How business was done

Mayor Lee testifies in corruption lawsuit that could cost the city $10 million

Mayor Ed Lee (with attorney Joe Cotchett) heads for the courtroom to testify in the case.

A complicated civil lawsuit alleging corruption and fraud and involving several prominent current and former city officials — including Mayor Ed Lee, who took the witness stand to discuss actions he took as city purchaser a decade ago — could end up costing city taxpayers as much as $10 million.

City and County of San Francisco vs. Cobra Solutions and Telecon was being deliberated by jurors in Superior Court at press time. It centers on a fraud and kickback scheme engineered by convicted felon Marcus Armstrong, a former Department of Building Inspection information technology manager who bilked the city out of at least $482,000 between 1999 and 2001 (see "Dirty Business," 2/8/11). His scheme was exposed by an FBI investigation following a whistleblower's complaints in September 2001 that sub-contractors were not being paid.

The City Attorney's Office accused Cobra Solutions of participating in Armstrong's fraud, but Cobra's owners denied being part of the scheme and they say their business was wrongfully damaged when their contracts were frozen by city officials.

Armstrong created two phony companies, Monarch Enterprises and Mindstorm Technologies, and ordered master contractor Cobra Solutions to use the phony sub-contractor companies to provide technology services to the city's Computer Store (a list of approved contractors) under an agreement awarded to Cobra by the Committee on Information Technology (COIT). It also partnered with another company alleged by the city to be fraudulent, Government Computer Sales, Inc. (GCSI), whose principals fled and whose whereabouts are unknown.

Cobra Solutions founder and president James Brady had raised questions about Armstrong as early as 2000, questions that triggered an unfruitful investigation by the city. Brady maintained in court testimony that Cobra, unaware of Armstrong's fraud, relied on him to sign off on work services that Armstrong's phony companies were supposed to have supplied to the city.

The Computer Store was set up by then-Purchaser Ed Lee under the administration of then-Mayor Willie Brown to centralize technology procurement across departments. Now-Mayor Lee was deposed in the case and called to the witness stand on Feb. 6, where he said he awarded Cobra Solutions the highest-rated ranking among several vendors being evaluated by COIT for master contract award status. Each of the other city evaluators, including Deputy Controller Monique Zmuda, also ranked Cobra the top service provider.

According to Armstrong's guilty plea agreement, GCSI partnered with Armstrong to defraud the City out of $240,000. Deborah Vincent James — then-director of COIT and now deceased — testified in a pre-trial deposition that GCSI was "fraudulent," that city staffers recommended against certifying the company, and that it was only awarded master contract status because of its political ties to Brown, who directed Lee to overrule the staff recommendation. In his deposition, Lee claimed he could not remember GCSI.

Vincent-James and former Purchasing Directory Judith Blackwell forwarded whistleblower complaints about GCSI to the City Attorney's Office in early 2001, but neither that office nor the Controller's Office acted on the complaints until GCSI had gone bankrupt and GCSI's owners, two foreign nationals, had disappeared.

Of note, Lee was not questioned about his and Brown's involvement in awarding GCSI its master contract status in 1998. Time restrictions placed on attorneys by Judge James McBride limited the scope of witness examinations, so the most politically explosive charges went largely unexplored in court.


Some one should investigate the no-bid contracts for the ESS Voting Systems and the additional no-bid contract on the now Sequoia Voting Systems purchased by Ed Lee, and used by San Francisco's Department of Elections for years. If my memory serves me well, each of these two shady approximately $10 million deals cost the taxpayers of San Francisco, about a $20 million dollar total hit. Rumor has it that there were more than a hand full of $500,000 payoffs to multiple players. Since both of these high-tech computer voting systems used the corrupt central tabulation unit as the single point where all the votes were set by manual input, it's pretty clear that Ed Lee and his staff may be in on wholesale elections tampering.

The ESS and Sequoia Voting Systems have since been exposed as dirty systems wide open to computer fraud, and manual over-rides in methods and process that deliver crooked results, as the votes of the voters are not even what are delivered as results. Since these corrupt systems were purchased by Ed Lee and his high tech swindle operation, and these systems successfully drove years of election tampering and fraudulent results, the elections for years are now suspect. Clearly the Administrations of Mayor Brown, Mayor Newsom and now under Mayor Ed Lee ran illegal voting operations, and crooked elections. The fact that the voters were swindled out of their votes is a much more serious set of felonies than simply stealing a few million here and there and destroying people in the process. I remember Kamala Harris's comment when she endorsed and introduced Chris Cunnie on his campaign opener, last 2011: "elections are blood sport to us here in San Francisco, and we play for keeps."

Posted by Paul Currier on Feb. 15, 2012 @ 2:20 am

This is the new standard being set by all those screaming for the head of a certain 'city official' named in another case. Maybe all those 'suspected' of involvement in this one should take a leave of absence until ALL aspects of the case have been exhaustively investigated and they have been cleared of any complicity or malfeasance.

Posted by Patrick Monk. RN on Feb. 15, 2012 @ 10:07 am

Let's ask the US Attorney to investigate contracts awarded by Ed Lee under the Brown and Brown/Newsom administrations and leave the cannabis clubs alone. I can almost guarantee some indictments if she would only look.

Posted by Guest on Feb. 15, 2012 @ 10:17 am

Is this really City and County of San Francisco vs. Cobra Solutions and Telecon, or is it Cobra Solutions and Telecon v. City and County of San Francisco. I believe that Cobra is the Plaintiff in the case to be decided today, but, not being a lawyer, I'm not sure whether there might be reason for it to have the same name as the City's suit against Cobra and Telecon.

Posted by Guest Ann Garrison on Feb. 17, 2012 @ 9:11 am

We talked about this a bit at the Project Censored book talk for its Censored 2012 Yearbook at Modern Times last night. Mirkarimi-Lopez news eclipsed all other San Francisco news for more weeks than I kept track of. Coverage of Ed Lee's involvement in a fraud and corruption scandal doesn't compare. Neither does coverage of Gascón's indictment of Go Lorrie's Vans and its top employees for absentee voter fraud.

Posted by Guest Ann Garrison on Feb. 17, 2012 @ 12:03 pm

media would just cover things to suit the agenda of the far right, I mean far left, we would all live in a Utopian Nirvana. The citizens would know better what to be "outraged" at, if the media covered abortion... I mean GMO foods... I mean Obama's birth certificate... I mean Israel... I mean we should all live like they do in European Greece. It does get confusing figuring out what to be indignant over.

If the media just suited the biases of the correct group we could end injustice, defeat the manarchy, promote the correct racialism, smash the illuminati, free Mumia, stop chem trails, promote oneness and usness, stamp out fast food, ban smokers from planet earth, create wellness and an era of good feelings.

Sadly today all the citizens are too duped by, far right wingers, I mean far left wingers, the mainstream press, or was it George Soros, or is it Koch brothers, or is it the ghost of Adolph Coors?

Posted by sure on Feb. 17, 2012 @ 12:59 pm

Yeah, watch out guys! ; )

Posted by Guest on Feb. 17, 2012 @ 4:25 pm

Very typical. Point out any potential problems with San Francisco Goverment and how it conducts its business and the City Attorney will sue you. I think it is done in the hopes that a settlement will result in you releasing any and all claims against the City. Kinda like being "leaned" on by the Mob.

Posted by roflynn on Mar. 26, 2012 @ 10:56 am