Federal government takes over fund with ties to Daley’s son, Patrick
THIS WEEK BY TIM NOVAK June 27, 2011 1:16AM
Updated: June 27, 2011 9:56AM
A Chicago venture capital fund whose projects paid more than $1.2 million to former Mayor Richard M. Daley’s son has been taken over by the federal government, which says the fund owes taxpayers $21.4 million.
Cardinal Growth L.P. — which was run by attorney and former federal prosecutor Robert Bobb Jr. and accountant Joseph McInerney, a close friend of Daley’s son, Patrick Daley — borrowed nearly $51 million from the U.S. Small Business Administration over the past decade but has been unable to repay $21.4 million, court records show.
U.S. Attorney Patrick Fitzgerald filed the civil lawsuit on behalf of the federal agency on June 15. The SBA is seeking to liquidate Cardinal Growth L.P. because of mounting losses that threaten the fund’s ability to repay the taxpayer money it got from the agency.
The venture capital fund agreed to be liquidated, acknowledging that it has mounting losses.
“There’s been significant write-downs on the portfolio,” says Alan B. Roth, its attorney. “If a company is not performing well, you have to write down its value.’’
A federal judge approved the plan last week, removing Bobb and McInerney as the fund’s general partners and ordering them to turn over their records to the SBA.
Between 2002 and 2009, Patrick Daley was paid a total of more than $1.2 million by Cardinal Growth L.P. and its general partner, Cardinal Growth LLC. Those payments included $708,999 in payments to the younger Daley after Cardinal Growth L.L.C. sold Concourse Communications, a company that had just won a contract from the Daley administration to install wireless Internet service at O’Hare Airport and Midway Airport.
Cardinal Growth L.P. used some of the money it got from the SBA to invest in Municipal Sewer Services, a sewer-inspection and cleaning company that later won more than $4 million in no-bid contract extensions from City Hall.
Patrick Daley and his cousin, Robert G. Vanecko, also invested in the sewer company, which failed to disclose their ownership stake, as required under city regulations.
The then-mayor said he didn’t know his son and his nephew had a stake in the company until that was reported by the Chicago Sun-Times in December 2007.
The sewer company is no longer in business.
Patrick Daley helped Bobb and McInerney find investors for the venture capital fund — money they used to obtain matching funds from the SBA, at a rate of $2 from the federal agency for every $1 raised privately, according to company sources.
Patrick Daley still has business ties with two of the six companies remaining in Cardinal Growth L.P.’s portfolio, including Certi-Fresh Foods, Inc., a shrimp distributor in Los Angeles, the sources say.