Herrera Names Top Building Department Official, Technology Vendors in Major Public Corruption Suit
Investigation by City Attorney's Public Integrity Task Force and City Controller Uncovers Elaborate Wrongdoing; Criminal Investigation Referred to U.S. Attorney
SAN FRANCISCO (Feb. 10, 2003) -- City Attorney Dennis Herrera filed a major public corruption lawsuit today charging Marcus O. Armstrong, the San Francisco Department of Building Inspection's top technology official, with an elaborate kickback and illegal payment scheme that defrauded City taxpayers of more than one-half million dollars over the last two years. Also named as defendants in the suit are now-defunct technology vendor Government Computer Sales, Inc.; the company's former chief executive officer and owner, Robert Fowler; and Foster City, Calif.-based technology consultant Raman Kumar.
"In masterminding an elaborate scheme intended for their own self-enrichment, Mr. Armstrong and his cronies have betrayed a public trust and cost our City something more than the money it sorely lacks," Herrera said. "Public corruption diminishes the confidence of our citizens in their government and dishonors the hard work provided by honest public servants every day. It's a slap in the face not just to taxpayers, but to firefighters and cops, nurses and teachers. They all deserve better -- and wrongs such as these deserve the most aggressive civil remedies and damages our office can obtain."
Herrera's civil lawsuit results from a yearlong investigation by the City Attorney's Public Integrity Task Force -- a specialized unit he created after taking office in January 2001 -- working in tandem with auditors from the office of City Controller Edward Harrington. Seeking substantial penalties and punitive damages in addition to the recovery of stolen funds, the suit alleges a complex web of wrongdoing that includes fraud, conversion, unfair business practices, false claims, breach of contract and violations of both state and local conflict-of-interest laws. A parallel criminal investigation -- which is likely to involve interstate activities -- has been referred to U.S. Attorney Kevin Ryan and the FBI, with whom Herrera has pledged his office's full cooperation.
According to the suit filed in San Francisco Superior Court today, the illicit kickback scheme began more than two years ago when Armstrong, information technology director for the Department of Building Inspection, pushed for Government Computer Sales, Inc. to be selected as the technology vendor on three major projects to improve the department's services to members of the general public. Hidden from City officials at the time, however, was the company's virtual insolvency: in the process of defaulting to creditors for more than $16 million, Government Computer Sales' CEO, Robert Fowler, began illegally transferring company assets offshore -- to a Caribbean bank Fowler himself controlled -- even as the company was assuring City officials of its intention to fulfill its contract with the department. It never did.
Instead, Armstrong intentionally misled superiors and lied to city auditors to gain approval for what were, in fact, illegal advance payments to Government Computer Sales that would eventually total more than $500,000. The company's work on the projects, which was incomplete at the time, would never be completed. And though most of Government Computer Sales' subcontractors would go unpaid for the projects, one subcontractor who did receive significant payments from the hemorrhaging company was Raman Kumar.
It was no lucky coincidence: according to the City Attorney's complaint, Kumar would kick back more than $21,000 of his payments from Government Computer Sales -- usually within days of receiving them -- in business checks written to "Mindstorm Technologies" and "Monarch Enterprises," both phantom front companies set-up and controlled by Marcus Armstrong. Among Armstrong's ill-gotten gains from the kickback scheme, according to the complaint, is a 2002 Mercedes-Benz automobile.
"When I set up the Public Integrity Task Force less than a year ago, I envisioned it as an innovative, multidisciplinary vehicle for civil law enforcement enabling us to aggressively pursue those who would violate the public trust," Herrera said. "Today's lawsuit furthers that vision, and I'm enormously grateful to Chief of Public Integrity Lori Giorgi and Chief of Investigations Timothy Armistead for their dedication and professionalism -- not merely on this case, but on all the cases that will continue to strengthen public integrity in our City."
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