City Attorney Dennis Herrera said he became aware of the scheme, when the contractor, Sheldon Morris, 76, of Novato, pleaded guilty in federal court in Sacramento in July to bribing employees of the cities of Sacramento and Sonoma.
Morris owned a business called Underground Express, which bought and sold used municipal equipment including water meters for recycling.
As part of the guilty plea in federal court, Morris also admitted to bribing San Francisco Public Utilities Commission employees Alexander Deanda and Gerald Lyons.
Morris said in the plea agreement that he gave Deanda $13,348 in checks and cash and Lyon $4,575 in checks, according to U.S. Attorney McGregor Scott of Sacramento.
The city's civil lawsuit alleges that Deanda and Lyon, who both worked for the commission's water department, abused their city purchasing authority to steer hundreds of thousands of dollars for supplies and services to Morris in exchange for kickbacks.
Deanda is also alleged to have secretly sold Morris nearly 5,000 pounds of valuable brass plumbing parts belonging to the city on Dec. 29, 2005, in return for a bribe.
The lawsuit is based on claims of fraud, deceit and violations of several state laws. It seeks financial compensation and penalties including triple damages from the three defendants.
San Francisco Public Utilities Commission General Manager Ed Harrington said, "These former employees have violated the public trust at the expense of our ratepayers."