On the Waterfront

Pier 39's management dismisses Joe Abuzaid as a wingnut, but this wingnut may be a real whistleblower.

I spent a couple of days tracking down and interviewing insiders with direct knowledge of the Port of San Francisco's oversight of the Pier 39 contract who have not been deposed in the Abuzaid suit. They're not in a position to speak officially, and asked that their names not be used.

They said the allegations in Abuzaid's suit of an ongoing conspiracy were news to them.

While Abuzaid's various lawsuits have never produced a judgment against Pier 39's management, that doesn't mean they haven't borne fruit. In gathering evidence for his unsuccessful suit against Pier 39, Abuzaid managed to get current Pier 39 president Bob MacIntosh to give a deposition in 2003. MacIntosh, who had served as the pier's chief financial officer, stepped into the leadership role in 2000 after previous CEO Fritz Arko quit without explanation.

In his deposition, MacIntosh and former employee David Hagerman described their ownership stakes in companies that held interests in stores at Pier 39. Their testimony seems to support Abuzaid's allegation that MacIntosh and others in management positions at the pier have at different times held secret stakes in their tenants' businesses. MacIntosh, for instance, testified that he was one of the owners of a motorized cable car company that operated throughout the 1990s from Pier 39, yet the relationship was not explained in quarterly rent reports. Applegate used the deposition testimony as a guide to pore over fictitious-business-name statements, corporate registries, campaign finance declarations, bankruptcy lawsuits, and myriad other documents and filings that might show other hidden business partnerships.

These stacks of documents depict a string of privately held companies set up to divvy part ownership in various stores, in some cases between current and former employees of Pier 39. These include magnet shops, ATMs, food carts, cable-car–style buses, a trampoline, the aquarium, tchotchke stores, and other businesses owned at one time or another by employees and their partners, children, spouses, and associates. The pier's reports to the Port Commission fail to disclose all of these relationships, creating the possibility that management could evade paying the city a percentage of gross receipts on these stores.

MacIntosh has also partnered with Pier 39 tenants in businesses in other locations — a relationship Abuzaid's suit alleges allows for rent money to change hands in ways that don't turn up on quarterly reports.

Applegate believes these off-pier business dealings could serve as a back channel for repaying rent with the Port knowing. As potential evidence, the lawyer notes how Hagerman has partnered with MacIntosh and Arko in stores in Minnesota and Florida, and how Hagerman and his partner, Ron Courtney, once bought out part of MacIntosh's interest in one of their partnerships for $200,000. "It was a windfall" to MacIntosh, Applegate says: "He gets that interest with little or no money paid. A few years later, he gives a portion of that interest back for $200,000. And he had no management authority; he was just an owner. If one of our presidential candidates had an ownership interest in something and walked away with $200,000, we'd view that as a disguised bribe, which is how I viewed this."

When I ran this allegation by Kennedy, he suggested Applegate is spouting new and unfounded allegations because the accusations leveled in the Abuzaid lawsuit failed to stick. "Applegate had multiple opportunities to give it their best shot, and the stuff you're telling me about didn't come up that way," he said. "Apparently they have better evidence when they talk to the press than when they talk to the judiciary."

The fact is, though, that Abuzaid's case offers evidence of several ownership relationships that appear to have the potential to compromise Pier 39 management's incentive to maximize the amount of rent paid to its landlord, the City of San Francisco.

If he's successful in his appeal, Applegate hopes to obtain documents Pier 39 submitted in connection with an application to obtain a $153 million bank loan that he believes might spell out how the pier's landlords and tenants do business with each other.

Under the False Claims Act, litigants can urge public attorneys to take up their claims of alleged fraud, with the caveat that the government must share in the spoils of any judgment or settlement. Applegate prepared a dictionary-sized sheaf of Pier 39–related allegations and evidence for City Attorney Dennis Herrera. But Herrera's office decided not to pursue Abuzaid's allegations, and would not comment on the case.

This means Applegate and Abuzaid must go it alone. Their whistleblower appeal awaits judgment in California's First Appellate District Court of Appeal.

By the time the case is adjudicated, San Francisco may have a new Board of Supervisors, fresh-faced and ready for action, who might expend some energy resolving to get to the bottom of why businesses on Pier 39 are tied together with a maze of shell companies, who really owns them, and whether they're paying taxpayers what they owe.

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