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Guilty plea in contract scam tied to company owned in part by Daley relatives

Jesse Brunt leaves Federal Building Thursday after pleading guilty federal charges minority-contract fraud scheme.  |  Brian Jackson~Sun-Times

Jesse Brunt leaves the Federal Building on Thursday after pleading guilty to federal charges in a minority-contract fraud scheme. | Brian Jackson~Sun-Times

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Updated: January 8, 2013 6:23AM

The African-American owner of a Chicago trucking company who obtained $8.7 million in sewer-cleaning contracts from City Hall pleaded guilty Thursday to taking part in a minority-contracting scam, admitting the work was actually done by other companies — including one whose investors secretly included the son and a nephew of then-Mayor Richard M. Daley.

Outside court, Jesse Brunt — a former sharecropper whose trucking company Brunt Bros. Transfer Inc. had worked on city contracts since Harold Washington was mayor — declined to comment on the fraud scheme that federal authorities say involved Municipal Sewer Services during the time its owners included Patrick Daley and Robert G. Vanecko.

Municipal’s former president, Anthony Duffy, has pleaded guilty in the case and is awaiting sentencing.

Patrick Daley and Vanecko haven’t been charged with any wrongdoing. Vanecko is the older brother of Richard J “R.J.” Vanecko, who was charged Monday with involuntary manslaughter, accused of punching 21-year-old David Koschman of Mount Prospect in a drunken confrontation more than eight years ago on Division Street.

Brunt, 76, pleaded guilty in federal court to mail fraud for receiving a $31,000 check from City Hall.

When he’s sentenced March 8, he faces a maximum 20-year prison term, though he is likely to spend less than three years in prison under the plea agreement he struck with federal prosecutors. Brunt has agreed to continue cooperating with federal investigators.

Brunt’s minority-contracting scheme began in 2000, when he and Kenny Industrial Services got city contracts to clean and inspect sewers across Chicago, according to prosecutors. It continued after Kenny went bankrupt and its assets were purchased in 2003 by Municipal Sewer Services, a company created by Duffy and a group of investors, including Daley’s son and nephew, according to court records and sources.

Under a series of city contracts between 2000 and 2006, Brunt was a minority subcontractor for Kenny and later for Municipal Sewer Services for sewer work in parts of the city, even as he also landed separate deals directly from City Hall to clean and inspect sewers south of 63rd Street.

But an investigation started by the city of Chicago inspector general’s office found that Kenny and later Municipal Sewer did almost all of the work and that Brunt’s role was a sham to make it appear they were meeting a city requirement for participation by a minority-owned and -operated company.

Duffy, who previously worked for Kenny, started Municipal Sewer Services with money from Cardinal Growth, a venture capital firm founded by then-Mayor Daley’s friend Robert Bobb and Joseph McInerney. Daley’s son and nephew secretly invested $65,000 in the company in 2003 — a deal the Chicago Sun-Times exposed in 2007, sparking the investigation of the sewer contracts.

Municipal Sewer Services was on the books as using Brunt’s company in January 2004 when the Sun-Times published an investigation of Daley’s Hired Truck Program, showing that the city spent nearly $40 million to hire private trucking companies, including Brunt Bros. Brunt told the Sun-Times in an interview for those stories that his trucking business was often “paid to do nothing.”

The FBI launched an investigation of the Hired Truck Program in 2004, seizing city records on the 165 trucking companies, including Brunt Bros.

Later that year, Daley’s son and nephew sold their interest in the sewer company, and Patrick Daley enlisted in the U.S. Army, while Bob Vanecko went on to create a firm that would get $68 million in city pension money to invest.

Brunt wasn’t charged in the Hired Truck scandal, which resulted in 48 people being convicted of bribery and corruption charges, including other trucking company owners and city officials.

Brunt started out as a business partner of Howard Medley, a top campaign fund-raiser for the late Mayor Washington. Brunt eventually bought Medley’s equipment and began landing work as a minority subcontractor for other trucking companies.

Municipal Sewer Services is no longer in business, but its dealings remain under scrutiny as part of a federal investigation by the U.S. Small Business Administration.

Cardinal Growth, the largest investor in the sewer company, has been seized by the SBA for failure to repay $20 million in loans from the SBA.

Over the years, Cardinal Growth paid Patrick Daley more than $1.25 million, primarily for lining up investors for the company that got the contract to install Wi-Fi service at O’Hare and Midway airports. Cardinal Growth also paid R.J. Vanecko more than $200,000 for his role in helping line up investors for several movie projects.

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