When Do Losers Win?

When Willie Brown is mayor, and one of their limiteds is Angelo Tsakopoulos

Even as one of his real estate investments, Live Oak Associates II, was selling off its last subdivisions in south Sacramento, Willie Brown won the race to be mayor of San Francisco. In January 1996, shortly after he was sworn in as mayor, Brown appointed two longtime supporters to seats on the San Francisco Public Utilities Commission. The new commissioners, Henry Berman, a Seagram's liquor distributor, and Victor Makras, a realtor, soon took what seemed to be strange positions in a bidding contest for a lucrative municipal golf course management contract over which the PUC held sway. They supported a group known as Crystal Springs Golf Partners, L.P. for the contract, even though that partnership had promised to pay the city $7 million less than its competitor, the widely experienced and well-financed Arnold Palmer Golf Management Co.

Crystal Springs Golf Partners won the contract, and it was an award that raised questions -- and eyebrows -- almost immediately. Contemporaneous news reports mentioned that competition for the contract had been intense, and that prominent City Hall lobbyists had been involved. At the time, however, press accounts did not provide some information that may have answered a lot of questions about why the competition went the way it went: The winning partnership is headed by Tom Isaak, a former employee of Assembly Speaker Willie Brown, and its partners include Sacramento-based real estate magnate and Democratic Party financier Angelo Tsakopoulos.

Late in December 1995, the PUC staff selected a short-list of qualified bidders for a contract to lease and manage the Crystal Springs golf course in Burlingame, located on the beautiful shores of the city's Lower Crystal Springs reservoir. A company that includes legendary golfer Arnold Palmer scored the highest of 15 bidders, in the eyes of PUC staff. Isaak's partnership did not make a staff-proposed cut down to four finalists.

The PUC originally intended that the contract be awarded to the company that "generated the most hard cash to the City." Before the bids were handed in, the amount of "base rent" was announced as the main attribute that would be used in judging the qualifications of the bidders. And, according to public records, Arnold Palmer's bid would have generated the most income for the city, and the company, which manages 40 golf courses across the nation, sported a proven record.

But then strangeness began to happen. Without giving a reason, PUC Commissioner Robert Werbe insisted that Crystal Springs Golf Partners be added to the short-list -- even though Isaak's limited partnership did not come close to matching the management experience of the Palmer company, according to the PUC's bid scoring system. And the bottom line was, actually, the bottom line: Arnold Palmer promised to pay the city a yearly base rent of at least $1.25 million; CSGP guaranteed just half that. And if the course income reached a certain level, Palmer promised 45 percent of greens fees to the city; CSGP offered only 25 percent. At a minimum, these differences would amount to at least $7 million over the 20 years of the contract. (Werbe's insistence on keeping the CSGP bid in play was odd in other ways, too. The partnership did not intend to manage the Crystal Springs golf course itself; it would hire CourseCo Inc., a company owned and operated by Isaak, to do the job, meaning that the city would contract not with the company performing the work, but with a middleman. Werbe did not return calls seeking comment.)

But the Public Utilities Commission agreed to include Crystal Springs Golf Partners, L.P. in the list of finalists. And at the commission's first meeting after Brown was sworn in as mayor, Makras and Berman were somehow able to convince the commission to award the contract to a firm that, a mere month earlier, staff had considered out of the running. The Arnold Palmer Golf Management Co. formally protested the contract award, alleging that the city had chosen to make a risky deal with a manager it could not even sue, and had broken its own bidding laws. (Strangely, after Isaak's group won, it negotiated a lease price that was much closer to Arnold Palmer's offer than its own bid. This is an indication that price did, indeed, matter -- at least, once the right bidder had been found.)

Arnold Palmer's lawyers at Morrison & Foerster said they were confident that they could prevail in court. But three weeks after filing the bid protest, the Arnold Palmer firm suddenly withdrew it. Peter J. Nanula, co-owner of the company, still has trouble talking about the bid results. He says the city's reasons for changing the criteria used in judging bids were "mysterious." Nanula says he dropped the bid protest because it "was not wise to pursue it."

"I knew who Tsakopoulos was," Nanula says. "I'd rather not dig it up."

Isaak also clearly knows Tsakopoulos; he invested in Tsakopoulos' Kramer Ranch, a new suburb in Sacramento County. Isaak knows Willie Brown, as well, having worked as Brown's director of majority services, and also as chief administrative officer of the state Legislature, under Speaker Brown's supervision, in the early 1980s. And Tom Isaak is not averse to letting you know that he knows the people it helps to know. He insists he did not contact Mayor Willie Brown directly about the Crystal Springs contract. As for indirect means, though ....

"Generally," he says, "people I know are well informed about what I do. And it gets to the decision-makers."

 
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