Flight Capital

How SFO officials used city employees and money -- in apparent violation of state and federal law -- in a very odd attempt to privatize the airports of Honduras

"I hate to break it to you, but we don't go around jimmying things up; we don't react to people's requests for information," says Rosales. "I can assure you that those agreements were in the works. The only reason those weren't consummated was that the legal review was so extensive about the thing. It's because we have so many lawyers looking at the thing that it took forever to put them in the final form. This SFOE thing is new; it's cutting edge. It means the lawyers get crazy about dotting every "I' 10,000 times. You may laugh, but that's what happens. We're pretty busy around here. The SFO Enterprises idea doesn't come out of people at the San Francisco International Airport not having anything to do."

In assessing the proposal to create a private consulting corporation, Deputy City Attorney Melba Yee accurately raised the question of potential liability to the city. As long as the accounts were kept separate, she said, the city would be safe. Accounts weren't kept separate, and by Yee's logic, the city is now not safe from liability relating to SFO Enterprises' airport privatization venture. Instead, our city government faces the prospect of being liable for airport safety in a country with some of the most dangerous airports in the world. Aside from Tegucigalpa's mountainous approach and short runway, there's Roatán, an isolated tropical island with limited firefighting or medical facilities.

Now it must be determined whether there is some way to limit or eliminate the city's new liability load.

But these issues take a back seat to possible violations of California criminal law, which explicitly prohibits public officials from giving money to private entities without authorization, and without getting value in return.

I have no evidence that Costas, Martin, Fermin, Rosales, or any of the public officials involved in SFO Enterprises used this corporation for their own financial benefit.

But a troubling fact remains: Because SFO Enterprises is a private corporation whose activities and records are secret to the public, it is all but impossible for me, most elected officials, and members of the public to monitor the activities of the corporation, its officers, or its employees. If the corporation's assets were ever used to benefit a public official, or anyone else, inappropriately, there would be little if any way for the malfeasance to be discovered.

At its inception, SFO Enterprises had a sole owner, the city of San Francisco, and airport officials suggested the city would reap profits from the private company's activities. But the city had no right to audit the books of the private company to see if profits were being made. The city had no ability to object if new owners came on board. It was clear from the beginning that the private firm had no obligation whatsoever to repatriate profits to the city. And because it is a private corporation, SFO Enterprises does not have to provide its records, or open its books, to journalists or the general public.

If this kind of arrangement, in which city resources are used in a private company distinct from the city government, is legal, a host of public officials might decide to be as enterprising as the bureaucrats at San Francisco International Airport.

Chiefs of police across the state might set up private security firms whose books are out of the reach of public disclosure laws. They might order police to spend days and weeks working for the private firms, and they might fudge their accounting so that it becomes unclear where city employee time ended and private corporate gain began.

City treasurers from here to San Diego might set up private accounting firms -- arguing that the firms would make those cities bundles of money -- and then keep the books secret and make extensive use of city employee time and expertise.

If prosecutors don't take action when laws prohibiting this kind of thing are violated, our government will wind up tangled in sweetheart deals, and smiley-faced embezzlements, and front companies, all protected by an impenetrable veil of secrecy. And when that happens, we will have created an American version of Honduras, right here in San Francisco.

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