Griftin' on the Dock of the Bay

The lease amendment was calendared for June 26. In the days before the meeting, Harrington nosed around the Pier 38 deal. "I called the head guy at [the state Boating Department]," he says. "He told me there was no urgency about the loan. Ernst was not being truthful; he had two years to get the loan.

"I looked at the lease; I found it to be the most incomprehensible lease I ever saw," Harrington continues. "Couldn't understand what the city gets in return for 36 years. Wong told me [Ernst] was parking cars and charging, which is in violation of the lease. In five years he had not done a single thing: no dry-boating, no restaurant, failed on public access, had nonmaritime tenants."

The morning of June 26 rolled around. At City Hall, Harrington received a fax of a portion of the lease amendment with a note scrawled across the top: "Willie, City pays 0 out of pocket! [Signed] Doc." Harrington says he never talked to McDonald, but he remembers the note. It was too little, too late. Harrington told the mayor Pier 38 was a problem. "The mayor said tell [Wong] to take it off the calendar and crunch the numbers."

In response to Ernst's assertion that O'Donoghue is responsible for what happened next, Harrington says, "I'm a friend of Joe's, but he had nothing to do with this." Harrington says he went to Port Commission headquarters at Pier 1 and told port officials to take the amendment off the calendar and to look into the problems with the lease. Noreen Ambrose, the commission's general counsel, says Wong removed the item shortly before the meeting was called to order.

Ernst's luxury yacht scheme appeared to be doomed.

The physical state of Ernst's pier reflects the financial condition of his business.

Wooden pilings that support the pier are rotting away. Most of the shed has no fire sprinklers, though its interior is littered with construction debris, rusting machinery, car engines, and barrels of flammable asphalt. Port engineers say the pier is a danger to the public.

Instead of cleaning up the mess, Ernst spent the summer of 2001 lobbying midlevel port officials for rent breaks. The port allowed him to go into arrears, asking only that he raise a sunken vessel, fix numerous fire safety and building code violations, and return to his original plan of building boat storage racks. Ernst declined to do any of these things; he had found a way to squeeze more money out of the state.

In October 2000, while weighing his request for a second loan, the state Boating Department asked Ernst to list his sources of income, according to e-mails obtained by SF Weekly under the California Public Records Act. A Pier 38 executive replied that berthing boats brought in about $28,000 a month. The executive mentioned that Ernst also made money from subleasing office space and from parking "memberships," but he did not quantify this income, which probably added roughly $15,000 to the total. At the time, Ernst was paying about $45,000 to $50,000 monthly in rent, loan payments, and salaries to himself and two employees. Thus, his expenses offset his income.

In July 2001, the state approved a second loan, for $1.3 million, on the strength of its own financial analysis, which projected that Ernst would be pulling in $220,000 a month by the following year. The income projection included revenues from a boat dealership and a restaurant that Ernst hoped to attract to Pier 38. However, the restaurant never materialized and the boat dealer later backed out.

Less than four months after granting the second loan, the state allowed Ernst to defer making payments on the first loan for a year. Public records show that Donald Waltz, chief of the facilities division of the state Department of Boating and Waterways, then refunded $56,000 of Ernst's previous loan repayments.

Responding to written questions from SF Weekly, Boating Department spokeswoman Megan Standard said the deferral was granted "due to observed poor business activity at Pier 38." She added, "At the time, it was apparent that business operations at Pier 38 were adversely affected by the downturn in the technology industry and the aftermath of September 11, 2001."

With the state recycling his money back to him, Ernst went on the offensive against Mayor Brown. In December 2001, he filed a legal claim against the city alleging that Harrington, the mayor's special assistant, violated city and state law by improperly intervening in "matters pertaining to the lease of property under the jurisdiction of the San Francisco Port Commission." Ernst claimed to have lost income and financing in excess of $25,000 as a result of Harrington getting his lease amendment pulled from the Port Commission agenda.

City officials denied the claim and in June Ernst sued, naming the mayor, Harrington, and the city as defendants. Ernst accused the mayor and his assistant of damaging the Pier 38 project by meddling in Port Commission business.

But Ernst never served his lawsuit on the defendants. He told SF Weekly he would drop it if the commission granted his lease amendment, although he was not optimistic about that. Ernst also said he notified port officials and City Attorney Dennis Herrera about the impending suit -- an apparent effort to use the threatened court action as leverage to get what he wanted from the port.