Thu, 24 April 2008
Down the drain
TARGET OF INVESTIGATION | Sewer company linked to Daley's son closes with more than 2 years left on multimillion-dollar city deal
April 24, 2008
A sewer-inspection company in which Mayor Daley's son and nephew had hidden ownership stakes has shut down, walking away from a $4.5 million contract with the city's water department in the face of an investigation by the city inspector general's office and the FBI prompted by reports in the Chicago Sun-Times.
Investigators are looking into whether Municipal Sewer Services:
• Deliberately filed fraudulent documents with the city to hide the ownership stake held by the mayor's son Patrick Daley and nephew Robert Vanecko.
• Used clout to get its city contracts.
• And actually did all the work it was paid to do.
Municipal Sewer Services closed its Near West Side offices this month, asking employees to turn in their keys, sources said. The company had more than two years remaining on its contract with the city water department. Its abrupt closing has forced the city to scramble to find a replacement to check for problems in sewers in the city's northern two-thirds.
The company's assets are set to be auctioned off at a Loop office this morning.
Municipal Sewer Services had been created five years ago to take over two city contracts from the bankrupt Kenny Industrial Services. City officials then gave Municipal Sewer Services millions of dollars in additional work, twice extending its contracts without seeking competitive bids.
In December, the Chicago Sun-Times reported that the company got that additional work from the city even as the mayor's son and nephew together had an undisclosed 5 percent ownership stake in the company.
Every owner should have been disclosed, under the city code. But the company filed papers with the city listing only three owners: Robert Bobb, a friend of the mayor; longtime Bobb business partner Joseph McInerney, and Anthony Duffy, a former employee of Kenny Industrial Services.
Mayor Daley has said he was unaware of his son's investment in Municipal Sewer Services and called it "a lapse in judgment for him to get involved with this company. I wish he hadn't done it."
The disclosure by the Sun-Times prompted the continuing investigation by the mayor's inspector general, David Hoffman, and the FBI. The Sun-Times previously reported that Hoffman was investigating Municipal Sewer Services. The FBI is jointly involved in that investigation, sources confirmed.
Municipal Sewer Services has hired attorney Dean Polales, a former federal prosecutor.
A company spokesman confirmed the closing and the hiring of Polales but would not comment further.
Daley's son and nephew no longer have a stake in Municipal Sewer Services. They cashed out their $65,000 investment in late 2004 at an undisclosed profit, as federal authorities were swarming City Hall in their investigation of the city's Hired Truck Program, which has resulted in 46 criminal convictions. One Hired Truck company -- Brunt Brothers -- also worked for Municipal Sewer Services.
Around the time that Patrick Daley cashed out, he enlisted in the U.S. Army. Daley, 32, now serves with the 82nd Airborne Division. He was recently deployed to an undisclosed location.
Since 2004, the city has paid Municipal Sewer Services more than $7.9 million. Most of that money was paid under the two contracts the company originally took over from Kenny Industrial Services -- contracts that the city extended for a year.
Daley's son and nephew were no longer investors in the company in 2005 when Municipal Sewer Services won its latest city contract.
Under that five-year deal, the city was to pay the company $4.5 million for inspecting and cleaning sewers. So far, the city has paid $1.6 million of that.
Now that the company has closed, it's uncertain who will perform that work for the city.
"The Department of Procurement Services and the water department are moving toward procuring new services,'' said Karen Bates, spokeswoman for the procurement agency.
Category:general -- posted at: 8:53pm CST