Prosecution star witness cross-examined
in alleged Department of Building Inspection
Fu alleges broad conspiracy
Real estate broker, loan specialist and one time contractor, Tony
Fu, is the prosecution star witness in the trial against former
Building Inspection Manager Augustine Fallay. On the stand Thursday,
Fu alleged a broad conspiracy involving Fallay, Victor Makras,
several building inspection department personnel, Mayor Gavin
Newsom, Judge Peter Busch, and defense attorney Randall Knox.
By Brent Begin, Bay City News Service
March 30, 2007
SAN FRANCISCO (BCN) - Prosecutors in the trial of a former
San Francisco building permit official finished playing secret
FBI recordings Thursday that are central to accusations of corruption
in parts of the city's building inspection process.
The tapes, recorded over six months beginning in late 2004, are
the crux of the district attorney's case against Augustine "Gus"
Fallay, a former permit approval manager at the Department of
Building Inspection charged with 33 counts of bribery, perjury
and insurance fraud.
Former San Francisco Department of Building Inspection manager
The prosecution's star witness, a real estate broker, one-time
contractor and loan specialist Tony Fu, has taken the stand for
more than four days to corroborate the recorded conversations.
In December of 2004, the FBI outfitted Fu with hidden recording
equipment as part of their investigation into alleged corruption
in the department. Defense Attorney Randall Knox has countered
that the wire Fu wore was a way to avoid prosecution himself.
Assistant District Attorney Marc Katz claims the tapes prove
the guilt of Fallay. The tapes also hint at a larger hierarchy
of wink and handshake deals in which Fallay would pressure his
friends at the department to help move projects forward.
Assistant District Attorney Marc Katz
During conversations recorded in February and March of 2005,
Fu and Fallay repeatedly named building officials who were standing
in the way of a building project at 337 28th Ave.
Fu's ex-wife Crystal Lei had bought the property in 2002 and
as soon as May of that year neighbors had started to complain
that she was doing work on the building, such as squaring off
the corners of the building and adding another third-story unit,
without the proper permits and notification.
The first building inspector to be sent out to the property was
Joe Duffy, according to building inspection documents. Duffy recommended
two notices of violation on the property due to a third unit being
installed without a permit.
Fu and Lei maintain in a sworn statement that Duffy tried to
extort the two by demanding a bribe of $50,000 in order to sign
off on their permits.
That's when Fu, who was doing much of the work for his ex-wife,
enlisted the help of Fallay.
The two had maintained a special relationship for over 11 years
in which at least four properties were approved under the radar,
Katz said that whenever Fu ran into building permit problems,
he could take Fallay out to lunch and pick his brain. Whenever
Fu needed a favor, he could call on Fallay to grease the wheels.
In return, Katz claimed, Fu would often pay for expensive lunches
in restaurants like the Koi Palace and Imperial Chinese Restaurant,
or give Fallay cash payments in red Chinese New Year envelopes.
Fu even facilitated a $50,000 loan through his associate Demas
Yan that Fallay never paid back.
Fallay's lawyer Randall Knox, however, says Fu is a small-time
real estate man who tried to turn that $50,000 loan into blackmail
Defense Attorney Randall Knox
Knox maintains that Fallay had every intention of paying back
the loan -- no more than a friend helping out a friend -- and
as soon as Fu began to use it as leverage to get his permits approved,
Fallay refused to play ball.
During cross-examintion Knox asked Fu to name all the people
involved in the conspiracy against him and Lei.
"Maybe you Mr. Knox," Fu answered.
When asked if Mayor Gavin Newsom was part of the conspiracy,
Fu answered, "Maybe."
Fu also named Judge Peter Busch as a co-conspirator.
"I do not have that answer at this time," Fu said when
responding to Knox' question asking Fu what Busch did to aid the
But Fallay may have played a large part in fueling Fu's paranoia,
according to the tapes. He told Fu that pushing through an approval
on the 28th Avenue project might not be as easy as he hoped because
"this is a lot more than you or I."
After Duffy issued a notice of violation to Lei, Fallay called
on another friend, Inspector Ed Sweeney, to come in to approve
Sweeney, however, refused to approve the permit and, according
to Fallay in the tapes, was told by officials higher up on the
chain of command to issue a second violation.
Fallay then told Fu that he was running into problems from James
Hutchinson, the interim director of the department at the time
and Roy Guinnane, who was a member of the city's building inspection
commission at the time.
Fallay told Fu that these men were at the mercy of Victor Makras,
a local real estate mogul and current member of the San Francisco
Fire Commission. Makras had apparently gained the favor of several
people in the building world by providing them with low-interest
loans and no-down-payment deals on local real estate, Fallay said
in the tapes.
Fallay told Fu that Makras was now using those connections to
deny Lei a permit at the 28th Avenue project. Lei claims the action
was in retaliation for a $5,000 small claims award she won against
Makras for improper asbestos removal.
Makras, who has served on the Board of Permit Appeals, the San
Francisco Public Utilities Commission and the San Francisco Police
Commissions under Mayors Art Agnos, Frank Jordan and Willie Brown,
has not returned repeated calls for comment.
"I have the concrete belief," Fallay said in one taped
conversation on Feb. 19, 2005. "I have the concrete belief
that the one single person in this thing is Victor."
Knox has repeatedly questioned Fu's honesty, calling him "a
liar of almost pathological proportions" during his opening
Knox maintains Fu went to the FBI to save himself from being
implicated in his own web of bribery and corruption. During cross-examination,
Knox went out of his way to let the record reflect that Fu had
himself engaged in a crime by negotiating alleged bribes with
Knox also accused Fu of soliciting backdoor deals even as he
was working with federal authorities.
"Even when you're an informant for the FBI to try and clean
up the Department of Building Inspection, you still want help
with your project and that's really important to you," Knox
Knox's cross-examination is expected to continue Monday at 9:30
a.m. in front of Judge Ernest Goldsmith.
Judge Earnest Goldsmith
Luke Thomas contributed to this report.
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