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Greasing the Rails 

Willie Brown's buddies rescue a disgraced city contractor

Wednesday, May 10 2000
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The grand opening of Muni's F line extension to Fisherman's Wharf in March marked one step in the rebirth of the city's eastern waterfront. It was also a rebirth of sorts for Stacy & Witbeck, the company that won the contract to finish the city's newest streetcar line.

If not for a well-connected lobbyist and the good graces of Mayor Willie Brown's administration, the San Francisco-based general contractor might be out of business right now. Instead, Stacy & Witbeck wound up with the lion's share of the almost $140 million in contracts to build the F line from the Castro to Fisherman's Wharf, even after the city concluded that the company submitted inflated bills to the tune of almost a half-million dollars.

In 1994, in a test of a new city policy aimed at cracking down on cheating contractors, city officials decided to ban Stacy & Witbeck from receiving any more city jobs for five years. The harsh sanction was the first of its kind, and still stands as the meanest punishment the city has ever imposed on one of its contractors. It was also costly, considering Stacy & Witbeck had garnered more than $150 million worth of work in San Francisco. The sanction was meant to send a message to all bidders for city work that there would be no boondoggles on then-Mayor Frank Jordan's watch, and it was certainly embarrassing for Stacy & Witbeck to be barred from bidding on municipal jobs in its own hometown.

The company fought the suspension all the way to the state Supreme Court. When that didn't work, it looked like Stacy & Witbeck would be out of the running for city jobs through the end of the millennium. But the salvation that was denied by the courts came with the election of Brown, whose administration decided to look more favorably on the company after it hired a close Brown ally as its lobbyist.

Stacy & Witbeck's fall from grace began with a $490,000 bill for F line construction that it submitted in 1992 to the Public Utilities Commission, which managed the municipal railway's affairs at the time. The bill was for work performed above and beyond the original contract. When the PUC looked at the numbers, however, it detected some startling problems. In order to account for the charges, the PUC concluded, Stacy & Witbeck's employees would have had to work more than 24 hours a day for five straight days.

The commission ultimately found that the bill was "grossly inflated," and that Stacy & Witbeck's arithmetic "yielded such grossly untrue results that [the company] knew or should have known that the claim was false." Outraged by what it saw as a serious breach of business ethics, the PUC decided to punish Stacy & Witbeck in 1994 by declaring the company an "irresponsible bidder," and barring it from doing business with the city for five years.

City officials applauded the action. "My question is how many times and how many other contractors have played fast and loose with our money?" then-Supervisor Susan Leal told reporters. "I'm very pleased the PUC has stepped up to this issue."

Attorneys for Stacy & Witbeck argued that the bill was legitimate. The charges, while maybe a little bit off, were nothing out of the ordinary, they said in court briefs, and if the city enforced the penalty Stacy & Witbeck would surely go out of business.

But city officials under Jordan rejected the contractor's pleas. The company went on to appeal the disbarment in San Francisco Superior Court, which granted the company an injunction, but the state's Court of Appeals and Supreme Court ruled that the city had acted within its rights. Stacy & Witbeck began serving its debarment effective September 1995.

The contractor apparently had run out of options, but then Brown ran for mayor. David Stacy, the company's co-owner, contributed $500 to Brown's campaign, and didn't stop there.

In 1996, after Brown was in office, Stacy & Witbeck hired as its agent Jim Gonzalez, who had worked as the mayor's campaign field manager before registering as a lobbyist. Gonzalez, in turn, got the company access to mayoral appointees such as Emilio Cruz, Brown's choice for general manager at Muni, and Rudy Nothenberg, Brown's pick as chairperson of the Public Transportation Commission.

Gonzalez says his work with both of these men during the election helped him open doors that had previously been closed to Stacy & Witbeck. "They would read my client's letters," Gonzalez says. "The Jordan administration wouldn't budge, but I was able to get my client's issues before these new policy-makers. That's all a lobbyist can do."

Stacy & Witbeck paid Gonzalez $16,200 in 1996, and saw almost instant results. By late summer of that year, the Public Transportation Commission, led by Nothenberg and four other Brown appointees, lifted the company's ban before it had lasted even a year. In return, Stacy & Witbeck agreed to donate $250,000 worth of work, drop its lawsuit against the city for its debarment, and promise that it would never make a similar mistake again. Stacy & Witbeck never admitted any wrongdoing.

The commission's decision to absolve Stacy & Witbeck was made against the advice of the city attorney. "There were people in government -- I can't be more specific -- who didn't want that firm debarred," Deputy City Attorney Mark Slavin says. "We felt that there had not been a sufficient learning experience on the part of Stacy & Witbeck. But we only serve as counsel. The department makes the final decisions."

H. Welton Flynn, who served on the Public Transportation Commission, declined to argue the merits of the commission's decision to reinstate the company.

Ron Wells, president of Stacy & Witbeck, says he was not employed by the company during its disbarment or subsequent appeal, and declined to comment.

Having been let off the hook by Brown's appointees, Stacy & Witbeck proceeded to win contracts for almost all the remaining work on the same project on which it had been punished for trying to cheat the city. The company bid on several contracts to finish the F line and won the majority of them by qualifying as the lowest "responsible bidder." The company only missed out on approximately $3.3 million in contracts put out to bid by Muni, according to department officials; after it came back from its hiatus it received $61 million more in contracts from the agency.

And when Stacy & Witbeck failed to win every slice of the pie, it turned to its political contacts for help.

When the company initially lost in its bid for the F line's Fisherman's Wharf Loop contract, an estimated $15 million job, Stacy & Witbeck paid Gonzalez and lobbyist Marcia Smolens of HMS Associates a combined $15,000 to convince members of the Public Transportation Commission to reject all bids and start over. Once again it was money well spent. The commission complied with the lobbyists' requests, putting the contract out to bid again, and this time, Stacy & Witbeck got it.

All told, the company won $118 million of the $137 million F line project, 86 percent of the work, according to Muni staff members . Not bad for a company that had faced extinction after being punished for attempting to pull one over on the city.

Slavin says Stacy & Witbeck's disbarment five years ago was a test case. The city had only recently enacted the law allowing it to punish contractors caught cheating the system, and it was important, Slavin says, for the city to protect its right to impose sanctions. "We thought they were dishonest," Slavin says of Stacy & Witbeck. "All contractors were put on call." But Stacy & Witbeck walked away from the imbroglio relatively unscathed, and no other contractor has been banned from doing business with the city since Brown has been in office.

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Matt Isaacs

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