Waste-hauling firm pays city $11 million for minority contract ‘shortfalls’
BY FRAN SPIELMAN City Hall Reporter fspielman@suntimes.com January 19, 2012 2:46PM
Fred Barbara (shown in 1982). | File photo
Updated: February 21, 2012 8:38AM
A company with ties to Bridgeport trucking magnate Fred Barbara and the Hispanic Democratic Organization at the center of the city hiring scandal has paid the city $11 million to cover “substantial shortfalls” in minority contracting.
Allied Waste Transportation has been awarded nine contracts totaling in the hundreds of millions of dollars over the last decade to transport city refuse from transfer stations to landfills. The latest $3.68 million waste-hauling contract was awarded just a few weeks ago.
Every one of those contracts was supposed to set aside 16.9 percent of all spending for minority contractors and 4.5 percent for companies controlled by women.
One of those minority-owned firms was Brunt Brothers Transfer Inc., whose owner, Jesse Brunt, has been indicted on federal mail-fraud charges related to a separate city sewer-cleaning contract in which Brunt subcontracted most of his work to Municipal Sewer Services, whose investors included then-Mayor Richard M. Daley’s son, Patrick, and nephew, Robert Vanecko.
Brunt is not accused of criminal wrongdoing related to Allied, but “from 2007-2009, Allied claimed over $9 million worth of MBE participation for Brunt Bros., approximately 20-25 trucks a day. Yet, Brunt Bros. owned at most five trucks that could be used on Allied’s contract,” according to a statement from city Inspector General Joseph Ferguson.
After acquiring Allied in 2008 and replacing top management, Republic Services got a tip about alleged minority business fraud at Allied, hired an outside counsel to investigate, then “voluntarily disclosed” the matter to the city and the U.S. Attorney’s office. The investigation determined that Allied’s minority and women-owned contractors had acted as a “pass-through” to white contractors that performed the work.
Minority- and women-owned firms suspected of acting as pass-throughs were replaced with legitimate minority contractors. Republic and Allied also agreed to “overspend” — by $12 million — on minority contracting going forward to reduce the past “shortfall.”
On Thursday, the city announced yet another part of the settlement. Allied has paid the city $11 million that will be spent “exclusively” to strengthen a minority business program that Ferguson contended last summer remained “dysfunctional” and “beset by fraud and abuse.”
The company has further agreed to continue “overspending” on minority contractors to make good on the past shortfall and convert 79 temporary jobs to higher-paid, permanent positions at its Chicago transfer stations for at least three years with a local hiring preference.
Allied also agreed to waive $40 million in claims against Chicago taxpayers stemming from the city’s alleged failure to meet “certain minimum quantity requirements” in one of its contracts.
“The message is, there’s a new sheriff in town and this mayor is serious about enforcing compliance with the MBE-WBE [minority- and women-owned business] requirements,” Corporation Counsel Steve Patton said.
Minority contracting fraud was a chronic problem during the 22-year reign of former Mayor Richard M. Daley. A string of revelations by the Chicago Sun-Times provided proof that the minority set-aside program had been manipulated by the politically connected at the expense of minorities.
Last summer, Ferguson released a follow-up audit claiming that Chicago’s minority-business program remained “dysfunctional” and “beset by fraud and abuse” because Daley lacked a commitment to clean it up. One year after concluding that blacks, Hispanics, women and Asians were deprived of at least $19 million worth of construction contracts in 2008 alone because of “widespread” fraud, abuse and mismanagement, Ferguson determined that precious little had changed.
City Hall still reports the percentage of city contracts awarded to minorities based on “projected participation” — not actual payment — “knowingly misstating” numbers “far less” than the city reports because of “widespread fraud and abuse and a lack of monitoring and field audits, Ferguson wrote.
And a failure to pursue penalties against contractors has allowed them to thumb their noses at the minority set-aside requirements, he said, adding, “There must be consequences.”
Ferguson’s office released a statement Thursday saying in part, “While Allied’s conduct was egregious, the fact that such a significant fraudulent scheme could continue for such a long period of time points to the numerous serious deficiencies in the City’s administration of the [minority- and women-owned business contracting] program.”
Mayor Rahm Emanuel claims to have made major changes, including unannounced site visits and training classes for prime contractors, subcontractors and city employees.
Allied Waste ran the city’s failed and abolished blue-bag recycling program and still operates three waste transfer stations that City Hall subsequently attempted to lease.
Allied and its blue-bag subcontractors were heavy contributors to HDO, a once-powerful political army at the center of the city hiring scandal.
Barbara is a grandson of Bruno Roti Sr., who was one of Chicago’s earliest organized-crime bosses and an associate of Al Capone’s, according to FBI files. The Sun-Times has reported that Roti relatives and associates cashed in on Hired Truck. Barbara also made a fortune hauling garbage to landfills until 1996, when blue-bag recycling was launched.
The following year, Barbara sold his three companies — including the Shred-All Recycling garbage transfer station — to American Disposal Services in a deal potentially worth $100 million. American Disposal subsequently acquired Allied.
Allied has employed Barbara as an operations analyst and made monthly payments to him based on the amount of trash city trucks dumped at the Shred-All station.
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