November 23, 2014
City Hall hired a minority-owned trucking company to clean and inspect sewers south of 63rd Street, but the owner secretly farmed out the multimillion-dollar job to a company owned in part by Mayor Daley’s son and nephew, according to a federal indictment returned Thursday.
The mayor’s son, Patrick R. Daley, and nephew, Robert G. Vanecko, were not charged with any wrongdoing.
Their former business partner Anthony Duffy was charged with three counts of mail fraud for allegedly participating in the latest minority-contracting scheme to hit City Hall, in which the city sets aside contracts for companies owned and operated by women and minorities that are nothing more than pass-throughs for white-owned businesses that actually do the work — and end up getting the bulk of the city money.
Duffy was president of Municipal Sewer Services, a Chicago company in which the mayor’s son and nephew had a hidden ownership stake that the Chicago Sun-Times revealed in December 2007.
The Sun-Times’ report led to the investigation by the city’s inspector general and federal authorities that resulted in the criminal charges Thursday.
A grand jury also indicted Jesse Brunt and his company, Brunt Bros. Transfer Inc., on three counts of mail fraud. The indictment seeks $3 million from Brunt, his company and Duffy — the amount the city paid Brunt’s certified minority-owned company.
Duffy, 46, of Bartlett, declined to comment. Brunt, 74, of Chicago, couldn’t be reached.
Brunt — whose company also got work through the city’s Hired Truck Program — had worked on city sewer jobs as a contractor and a subcontractor since 2000.
Starting in 2000, Brunt was a trucking subcontractor to Kenny Industrial Services, which had two city contracts to clean and inspect sewers north of 63rd Street. The city decided to hire a minority-owned company to clean and conduct videotaped inspections of the sewers south of 63rd Street and gave the contract to Brunt — who didn’t own any video equipment. So, according to the indictment, he subcontracted almost all of the work to Kenny, whose sewer business was run by Duffy.
Three years later, Kenny went bankrupt. Its sewer-cleaning equipment — and city contracts — were taken over by Municipal Sewer Services, formed by Duffy with Robert Bobb Jr. and Joseph M. McInerney, the principal operators of Cardinal Growth, a Chicago venture capital firm. Patrick Daley and his cousin invested $65,000 in MSS, but their ownership stake wasn’t disclosed, as required, on documents the company filed with City Hall.
MSS also took over Kenny’s former role as a subcontractor to Brunt Bros., cleaning and inspecting the sewers south of 63rd.
During the time the mayor’s son and nephew had a stake in MSS, it was given more than $4 million in no-bid contract extensions from City Hall. The mayor later said he never knew his son and nephew had a stake in the company until the Sun-Times uncovered it.
Daley and Vanecko cashed out their investment at the end of 2004, when federal investigators were swarming City Hall, interviewing all companies involved in the Hired Truck Program, including Brunt Bros.
Between 2000 and 2006, Brunt subcontracted all of the city sewer-inspection work south of 63rd Street to Kenny or MSS. When MSS replaced Kenny as Brunt’s subcontractor in 2003, the indictment charges, Brunt and Duffy “fraudulently inflated Brunt Brothers’ invoices to the city approximately 15 percent in excess of the amount” MSS was charging Brunt. The indictment says that scheme alleged lasted until 2005, about a year after the mayor’s son and nephew left the company.
“Patrick Daley, who owned about 2 percent of this company, walked away from it seven years ago with no knowledge of any wrongdoing,’’ said the mayor’s press secretary, Jacquelyn Heard. “I think it’s a stretch to call him a business partner’’ of Duffy.
Vanekco, Bobb and McInerney couldn’t be reached for comment.
Municipal Sewer Services remains a registered business with the Illinois Secretary of State, but the company shut its doors and walked away from its government contracts in April 2008, about five months after the Sun-Times’ investigation. Brunt Bros. remains in business, working on various government contracts as a minority-owned trucking company. It’s still certified by the city of Chicago as a minority-owned and operated sewer-cleaning company.
“M/WBE work is a vital provider of economic opportunity in communities throughout the city,’’ said inspector general Joseph Ferguson. “We will continue to work with out federal partners to eliminate the waste, fraud and abuse that has historically plagued this program.’’