New questions on deals made by Mayor Rahm Emanuel’s indicted ex-comptroller
By CHRIS FUSCO AND DAN MIHALOPOULOS Staff Reporters October 5, 2013 9:51AM
Amer Ahmad (left) in April 2011 as then-Mayor-elect Rahm Emanuel announced his appointment as city comptroller. | Rich Hein~Sun-Times file photo
County sues insurers
As lawyers hired by Mayor Rahm Emanuel’s administration review USI Insurance Services’ City Hall deals, the firm is under fire from Cook County officials, who say USI left the county with a massive tab from a court settlement in a case involving strip searches at the Cook County Jail.
The county ended up settling that class-action suit for $55 million in 2010, after the searches were found to be inhumane and sexually degrading. County officials thought that money would come from policies USI had brokered with insurance giant American International Group and several AIG subsidiaries.
Instead, the county’s insurance covered only $10 million of the settlement.
Now, Cook County has filed lawsuits against USI and AIG in Cook County Circuit Court.
The county is seeking more than $20 million from USI.
In a separate case, it’s seeking more than $180 million from AIG, including $60 million the county claims AIG should have paid, plus $120 million in damages because AIG allegedly “misled” county officials.
“AIG engaged in a bogus insurance transaction” that deprived the county of “tens of millions of dollars of insurance coverage that the county had already bought and paid for,” the county’s suit against AIG says.
The lawsuit against USI says the insurance broker “failed to procure the required insurance coverage and failed to properly advise Cook County of the implications and consequences of its error.”
It also claims county officials told USI executive vice president Ralph M. Wilson they were concerned about potential liability as a result of the strip-search lawsuit, filed in 2006, and that “Wilson represented to Cook County that he would be able to devise a program that would protect the county from such claims.”
A lawyer for AIG declined to comment.
Caesar A. Tabet, a Chicago lawyer representing USI, said neither AIG nor his client did anything wrong.
“AIG has denied insurance because the claims against the county are old claims and not new claims,” Tabet said. “The insurance company argues that you can’t get fire insurance after your house starts to burn down.”
Added Tabet: “The county should not be spending taxpayer dollars on a frivolous claim against the insurance broker.”
Over the past 13 years, USI, Wilson and another USI executive have given about $162,000 to dozens of politicians and political groups throughout Illinois, campaign-finance records show.
That includes a total of $26,550 to former Cook County Board President Todd Stroger; his late father John Stroger Jr., who preceded him in that post; and the 8th Ward Regular Democratic Organization the Strogers once controlled.
USI also has made campaign contributions to Cook County Board President Toni Preckwinkle, who got $1,500 in 2010, and Cook County State’s Attorney Anita Alvarez, who got a total of $3,500 in 2008 and 2009.
In response to questions, a Preckwinkle political aide said Friday that the county board president will return USI’s contribution.
An Alvarez spokeswoman said the state’s attorney doesn’t plan to return her contributions from USI because an outside law firm is representing the county in the USI lawsuit, and the contributions were made before the county sued.
Updated: November 7, 2013 6:24AM
An insurance firm that won deals under Mayor Rahm Emanuel’s now-indicted former city comptroller was late completing some key tasks and wasn’t getting others done at all, City Hall emails obtained by the Chicago Sun-Times show.
Despite that, Amer Ahmad gave USI Insurance Services a two-year extension in early July that boosted the value of one of its city contracts by $1 million — making it worth $2.5 million.
About two weeks later, on July 23, Ahmad abruptly resigned his post with Emanuel’s administration.
The City Hall emails about USI are dated Aug. 7. It’s unclear whether Ahmad was aware of complaints about the firm when he extended its contract to find insurance for the city’s airports and special events such as Taste of Chicago.
Ahmad, 39, was indicted Aug. 15 in Ohio on federal charges involving his previous job as Ohio’s deputy state treasurer. Prosecutors say he awarded “lucrative state business” to a financial adviser in exchange for payments totaling more than $500,000 to himself and others.
The former high-ranking Emanuel aide, who could not be reached for comment, has pleaded not guilty. He is not accused of any wrongdoing involving Chicago city government.
The concerns about USI were logged by Susan L. Schmitz, a 22-year city worker who is a risk manager in the comptroller’s office. She emailed James T. Raussen, the city’s managing deputy comptroller, saying she had been in touch with USI executive vice president Ralph M. Wilson about work that wasn’t being done.
“If you recall, we asked him to do a benchmark study on terrorism liability,” Schmitz wrote. “Never done.”
Schmitz also complained that USI, which is based in Briarcliff Manor, N.Y., was behind in developing a “risk management information system,” writing: “I gave them a wealth of information on a jump drive. But only some of it is in the system. Also, it is not organized by project. . . . You would think they would at least organize them.”
Provided with a copy of that email and others, a lawyer representing USI did not respond to Schmitz’s allegations. The company previously put out a statement saying it has saved the city “millions of dollars in premiums and losses” and that, “in USI’s experience, all of the officials involved in the city’s complex insurance needs have exhibited the highest integrity and skill.”
In response to questions about insurance deals under Ahmad, Emanuel spokeswoman Sarah Hamilton cited a previously announced investigation that the city has hired a law firm to perform.
“Drinker Biddle is conducting a thorough review of Amer Ahmad’s tenure with the city of Chicago, and that review includes questions regarding procurement of insurance contracts,” Hamilton said. “While we have no evidence of any wrongdoing at this point, the review continues, and if anything is found, the city will take appropriate action.”
Last month, Emanuel aides announced City Hall is changing the way it awards insurance brokerage deals, taking away much of the authority that the mayor and City Council had given the comptroller in late 2011.
Such contracts had been subject to competitive bidding intended to get the best deal for taxpayers through the city’s Department of Procurement Services. That changed in November 2011 when the City Council unanimously approved an Emanuel proposal to give the comptroller’s office the authority to choose insurance providers for the city at its own discretion.
City procurement officials had received five bids for a major insurance-brokerage and consulting deal that were cast aside after the change took effect. Then, in 2012, Ahmad awarded contracts to two of the firms which bid: USI and Arthur J. Gallagher Risk Management Services, according to city records.
Under the new law, those deals weren’t awarded under the city’s normal contracting process, but under a process where the city Finance Department “invited brokers in to present and those presentations were evaluated,” Hamilton said. “USI brought in the most savings on the airport.”
An Arthur J. Gallagher spokeswoman said Friday that the company competed for its city business, adding, “We do not know how or by whom our bid was evaluated.”
The move to bring back competitive bidding for insurance work through the procurement services department came after the Sun-Times reported that USI won its two contracts with help from an Ohio lobbyist with ties to Raussen, the top Ahmad aide. Raussen had worked with Ahmad in Ohio government before Ahmad hired him to come to Chicago and be the city’s point man on insurance matters.
Raussen, who remains on the job at City Hall and makes $127,332 a year, served in the Ohio General Assembly between 2003 and 2008 and later was an aide to former Ohio Gov. Ted Strickland.
Five months after Ahmad hired Raussen, USI hired Christopher S. Colwell as its City Hall lobbyist. Colwell had been an early contributor to Raussen’s state legislative campaign and later lobbied on behalf of two communities in Raussen’s legislative district.
The City Hall emails show Colwell, who records show was paid $48,000 by USI last year, repeatedly contacted Raussen to schedule meetings with Ahmad.
Raussen forwarded the Aug. 7 email from Schmitz regarding USI and Wilson, the firm’s executive vice president, to Colwell, who replied, “I will address. How directly do you want me to proceed with Ralph?”
“Don’t forward,” Raussen responded, referring to sending along the email. “Just discuss with them.”
In another email later the same day, Raussen told Colwell, “It just seems comical that we ‘the city’ have to remind them of what they promised to do.”