By Steve Rhodes
“The owner of a sewer-inspection and cleaning business admitted Friday that he lied to federal agents when they asked him why he failed to tell City Hall that his company’s investors included the son and a nephew of then-Mayor Richard M. Daley,” the Sun-Times reported over the weekend.
“At first, when he spoke with investigators on March 10, 2008, Tony Duffy blamed his own ‘carelessness and negligence’ for omitting the names of Patrick R. Daley and Robert G. Vanecko from the ownership documents that Municipal Sewer Services was required to file with City Hall to get millions of dollars worth of city business.
“But that was a lie, according to Duffy. He now says he didn’t know at first about Daley and Vanecko’s involvement. He says that, when he found out, he went to Joseph M. McInerney, a principal in Cardinal Growth, a Chicago venture capital firm that also invested in the sewer company, and that McInerney ‘directed’ him not to change the ownership-disclosure filing, to ‘keep it the same,’ according to court records and sources familiar with the case.
“McInerney is a friend of Patrick Daley.”
Let’s go back in time before we move the story forward, shall we?
From the Sun-Times in December 2007:
Mayor Daley’s son Patrick had a hidden interest in a sewer-inspection company whose business with the City of Chicago rose sharply while he was an owner, a Chicago Sun-Times investigation has found,” the paper reported in December 2007.
Patrick Daley invested in Municipal Sewer Services in June 2003, along with Robert Vanecko, a nephew of the mayor. The pair cashed out their small investment about a year later, as federal investigators were swarming City Hall in the early days of the Hired Truck scandal.
Municipal Sewer Services had partnered with a Hired Truck company in the sewer-cleaning program.
It’s unclear how much money Patrick Daley and his cousin made from the city contracts, which were signed by the mayor. Five months after they became owners, the company got a $3 million contract extension from the city.
After cashing out at a profit, Patrick Daley – then 29 and a recent MBA graduate of the University of Chicago’s Business School – made an abrupt career change. He enlisted in the Army. He is stationed at Fort Bragg, N.C., but is to be deployed next week to an undisclosed location, the mayor confirmed this week.
The mayor’s press secretary said Daley never knew that his son and nephew had stakes in Municipal Sewer Services as the company sought City Hall’s permission to take over two contracts from Kenny Industrial Services.
“Yes, it is the mayor’s son, and, yes, it is also his nephew,” Daley press secretary Jacquelyn Heard said. “But, as you know, the mayor is a very busy man, and he does not make a practice of knowing the details of other people’s investments, including those of his son and/or his nephew.”
The story goes on to note:
Beside allowing Municipal Sewer Services to take over the contracts, City Hall twice extended the deals, by a total of 23 months, rather than seeking new competitive bids. That gave the company an additional $4 million of work.
The mayor’s son and nephew never publicly disclosed their ownership stake in Municipal Sewer Services, despite a city ordinance that appears to require such disclosure.
And:
Heard would not discuss details of the deals involving the mayor’s son and nephew, referring questions to them and the other investors in Municipal Sewer Services.
Patrick Daley could not be reached.
His cousin, Vanecko, issued a written statement that said, in part: “My cousin and I were small, passive investors in Municipal Sewer Services from approximately mid-2003 to late 2004. . . . We were not involved in running the company and had no dealings with any of its clients.”
The other investors – Robert Bobb, a former federal prosecutor who is now chairman of the investment firm Cardinal Growth, and his partner, Joseph McInerney – also declined to be interviewed for this story, though, in written responses to questions, Bobb said the company did nothing wrong.
The company’s former president, Anthony Duffy, would not comment.
In fall 2000, City Hall hired two private companies – Kenny Industrial Services and Brunt Brothers Transfer Inc. – to do videotaped inspections of sewers to spot cracks or other signs of deterioration. The work was split into three contracts. Two of them went to Kenny, which did all of the inspections north of 63rd Street. Brunt Brothers got the other contract, doing all inspections south of 63rd.
Kenny worked closely with Brunt, which was one of the largest black-owned companies in the Hired Truck Program. Brunt didn’t have its own video equipment, so Kenny ended up doing all of the sewer inspections, while Brunt hauled debris from the sewers .
In February 2003, Kenny Industrial filed for bankruptcy, listing creditors across the United States – among them Disney World and the City of Chicago.
Duffy, who was then Kenny’s sewer division manager, proposed taking over the sewer inspection business, including the City of Chicago contracts.
But Duffy needed money. So he turned to Cardinal Growth, a Loop investment firm headed by Bobb and McInerney. At the time, Patrick Daley was an unpaid intern at Cardinal.
Moving forward . . .
“Duffy says the sewer company might have faced ‘greater scrutiny’ if he’d disclosed that his partners included the mayor’s son and nephew, according to his plea agreement, entered before Senior U.S. District Court Milton Shadur.”
Greater than it’s gotten so far?
“Cardinal Growth had invested in Concourse Communications, a company the city of Chicago hired in September 2005 to install Wi-Fi Internet service at O’Hare and Midway airports. After the system was installed, Concourse Communications was sold – a deal that made $708,999 for Patrick Daley, who had helped find investors for the company.”
Gee, I wonder how he did that.
“The U.S. Small Business Administration took control of Cardinal Growth last summer, saying the venture capital firm owed taxpayers $21.4 million. Bobb and McInerney were ousted from Cardinal Growth, which had borrowed more than $50 million from the SBA over a decade – money they used to invest in companies including Municipal Sewer Services, which went out of business four years ago amid the investigation by the FBI and the city inspector general’s office.”
Now back in time again . . .
“An emotional Mayor Daley said Tuesday it was a ‘lapse in judgment’ for his son to have held a hidden interest in a sewer inspection company that did business with the city – a deal that Daley ‘s corruption-fighting inspector general has begun investigating,” the Sun-Times reported after the connection was revealed.
“Daley changed the subject to the CTA’s financial crisis. Asked a few minutes later if he knew whether his son or nephew were involved in any other city contracts, the mayor said, ‘I don’t know.'”
He didn’t ask? He didn’t say, “Patrick, what else are you involved in? Is there anything else I need to know?”
Or maybe he didn’t have to ask.
Daley also refused to answer questions the Sun-Times put in writing.
And then came this, a day later:
Inspector General David Hoffman’s decision to investigate mayoral son Patrick Daley ‘s hidden interest in a sewer inspection company that did business with the city is almost certain to widen the rift between Mayor Daley and his corruption-fighting inspector general.
But if the mayor is miffed about it, he wasn’t saying so Thursday. In fact, Daley wasn’t saying anything at all about the controversy.
Four times, reporters tried to get answers from the mayor. Five times, Daley deferred.
Q. What’s your reaction to the inspector general investigating Patrick ‘s sewer deal?
A. I have no comment on that.
Q. Do you have any problem with him investigating it?
A. Any other questions?
Q. Have you given any thought to an executive order that would bar family members [from doing business with the city]?
A. No comment. I’ve answered all that.
Q. Are you confident that nobody in City Hall helped [ Patrick ]?
A. (Cutting off the question) I have no other questions. Fran, please, you’ve done this. No other questions [on this topic]. Any other questions. . . . And I’m not mad at her. So, don’t write a big headline: ‘Mayor Daley is mad. The mayor gets mad. He gets red, screams, yells.’ No, I’m not. Please don’t write that headline. I know you want to write it. They’re having challenging times there [at the Sun-Times]. But please don’t do it to me.
The Sun-Times also noted in that same story:
“The mayor did respond to questions about the blistering report issued earlier this week by a federal hiring monitor.
In her annual report filed in federal court, Noelle Brennan accused the city of engaging in “subtle types of manipulation” that have impeded efforts to implement a hiring system free of politics 17 months after the conviction of the mayor’s former patronage chief.
Gee, don’t you miss the good ol’ days?
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These days Patrick Daley is still in business with his father.
Burke Work
“As the head of the Chicago City Council’s Committee on Finance, Ald. Edward M. Burke (14th) holds sway over all worker compensation claims filed by city workers – and all of the outside lawyers the city hires to fight those claims,” the Sun-Times reports.
“Now, Hennessy & Roach, a law firm that the powerful Southwest Side alderman’s committee paid more than $1.4 million over a three-year period to fight injury claims from city workers, is giving back: It’s hosting a political fund-raiser Thursday for the powerful alderman . . . ”
Well, maybe they just think Burke is a fine public servant who may need the money to stave off a challenge.
“. . . who already has the richest campaign war chest of any politician in Illinois.”
Oh.
“Burke had a total of more than $8.6 million in his three political campaign funds at the start of this year, records show. By comparison, Mayor Rahm Emanuel had $1.2 million, the Illinois Democratic Party had a little more than $1 million, and Gov. Pat Quinn had about $720,000.”
And no challenger on the horizon.
So Hennessey & Roach is clearly just saying thanks.
“Hennessy’s law firm has been doing work for the City Council Finance Committee for at least two decades.
“Through the committee, Burke has complete control over how to handle worker compensation cases filed by city employees. He has City Hall’s corps of staff lawyers – from the corporation counsel’s office – fight most of the claims. In some cases, he hires outside law firms – like Hennessy & Roach – to defend the city.
“Burke hired Hennessy’s law firm to defend the city in 776 worker compensation cases between 1992 and 2006, the Chicago Sun-Times has reported. In all, City Hall paid Hennessy & Roach more than $1.4 million between between 2004 and 2006.
“The firm and its lawyers have given Burke more than $30,000 in campaign contributions in the past 12 years.”
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Here’s my favorite part:
“The event has a professional sports theme – and a decided South Side bias. Top contributors – those who give $1,500 or more – are proclaimed ‘Sox fans.’ Those who give $500: ‘Bears fans.’ For $150: ‘Bulls fans.’ Not going? ‘Cubs fans.'”
It’s my favorite part not because of the Cubs diss, but because the Chicago Fire are missing. I guess nobody wanted anyone joking about kickbacks.
Higher Education
“Politicians exerted their influence at the University of Illinois to boost admissions prospects for the relatives of lobbyists, fundraisers, a union leader and other connected applicants, a Tribune investigation has found.”
I’ll have a lot more on this tomorrow; go read the whole thing now though, it’s a terrific – if outrageous – story.
Proposed New Sin Taxes
Immorality is in the eye of the beerholder.
Bulls All-Star Report
In SportsMonday.
Jimmy Kimmel Shout-Out
To Dino’s on Higgins.
The Weekend In Chicago Rock
See how Korn and Van Halen compare to the bands that played the Beat Kitchen, Lincoln Hall, the Empty Bottle and the Bottom Lounge.
Programming Note
The Beachwood Inn celebrates Eastern Orthodox Lent tonight by staying open and serving beer. I’ll be behind the bar from 5 p.m. – 2 a.m.
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The Beachwood Tip Line: Light it up.
Posted on February 26, 2012