Former Mayor Daley’s son profited after airport Wi-Fi deal
THIS WEEK BY TIM NOVAK & CHRIS FUSCO June 6, 2011 1:58AM
Patrick Daley and then-Mayor Richard Daley last year. | Rich Hein~Sun-Times
Updated: September 22, 2011 12:31AM
For years, City Hall maintained that Mayor Richard M. Daley’s son, Patrick Daley, had no financial stake in the deal that brought wireless Internet service to city-owned O’Hare Airport and Midway Airport.
But it turns out that the younger Daley still reaped a windfall of $708,999 when Concourse Communications was sold in 2006, less than a year after the Chicago company signed the multimillion-dollar Wi-Fi contract with his father’s administration, company documents obtained by the Chicago Sun-Times show.
Concourse disclosed its investors to the city, as required. Patrick Daley wasn’t one of them.
But he still had a stake in Concourse’s success, the company documents show, and profited as a result when the company was sold after winning the city contract.
Daley’s role was as a middleman who lined up investors for Concourse. Among them: M. Blair Hull, the millionaire commodities trader who mounted an unsuccessful campaign for the Democratic Party’s nomination for U.S. Senate in 2004.
On June 27, 2006, nine months after it signed the potentially lucrative city contract for airport Wi-Fi service in Chicago, Concourse was sold — at a 33 percent profit — to Boingo Wireless Inc. for $45 million.
Three days later, Patrick Daley got his first payment as a result of the sale, the documents show — for $164,789.
Over the next 17 months, with Daley now serving in the U.S. Army, he got four more payments resulting from the sale, totaling $544,210, the documents show, for a total of $708,999.
Shortly after Patrick Daley received the last of those payments, his father’s City Hall press secretary, Jacquelyn Heard, told a Sun-Times reporter in a Dec. 3, 2007, interview, that Patrick Daley “has no financial interest with the Wi-Fi contract at O’Hare.”
Exactly how the deal was structured isn’t clear. Neither Patrick Daley nor his father replied to interview requests. But the amount that Patrick Daley was paid was linked to the sale price of the company, a source with knowledge of the arrangement said: The more the company was sold for, the more Patrick Daley would be paid.
The elder Daley — who left office May 16 after deciding not to seek re-election — is now in business with his son. The two Daleys are working out of offices on Michigan Avenue on international business deals.
Patrick Daley’s Wi-Fi windfall was part of $1.2 million he was paid as a result of deals he had with Cardinal Growth, a Chicago venture-capital firm that invested in Concourse and other businesses. Among those businesses was a sewer-inspection company that got millions of dollars in no-bid city-contract extensions.
In addition to Patrick Daley, Cardinal Growth also has had business dealings in which it made payments to two of his cousins, Robert G. Vanecko and Richard J. “R.J.” Vanecko.
Patrick Daley’s payments from the sale of Concourse Communications ended in March 2009 — four months before Cardinal Growth received a subpoena from a federal grand jury investigating his and Robert Vanecko’s roles in the sewer-inspection business.
The sewer company’s president has since been indicted on federal charges that accuse him of minority-contracting fraud. Patrick Daley and Robert Vanecko haven’t been charged with any crime. Nor have Cardinal Growth or its owners been charged with any wrongdoing.
Cardinal Growth is owned by Robert Bobb, who’s a lawyer and former federal prosecutor, and Joseph McInerney, an accountant. The firm has raised millions of dollars from private investors and, with those investments in hand, has been able to borrow $50 million from the U.S. government to use in its projects.
Among the businesses that Bobb and McInerney acquired with that money: Concourse and the sewer company, Municipal Sewer Services.
Six of the businesses now are facing forced liquidation by the U.S. Small Business Administration, which is trying to recover $20 million it’s still owed from the $50 million in loans it made to Cardinal Growth.
Patrick Daley, now 35, began working with Cardinal Growth in 2002 as an unpaid intern for the firm, while he also he worked on the master’s degree in business administration he would obtain from the University of Chicago Booth School of Business. After his internship, he continued working with the firm, helping Bobb and McInerney find people to put money into Cardinal Growth’s investments.
Among the investors Patrick Daley brought in was Hull. Patrick Daley previously had worked for Hull, who was seeking then-Mayor Daley’s endorsement in the 2004 Democratic U.S. Senate race around the same time he agreed to invest with Cardinal Growth in Concourse Communications. Mayor Daley decided not to endorse anyone in that race, which was won by future President Barack Obama.
Hull was among the bigger investors in Concourse Communications, which was one of nine companies that submitted proposals to the city in 2003 to install Wi-Fi at O’Hare and Midway. At the time, Concourse had won deals to build wireless Internet networks at airports in New York City and Minneapolis.
During the time the city was evaluating the O’Hare and Midway Wi-Fi proposals, Patrick Daley graduated with honors from U. of C.’s business school in June 2004.
About two months later, then-Mayor Daley’s city aviation commissioner, John Roberson, and a panel of unidentified city employees decided to recommend that City Hall award the contract to Concourse.
In November 2004, Patrick Daley announced he had enlisted in the Army. He left Chicago for basic training the next month.
In September 2005, while Patrick Daley was in the Army, City Hall signed a 10-year contract with Concourse that also included two renewal options for three years each.
Under that deal, Concourse charges a fee that allows anyone at O’Hare or Midway to connect wirelessly and go online.
The contract guarantees the city a minimum of $1 million a year.
If Concourse takes in $7 million from Internet users at O’Hare and Midway, the city’s take on the deal becomes 35 percent — $2.45 million from the $7 million.
Roberson told the Sun-Times in an interview shortly before the contract was signed in 2005: “Patrick Daley has no involvement in this at all.”
But though he wasn’t listed among the investors, Patrick Daley still benefitted as Concourse built its business with the help of the O’Hare and Midway city contract. With that deal completed, Concourse then provided wireless Internet service at 12 of the busiest airports in North America, making it an attractive takeover target.
Nine months after the Chicago contract was signed, Cardinal Growth sold Concourse to Boingo Wireless at a 33 percent profit, while also becoming a minority shareholder in Boingo.
Soon after came the first of five payments to Patrick Daley.
In addition to the $708,999 from those payments linked to the Concourse sale, Cardinal Growth made numerous other payments to Patrick Daley, totaling $543,127, between July 10, 2002, and Oct. 31, 2009, company records show. It isn’t clear what those payments were for.
Bobb and McInerney declined interview requests.
Patrick Daley still has business ties with two companies that have received private and government funding through Cardinal Growth: Certi-Fresh Foods LLC, a shrimp-distribution company in Los Angeles, and TWG Capital, an insurance-services company in Indianapolis. They are among the six Cardinal Growth companies facing forced liquidation by the SBA.
For years, Patrick Daley maintained a rent-free office at Cardinal Growth’s headquarters, on the 55th floor at 311 S. Wacker. Also, he has two sport-utility vehicles registered at that office, which Cardinal Growth recently left after its landlord sued to evict the firm.