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February 2012: Sewer company boss: I was told to hide Daley son’s role

Story originally published Feb. 25, 2012

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.

Duffy changed his story as part of his plea agreement with federal prosecutors. He did so in hopes of avoiding deportation to his native Scotland, according to his attorney, John Meyer.

Duffy, 47, is a lawful permanent resident of the United States. He and his wife live in Bartlett.

Duffy, who could not be reached for comment, pleaded guilty to lying to a federal agent.

He initially was charged last year with three counts of mail fraud, accused of participating in a fraudulent minority-contracting scheme with Jesse Brunt, the owner of Brunt Bros. Transfer Inc., to obtain city contracts to inspect and clean Chicago sewers.

Brunt — whose company also had gotten city work through the now-disbanded Hired Truck Program — is also expected to plead guilty in the case.

Brunt’s company had been certified by City Hall as a minority-owned and operated business. That helped him land millions of dollars in city business set aside for minority-owned companies. But Brunt’s company didn’t do most of the sewer work, according to prosecutors.

Patrick Daley and his cousin — neither who could be reached for comment — haven’t been charged with any crime.

The federal investigation of the sewer deal began after the Chicago Sun-Times reported in December 2007 that Patrick Daley and Vanecko had secretly held an ownership stake in the sewer company. MSS was given more than $4 million in no-bid contract extensions from Mayor Daley’s administration during the time the mayor’s son and nephew had a stake in the company, the Sun-Times reported.

The then-mayor said he didn’t know his son and nephew were involved until the Sun-Times revealed that.

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.

Duffy was the president of Municipal Sewer Services, which he founded in 2003 with investments from Cardinal Growth, whose principals were McInerney and Robert Bobb Jr., a friend of Mayor Daley. The mayor’s son and nephew invested $65,000.

Municipal Sewer Services took over two city contracts that previously were held by Duffy’s former employer, Kenny Industrial Services, which had gone bankrupt. MSS also took over Kenny’s role as a subcontractor to Brunt, responsible for inspecting and cleaning city sewers south of 63rd Street.

Patrick Daley and Vanecko cashed out their stake in MSS at the end of 2004, as the heat was on at City Hall, with federal investigators interviewing the operators of all companies involved in the Hired Truck Program, including Brunt Brothers.

Patrick Daley subsequently enlisted in the Army, though he kept his venture capital business and his vehicle registered at McInerney’s Cardinal Growth offices at 311 S. Wacker.

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.

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.

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