Long-stalled Hayes Valley development snared in fraud scandal

Something is rotten in Hayes Valley, or at least that’s what the San Francisco City Attorney’s Office suspects. On Thursday the city attorney issued a barrage of subpoenas that threaten to ensnare a long-delayed mixed-use project in that neighborhood in the ongoing City Hall corruption scandal focused on ex-Public Works chief Mohammed Nuru.

The development at 555 Fulton Street has been something of an enigma, backed by an overseas developer but plagued by mysterious delays that have kept it in limbo for more than five years.

Here’s what we know so far.

What is 555 Fulton?

This five-story, 139-unit mixed-use development in Hayes Valley broke ground in 2014. It comes with one-, two-, and three-bed condos starting at $889,000 and up to more than $1.2 million, advertising to deep-pocketed buyers looking for “contemporary and convenient luxury” homes in SF’s trendiest neighborhood.

Although the name of the developer is Fulton Street Ventures, in reality Chinese mega-developer R&F Properties is behind the building, designed by architect Ian Birchill.

But the most newsworthy thing about 555 Fulton is the mystifying amount of time construction has taken, largely on account of arguments with the city over alleged changes to its design in the midst of construction. The San Francisco Chronicle reported in 2018 that as many as 30 buyers walked out on purchases at 555 Fulton because they got tired of waiting.

The holdup frustrated both neighbors and the city because a big part of the appeal of the building was that it includes a much-needed grocery store in Hayes Valley that couldn’t open until construction finished. Nor is it open now; the building remains unfinished.

Photos by Patricia Chang

What’s the scandal?

Until very recently, Mohammed Nuru was director of San Francisco’s Department of Public Works (DPW), the city agency tasked with jobs like street cleaning. He also served on bodies like the Transbay Joint Powers Association, which oversaw construction of the new Transbay Terminal. Ironically, he was sometimes referred to as “Mr. Clean,” and even made the sobriquet his Twitter handle.

In January, the FBI arrested Nuru on fraud charges, with a 79-page complaint alleging that he tried to reward friends with lucrative city contracts, accepted gifts as bribes from developers and offered bribes to others, used city employees to work on his vacation home, and lied to the FBI.

For the record, Nuru hasn’t admitted any crimes and has not yet been convicted of any criminal act. His attorney denies any wrongdoing on Nuru’s part.

Although DPW may not sound like a glamorous or influential job, Nuru was a longtime City Hall veteran who knew everybody. FBI agents claim he engaged in escapades like trying to bribe an airport commissioner with an envelope full of cash and letting a developer serve him a $10,000 bottle of wine.

Nuru resigned as head of Public Works earlier this month; Mayor London Breed said for legal reasons it was impossible to fire him sooner. Now the affair has expanded to potentially ensnare permit expediter Walter Wong and R&F executive Zhang Li.

What’s the scandal got to do with the building?

City Attorney Herrera took out 14 subpoenas Thursday, all aimed at parties related to 555 Fulton. Six of them were for companies Herrera says are linked to Zhang, whom Forbes identifies as a billionaire with major properties in 28 cities and who serves as chair for 555 Fulton developer R&F.

Five more were directed at Walter Wong and his businesses. Wong is a permit expediter, a consultant who helps developers navigate the Byzantine process of entitlements in San Francisco, and he helped R&F with permits for 555 Fulton.

In 2001, the San Francisco Chronicle called Wong “one of the most influential figures in SF’s development world,” characterizing him as a powerful and wealthy deal broker, as well as a millionaire immigrant success story and Chinatown stalwart once hailed by columnist Herb Caen.

Other subpoenas went to investment firms SCGHRC Holdings III and Synergy California Green Hospitality Regional Center, as well as engineering company BKF Engineers.

The City Attorney’s office stops short of saying what it may suspect these parties of doing. But the general thrust of the investigation is clear in the disclosure that Herrera is looking for documents “that could show things or services of value being provided to a city employee or official,” up to and including cash, gifts, meals, vacations, etc.

Herrera also says he wants “communications and other records related to the progress of construction at 555 Fulton Street.”

He add, “We’re following the evidence wherever it leads.”

The city’s investigation is separate from the FBI’s. The FBI indictment includes many references to a “multimillion-dollar mixed-use development scheme” with an unidentified developer, whom agents believe bribed Nuru with travel and lodging, “high-end liquor,” and other gifts (including the aforementioned expensive wine) in exchange for help with a new building.

The complaint references delays on the project that they wanted Nuru’s help with. The FBI does not identify the developer or the building.

The FBI allegations also makes dozens of references to an SF-based permit expediter, whom agents believe paid for Nuru’s trips abroad “so that Nuru will use his official position to help [the expediter] when needed.” The complaint does not name the expediter.

Correction: Though designed in the first phase by Stanley Saitowitz, the majority of the building was done by another architect. Saitowitz tells Curbed: “We designed and got the building entitled through planning for a local developer, Henry Wong. When he sold the project to the current owners, we terminated our involvement after one brief meeting with the potential buyers, and have had nothing to do with the project since planning approval. Ian Birchill was hired as the architect, and is responsible for the current project, which is only a shadow of our originally approved design.”