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SEC probing clout-heavy UNO for possible securities violations

UNO CEO Juan Rangel

UNO CEO Juan Rangel

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Updated: November 18, 2013 7:45AM



Federal authorities are investigating possible securities violations involving the state’s largest charter-school operator, the scandal-scarred United Neighborhood Organization.

The federal Securities and Exchange Commission requested documents last month from the clout-heavy Chicago group, according to a letter obtained Wednesday by the Chicago Sun-Times.

A spokeswoman for the federal agency wouldn’t comment. But in a Sept. 20 letter to UNO’s board, an attorney from the SEC’s enforcement division in Chicago said the agency “is conducting an investigation . . . to determine if violations of the federal securities laws have occurred.”

An UNO spokesman said the group is cooperating.

A top UNO executive, Miguel d’Escoto, resigned in February, days after the Sun-Times reported the group gave $8.5 million of business to companies owned by two of d’Escoto’s brothers with money from $98 million in state school-construction grant funding.

The SEC is looking at how UNO raised more than $37.5 million on Wall Street in 2011 through state-approved bonds, the letter shows.

In all, UNO has borrowed more than $70 million from private lenders to rehabilitate some of the buildings it uses for the 16 schools it operates in Chicago, which more than 7,600 students attend.

The attorney for the federal agency, Michael J. Mueller, asked UNO for records including:

◆ Documents and communications involving work done under the state grant by the two companies owned by d’Escoto’s brothers — Reflection Window Co. and d’Escoto Inc.

◆ Transcripts and copies of UNO board minutes, particularly from meetings with any discussion of “conflicts of interest between UNO and d’Escoto” and “between UNO and Reflection Window.”

◆ Communications with state authorities, bond underwriters and investors.

The SEC also demanded documents regarding UNO from the Quinn administration’s Department of Commerce and Economic Opportunity-the agency overseeing the group’s school-building grant — in a letter on June 26.

In April, Gov. Pat Quinn temporarily suspended payments from the state funding in the wake of the Sun-Times reports.

Last month, Chicago businessman Martin Cabrera Jr. resigned as UNO’s board chairman, citing “a difference of philosophy and mission.” He left just 3 1/2 months after he took the unpaid post as part of a board overhaul and other reforms that Quinn cited when he restored UNO’s state funding in June. Cabrera, 42, is chief executive officer of Cabrera Capital Markets, which has gotten bond business from City Hall and other government bodies for more than a decade. Cabrera had replaced Rangel as board chairman, with Rangel staying on as chief executive officer.

Quinn’s move to restore funding allowed UNO to finish construction of the state-funded UNO Soccer Academy High School on the Southwest Side.

Ald. Edward M. Burke (14th), a major Quinn campaign fund-raiser, had urged the governor to restore the funding, believed to be the largest government subsidy nationwide for a charter operator.

So far, the state has given UNO $83 million of the promised $98 million.

UNO also gets tens of millions of dollars a year from the Chicago Public Schools, which it relies on to run its schools and repay money it has borrowed.

Juan Rangel, UNO’s $250,000-a-year chief executive officer, was Mayor Rahm Emanuel’s campaign co-chairman in 2011 and also has close ties to Illinois House Speaker Michael Madigan (D-Chicago).

A statement from UNO Wednesday acknowledging the federal probe came hours before the group’s lawyers were due to respond to a Sun-Times public-records request seeking copies of any demands UNO received from government investigators.

The statement came via ASGK Public Strategies, a public relations firm hired to help UNO deal with fallout from the Sun-Times reports. ASGK was founded by Emanuel friend David Axelrod, who sold his stake in the firm when he went to work for President Barack Obama at the White House five years ago.

Email: dmihalopoulos@suntimes.com

Twitter: @dmihalopoulos



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