the prime contractor for a boarding area contract, and Tutor-Saliba leads the joint venture, Tutor-Saliba-Perini- Buckley & Co., that won that contract. A city official who requested anonymity also told The Chronicle that Sanford named Tutor-Saliba in verbal complaints.

Numerous messages left by The Chronicle at Sanford's current and past business and home addresses, as well as his son's home, were not returned.

Sanford said on tape that in a prebid meeting regarding airport work, a Tutor-Saliba-Perini-Buckley official suggested that Sanford's family-run company, S&S Construction Inc., form a joint venture with the white-owned Atlas Plastering of Fresno.

State records show that S&S Construction and Atlas Plastering formed a joint venture called Bay Area Contractors in March 1996. Airport records show S&S Construction owning 51 percent and Atlas Plastering 49 percent.

To his delight, Sanford said, Bay Area Contractors then submitted a $6.1 million bid to the Tutor-Saliba-led venture, which in May 1996 was awarded the $64.6 million boarding area contract by the San Francisco Airport Commission.

"We celebrated getting the job," Sanford recalled. "We thought we were in line to enhance our business to another level."

The taste of success turned bitter, Sanford said, when the Tutor-Saliba-led venture sent Bay Area Contractors a contract for $5.1 million of work instead of $6.1 million, and Sanford requested new documents.

"They . . . told me that they wanted no more contact with me," Sanford said.

"They wanted to have all contact and negotiation with the contractor that was my joint-venture partner," Atlas Plastering.

Bob Murphy, the owner of Atlas Plastering, denied Sanford's allegations.

Murphy insisted that Bay Area Contractors never discussed or submitted a bid for $6.1 million, said attorney Ronald Kahn.

"Bob Murphy never quoted that price," Kahn said.

Airport records from April 1996 show, however, that Ronald Tutor signed documents under penalty of perjury showing that "Bay Area Constructors" (sic) was supposed to get $6.1 million of work, just as Sanford said.

Further, the document requests credit for work going to a minority contractor, that is, S&S Construction. Such credit gives a general contractor an advantage in bidding for a public works contract.

Atlas Plastering has since had a falling out with Tutor-Saliba and is suing the company for $8.9 million. In that suit, Atlas Plastering states that the boarding area contract was really for $5.1 million.

Yet the airport has no record of Tutor ever requesting approval for changing the contract amount, which he would have been required to do by law. In the Los Angeles County lawsuit, one of the accusations is that Tutor-Saliba unilaterally changed contract amounts and took work away from minority subcontractors for which Tutor-Saliba received hiring credit.

After being rebuffed by Tutor-Saliba, Sanford said, he learned that Bay Area Contractors had, without his knowledge, won a separate $4.8 million contract with the Tutor-Saliba-led venture on the new international terminal. That contract was awarded in August 1996.

Murphy said Sanford was "not fully involved" in preparing that contract -- even though Sanford was the majority owner of the partnership -- because the work mostly involved fireproofing, not the kind of work Sanford does, Kahn said.

Sanford said he was upset enough to submit a written complaint to the Human Rights Commission in 1996 but that nothing came of it. The commission says it has no record of a written complaint, although commission minutes show that Sanford made a complaint in person in December 1998.

In response to his 1996 complaints, Sanford said, the Tutor-Saliba-led partnership sent a representative from Southern California who said, " 'Look, you're creating problems. Since you want to be a problem-maker, then we're going to offer you some money to give up (the $10.9 million in contracts).' "

Sanford said the man presented a choice: S&S Construction could try to go it alone and likely go out of business, or " 'you walk away from this project with $100,000 in your pocket and you won't have any problems -- $100,000 for doing nothing.' "

Asked by a commission interviewer whether the $100,000 was a bribe, Sanford said he did not know the legal definition of bribery, but he felt the money "was a form of it."

Sanford and his son, Jamala, gave Atlas Plastering a letter dated Dec. 13, 1996, saying they were dropping out of Bay Area Contractors in return for $100, 000 because of an "inability to perform."

A Human Rights Commission compliance officer questioned in a Jan. 16, 1997, memorandum why Atlas Plastering was paying S&S Construction when it had done no work.

Murphy did not think S&S Construction deserved any money, but he paid the Sanfords $100,000 in "consideration" at the urging of Ronald Tutor, using payments from airport work, Kahn said.

Tutor said yesterday that Sanford had been threatening litigation, and he told Murphy that paying him was the appropriate thing to do.

"If I counseled Murphy to settle up with him, I would do the same with any subcontractor," Tutor said.

Contrary to Sanford's story, Murphy contends that S&S Construction quit because it was insolvent, and he pointed out that Sanford filed for bankruptcy the next month.

In that filing, which pertained to Sanford's old company, San Francisco Interior Builders, Sanford listed debts of $8.8 million. The court denied him bankruptcy protection. State records show that S&S Construction's contracting license has been suspended for failure to comply with a civil judgment.

Tutor, meanwhile, said Bay Area Contractors was dropped from the airport jobs because the Human Rights Commission disqualified it as a minority-owned firm. None of the documentation the commission provided to The Chronicle on the joint venture said the firm had been disqualified, and commission officials would not comment on the matter.

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Like Sanford, Al Norman complained on tape that his white partners conspired with Tutor-Saliba to do business behind his back.

Norman's small plumbing company in 1993 had formed a joint venture with the white-owned Scott Co. of San Leandro, a longtime Tutor-Saliba subcontractor with $199 million a year in revenue. In 1996, the venture incorporated as Scott-Norman Mechanical Inc., and went on to win more than $50 million in airport subcontracts.

As with Sanford, documents filed with city agencies state that Norman owned 51 percent of Scott-Norman's stock. Norman complained, however, that Tutor- Saliba sent all checks directly to Scott Co., despite his protests.

"Even though I'm the president (of Scott-Norman)," Norman told the Human Rights Commission, "I still have the conspiratorial situation between Tutor and Scott concerning checks." Both Tutor-Saliba and Scott Co. knew the arrangement "doesn't meet obligations of what the (city affirmative action) ordinance says," Norman said.

Tutor said the checks were sent to Scott Co. because that was the mailing address given to him by Scott-Norman.

Norman -- who already had a serious criminal record including convictions for murder and assault with a deadly weapon -- was indicted this year in federal court along with three Scott Co. executives for allegedly using a bogus minority-owned company to win government contracts. Scott-Norman got about $80 million in public work, much of it with Tutor-Saliba.

The partnership started to unravel in November 1998, when Norman and his wife, Jacqueline, tried to block Scott Co. executives from having access to Scott-Norman's bank accounts, court records show. Scott Co. in turn sued the Normans, accusing them of simply wanting more money.

Scott Co.'s attorneys then made a remarkable move: They asserted in court papers that even though Al Norman Plumbing was the supposed majority owner, Scott-Norman was in reality run by Scott Co., with just 1 percent to 1.9 percent of gross revenue going to the Normans "for qualifying the company as a minority-owned business." Scott Co. asserted that the Normans had verbally agreed to the arrangement.

The Human Rights Commission started investigating Scott-Norman in response to a complaint from Al Norman, but that inquiry was dropped after the lawsuit was settled in January 1999, with the Normans agreeing to resign from Scott- Norman in return for $1.5 million.

Federal prosecutors allege that Human Rights Commission executive Zula Jones called off the investigation at Al Norman's request even though she knew Scott-Norman was a fraud.

By that time, however, the city attorney was on the case, and last fall the city sued Scott-Norman and its executives. A federal grand jury this spring indicted Norman, Jones and Scott Co. executives Richard Davis, Joseph Guglielmo and Robert Nurisso. All have pleaded not guilty and are awaiting trial.

Norman and his attorney did not return phone calls seeking comment.

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This not the first time Tutor, Atlas Plastering and Scott Co. have been caught up in questions involving San Francisco's minority contracting program. Nearly two decades ago, similar questions were raised during a trial of Norman's friend Charlie Walker, an African American whose companies got $5 million of work from Tutor on a post office job in Hunters Point-India Basin.

Prosecutors said Walker did little work and that his participation amounted to a minority front. The government never pursued Tutor or any of his white subcontractors. The prosecution, defense and judge, however, all said they believed that Walker was doing the bidding of Tutor and his subcontractors.

Superior Court Judge Laurence Kay said the money paid to Walker was a "payoff -- nothing more than the cost of doing business for contractors to be able to pay and hire just one black, Charlie Walker, in effect so they wouldn't have to hire any others."

Tutor personally directed subcontractors -- including Murphy at Atlas Plastering and current Scott Co. president Guglielmo -- to funnel business to Walker's company, according to transcripts of the 1984 trial. Walker said he never formally bid for any of the work.

Walker said it was only because Tutor gave the nod that the subcontractors dealt with him.

"What you have to understand is we didn't have any voice, not even them (the subcontractors)," Walker testified. "If Ron Tutor said it, that's what you have to do if you want to be on the job."

Guglielmo, then Scott Co.'s manager of industrial relations, testified that his firm simply typed purchase orders onto Walker's corporate stationery. Walker's checks had to be co-signed by a Scott Co. official, and Walker was paid commissions totaling about $20,000. Guglielmo and his attorney did not return calls for comment.

Walker also enlisted an African American man named Clyde Pierce, who had a contractor's license, to form a joint venture with Atlas Plastering. Tutor took credit for giving $3.6 million worth of drywall work to the Atlas-Walker- Pierce joint venture.

Assistant District Attorney George Butterworth showed, however, that Walker had no experience as a drywaller, and he called the joint venture a sham. Pierce also testified that he quit because he felt the venture might be an illegal attempt to circumvent minority hiring goals.

Walker never criticized Tutor, however, saying he had done much to benefit African Americans. Walker recalled on the stand how early in their relationship Tutor flew him and Murphy in a private airplane to Lake Tahoe. Tutor lent Walker $5,000 for gambling, and then the men flew back for a late dinner at Fisherman's Wharf, Walker said.

"Somebody as big as they (Tutor) are just decides that anything you want, they'll help you do it," Walker testified. "And there's no string attached to it, but merely out of friendship. You couldn't ask for better.

"It's just a break that very rarely people get, particularly my people."

The jury convicted Walker of 23 felonies and he was sentenced to state prison.

Upon Walker's release after three years, Tutor gave him a job in Southern California. Walker later returned to San Francisco, and his trucking company has since received millions of dollars of work on Tutor's Bay Area public contracts.