Oakland-Based Government Finance Director Pleads Guilty To Embezzling Public Funds

SAN FRANCISCO –  Clarke J. Howatt, a former public finance director of the Association of Bay Area Governments (ABAG), pleaded guilty today to embezzling almost $3.9 million from that government authority, announced Acting United States Attorney Brian J. Stretch and Federal Bureau of Investigation Special Agent in Charge David J. Johnson.  The guilty plea stems from the February 13, 2015, information filed by the federal government charging Howatt with wire fraud for fraudulently inducing ABAG and its related Finance Authority for Non-Profit Corporation (FAN) to make payments to accounts he controlled.

In the plea agreement, Howatt, 56, formerly of Oakland, admits he engaged in a scheme to fraudulently obtain funds from ABAG/FAN.  The plea agreement describes the transactions Howatt conducted to purloin the money.

ABAG, headquartered in Oakland, is a Joint Powers Agency formed in the 1960s.  As ABAG’s Financial Services Director, Howatt oversaw all bonds issued on its behalf by FAN.  In some case, Howatt also had the power to request that FAN make certain payments to, among others, entities completing work for certain public capital improvement projects.  In the plea agreement, Howatt admits he used his power to convince FAN to make payments to accounts he controlled by disguising the transactions as legitimate expenditures.

One of the transactions described in the plea agreement involves Howatt’s creation of a Nevada corporation and the establishment of a related bank account to receive FAN funds.  In June of 2006, FAN approved an indenture and issued a series of bonds to pursue a public capital improvement project in the South of Market neighborhood of San Francisco.  The project was intended to offset the impact of a high-rise building to be built on Rincon Hill.  Howatt admitted that he opened a Citibank account in the name of the Nevada corporation.  Then, in August of 2014, Howatt requested that the FAN reimburse the corporation for more than a million dollars in expenditures incurred as part of the capital improvement project.  The request for reimbursement was purported to be for “reimbursable costs, fees, and expenses submitted to the ABAG Finance Authority [FAN]” by the developer of the Rincon Hill project; however, the request was truly from Howatt.  FAN eventually made a wire transfer of $1,296,340.66 to the Citibank account controlled by Howatt.  

In another scheme, Howatt convinced FAN to issue over a million dollars to “Windemere BLC Land Company LLC,” another company associated with Howatt.  This company was purported to be a developer of a housing development located in San Ramon, Calif.  FAN issued several bonds and made numerous legitimate expenditures in connection with the public capital improvements associated with Windemere Ranch and its special districts.  Nevertheless, several years after the improvements funded by the bonds had been completed, there remained surplus funds from bonds issued by the FAN.  In 2011, Howatt convinced the FAN to issue a wire transfer moving over a million dollars of the surplus funds to an account created for the company he controlled. 

In total, Howatt admitted he illegally obtained $3,876,135.21 as a result of his scheme to defraud.  He pleaded guilty to the single count of wire fraud in the information, a violation of 18 U.S.C. § 1343.

Howatt currently is released from custody pending sentencing.  He is scheduled to appear for sentencing on March 23, 2016, before the Honorable Charles R. Breyer, District Judge.  The maximum penalty for a violation of 18 U.S.C. § 1343 is 20 years’ imprisonment; a fine of $250,000 or twice the gross gain or loss, whichever is greater; and 3 years of supervised release.  However, any sentence following conviction for this offense would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

Assistant U.S. Attorneys Kyle Waldinger and David Countryman are prosecuting the case with the assistance of Jessica Meegan and Carolyn Jusay.  The prosecution is the result of an investigation by the FBI.