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On the Waterfront 

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

Wednesday, Oct 22 2008

Some might perceive mere assaults on good taste amid the knickknack stores, greasy spoons, and sea-lion stench at San Francisco's Pier 39. Shopkeeper Joe Abuzaid goes further: He claims to detect real, prosecutable crimes. "You have to be able to see things with different eyes," says Abuzaid, who grew up in the Israeli occupied territories, and who now sees the city's biggest tourist trap as a different type of war zone.

Abuzaid, who owns the Flags America store, takes me past a mini-doughnut stand that is supposedly a front for political payoffs. He points to a memorabilia store he says is part of a kickback scheme, and claims a store selling gadgets for left-handed people somehow dovetails into an overarching plan to defraud the city and harm hardworking businessmen like himself.

"You see that, how that store looks?" Abuzaid says, pointing to the Hard Rock Cafe, which, thanks to the supposed conspiracy, isn't doing as much business as the nearby Wipeout Bar and Grill. According to Abuzaid, the Wipeout was rewarded for its participation in the conspiracy by being allowed to have outdoor seating and gaudier signage, making it more enticing for customers.

I look at one cafe, then the other, and then back again; they seem pretty much the same. And I'm not the only skeptic.

Abuzaid is the plaintiff in a whistleblower lawsuit claiming that the Pier 39 Ltd. Partnership, which manages the pier, has cheated the City of San Francisco out of $10 million in rent. Through shell companies, alleged payoffs, and complicated sweetheart deals, he claims the pier's management has underestimated the percentage of rents it is obligated to pay the city under its lease agreement. In court testimony and filings, Pier 39's management has rejected these claims, calling Abuzaid "paranoid." Recently a judge ruled that Abuzaid didn't qualify as a true whistleblower, which the law defines as someone with exclusive private information proving a government agency was ripped off. That judge reasoned that much of the information Abuzaid offered up was old news. City Attorney Dennis Herrera also declined to pursue Abuzaid's allegations.

"Somehow, the cash-starved city decided these allegations weren't worth pursuing," Pier 39 attorney Raoul Kennedy says sarcastically. "What, in this day in age, when municipalities are hard up — who doesn't pursue a meritorious claim for back rent against a solvent entity?"

Indeed, Abuzaid is someone who might be politely referred to in the legal world as a "challenging" client. He's definitely litigious: He ran up significant legal bills in a related unfair business practices case against his Pier 39 landlords. He has filed a malpractice suit against his former attorney, and is in litigation with another landlord at the Anchorage Shopping Center on Beach Street, where he previously had a store.

Despite Abuzaid's conspiracy theories, multiple lawsuits, and fights with attorneys, I believe we should pay close attention to his whistleblower case, because it includes evidence that America's third-largest tourist attraction may be cheating the city.

I'm impressed that Abuzaid's latest lawyer, Douglas Applegate, a San Francisco complex litigation specialist, believes so strongly that this case has turned up compelling evidence of alleged fraud that he has taken it up on a contingency basis. Applegate makes a convincing case that he's found a needle in the haystack of Abuzaid's legal filings.

It's possible his faith can be attributed to a personality quirk. "That's a weakness from a business perspective, that I take cases I find interesting even if they're not that lucrative," he said. "I found Joe's case to be interesting."

In August, Applegate won an appeal for Eben Gossage, a convicted San Francisco killer, junkie, and thief who'd hoped to develop a restaurant in Sausalito but had been stymied by the city. The lawyer recently worked on a case involving the New Jersey mob leaning on dairy farmers in California's Central Valley. In this case, he's asserting that a suspicious-minded local shopkeeper has uncovered a complicated fraud conspiracy.

Pier 39 attorney Kennedy strenuously denies this version of events. And Port Commission spokeswoman Rene Dunn explains that "the port had earlier declined to exercise its right to intervene ... because, based on our forensic auditor's report, we concluded the case did not have merit." Nonetheless, I believe the case has turned up enough evidence to warrant a real attempt to untangle the shell companies and transactions surrounding the $175 million per year shopping mall at the east end of Fisherman's Wharf.

In 1977, developer Warren Simmons, with the enthusiastic backing of then-Supervisor Dianne Feinstein, obtained a 60-year lease to build a $40 million development that was supposed to extend San Francisco's vintage streetlamp-and-cobblestone charm out to the waterfront. What the city got instead was an asphalt-paved jumble of tourist-trap shops. Visitors didn't seem to mind — the place has been wildly successful. Within two years, Simmons claimed his traffic had topped Disneyland's. More recently, Pier 39 has been described in city hearings as one of the top three tourist attractions in America, with reported 2007 gross sales of $175 million.

From the get-go, however, Simmons' development had a darker side. Not long after Pier 39 opened, then-District Attorney Joseph Freitas and then-City Attorney George Agnost began investigating the fact that several city officials with roles in its development approval process had been given prime storefronts, either directly or through family members. Their investigations turned up bizarre tidbits, such as the fact that Harvey Milk assassin Dan White had obtained a potato stand at the pier as a sort of send-off from the Board of Supervisors. Then-Mayor Joseph Alioto reportedly ordered a San Francisco port official to deal only with Simmons when negotiating the lease for Pier 39.

Simmons was involved in other fishy goings-on. The developer had helped open several stores of which he was part owner, according to the Abuzaid false claims lawsuit. This created a situation where Simmons was, in effect, his own landlord. By charging lower rent to himself or to companies in which he had an interest, he could reduce the amount he had to pay the Port Authority because it calculated part of the money it was due from Pier 39 as a percentage of rent collected from stores. Simmons would share the profits from the lower rent payments with his business partners.

About The Author

Matt Smith


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