Update: Questions Linger, Contributions Dwindle

by Ethan Michaeli, Publisher 

Well over one-half of the contributions to a political fund closely linked to Chicago Housing Authority CEO Terry Peterson came from CHA contractors, affiliated companies or their employees and officers, according to an analysis by Residents’ Journal and the Better Government Association.

Over 60 percent of the itemized individual contributions to the 17th Ward Democratic Organization in 2005 came from CHA contractors and related sources, according to a comparison of records filed with the Illinois Board of Election Commissioners with lists of CHA contractors. The overall total of contributions to the 17th Ward Democratic Organization dropped dramatically in 2005 as compared with previous years after three straight years of increasing totals. The 17th Ward Democratic Organization saw its donations drop to their lowest level since 2001.

The Residents’ Journal/BGA investigation also found that a number of CHA contractors who made donations to the 17th Ward Democratic Organization failed to make required contributions to residents and comply with labor rules. An analysis of correspondence between CHA and its contractors found that CHA cited five different firms for failing to meet their legal obligations to provide jobs or financial contributions to groups serving residents.

In 2004, Residents’ Journal and BGA launched an 8-month investigation of possible connections between CHA contractors and the 17th Ward Democratic Organization. Peterson was the alderman of the 17th Ward before he was appointed CEO of the CHA by Mayor Richard M. Daley in 2000. The investigation, published in April 2005 as “A Questionable Connection,” found 63 companies who donated to the 17th Ward Democratic Organization and also received contracts from CHA. From 2001 to 2004, the 17th Ward Democratic Organization took in a total of $673,333.05, of which $225,318.32 – 33.46 percent – came from contractors at the CHA. Many companies gave to the 17th Ward Democratic Organization just before or just after they were awarded contracts from the CHA. One firm gave a $2,500 donation to the 17th Ward Democratic Organization the same day the firm was awarded a construction contract worth $3,292,095.

The percentage of funds donated to the 17th Ward Democratic Organization which came from CHA contractors increased dramatically in 2005. Records show that the 17th Ward Democratic Organization took in a total of $70,445 in individual itemized contributions in 2005, of which $42,850 – or 60.83 percent – was contributed by CHA contractors.

The donations to the 17th Ward Democratic Organization from CHA contractors are particularly surprising given that the 17th Ward contains no CHA family public housing developments, senior buildings or redevelopment sites. In the first “Questionable Connection,” the investigative team found two out-of-state CHA contractors which made their only political contributions inside Illinois to the 17th Ward Democratic Organization and related political candidates. Many of the companies are involved in CHA’s 10-year, $1.6 billion Plan for Transformation, including managers of public housing sites, relocation counselors, moving companies, developers and construction companies.

It is not illegal for CHA contractors to give donations to political organizations. However, if Peterson or other CHA officials promised to provide contracts to companies in exchange for the donations to a political fund or threatened to pull existing contracts if political donations were not made, those actions could be considered bribery or extortion under state or federal law, according to a legal analysis by BGA.

Peterson or other CHA officials could further be at risk of being found in violation of the federal Hatch Act, which prevents federal officials or local government officials paid with federal dollars from engaging in certain types of political activity. Almost all of CHA’s budget comes from the federal government, making CHA employees subject to the Hatch Act.

CHA policy states that “Contracts with a value equal to or greater than $100,000 must be led by an open competitive sealed bidding process, or competitive negotiation after public advertisement.” If Peterson or other CHA officials are found to have influenced or interfered with the competitive bidding process, however, they could be found in violation of state or federal law, according to BGA’s legal analysis.

According to a review of campaign finance reports filed with the Illinois Board of Election Commissioners, 2005 was the worst year for the 17th Ward Democratic Organization since the fund was reestablished in 2001. Last year, the 17th Ward Organization took in just $72,512.94, as compared with $251,518.33 in 2004, $202,355 in 2003 and $172,668 in 2002. In 2001, the 17th Ward Democratic Organization took in $47,791, though those funds represent income only for the second one-half of the year, since the fund was re-launched in September 2001.

Contributions dropped significantly after publication of “A Questionable Connection” in April 2005. During the second one-half of 2005, the 17th Ward Democratic Organization took in just $35,550. In a similar period of 2004, the fund took in $161,383.33. During the last six months of 2003, the fund took in $140,830. In the same period of 2002, the 17th Ward Democratic Organization took in $148,425.

CHA spokesperson Karen Pride sent the following e-mail in response to a request for comment on this story: “RESPONSE – The CHA has no comment.” 17th Ward Ald. Latasha Thomas did not return a telephone call seeking comment on this story.

A review of correspondence between CHA and its contractors obtained under a Freedom of Information Act request, meanwhile, found that several CHA contractors who were also donors to the 17th Ward Democratic Organization were cited by the CHA for failing to fulfill rules on wages, requirements for firms owned by minorities, women and persons with disabilities, and for failing to make contributions to residents as well as other issues.

Construction company G.F. Structures received 13 contracts from CHA worth more than $70 million, according to information on CHA’s web site. Several of these contracts were awarded at approximately the same time that G.F. Structures made donations to the 17th Ward Democratic Organization. Campaign finance records show that from 1998 to 2004, G.F. Structures made 11 separate donations to the 17th Ward Democratic Organization and Citizens to Elect Terry Peterson totaling $14,000. On October 27, 2003 – the same day they made a $2,500 donation to the 17th Ward Democratic Organization – the company received a construction contract worth $3,292,095 from the CHA. In 2000, G.F. Structures lost a contract to provide wrought iron fences to the City of Chicago after a media investigation revealed that it overcharged for its services. The media reports mentioned that G.F. Structures’ owner, Richard Crandall, was a reliable contributor to the political campaigns of Mayor Richard M. Daley and an insurance client of Cook County Commissioner John Daley, the mayor’s brother.

Correspondence obtained by Residents’ Journal and BGA indicates that G.F. Structures and its subcontractors were cited six separate times for failing to meet their requirements for Davis-Bacon labor rules, HUD Section 3 rules – which require firms which do business with housing authorities to provide jobs and make contributions to residents – as well as rules for participation of minorities, women and persons with disabilities.

Michael Lusk, a spokesperson for G.F. Structures, said he was unable to answer questions about this story.

Several other CHA contractors who donated to the 17th Ward Democratic Organization were cited for similar failures, according to the correspondence. Old Veterans Construction was assessed $26,081.98 from its $3 million contract on Oct. 25, 2004, for failing to meet Section 3 requirements. On Nov. 16, 2004, Old Veterans was cited for failing to pay one of its subcontractors according to prevailing wages set by the Davis-Bacon Act. Campaign finance records show Old Veterans gave the 17th Ward Democratic Organization $1,500 on Oct. 20, 2004.

The Oakley Construction Company was cited by CHA on July 29, 2005, for non-compliance issues including a failure to pay back wages to subcontractors. In 2003 and 2004, Oakley Construction made seven separate donations to the 17th Ward Democratic Organization totaling $6,100. In 2005, Oakley Construction made two donations to the 17th Ward Democratic Organization – $1,000 on June 6, 2005 and $500 on Oct. 24.

On Nov. 22, 2004, the Heneghan Wrecking Company was cited for failing to pay proper wages to an employee. Also in 2004, Heneghan made three separate donations to the 17th Ward Democratic Organization totaling $2,350.

Rita Joan Heneghan, a spokesperson for Heneghan Wrecking, said the company worked in the 17th ward and made donations to the ward organization because of that work. Heneghan said she was not approached by CHA officials on behalf of the 17th Ward Democratic Organization, and did not get special treatment from CHA because of the contributions.

“Contributions to the 17th ward have nothing to do with CHA,” she said.

On March 23, 2005, CHA wrote the Kutak Rock law firm to inform them their contracted funds would be placed on hold until the firm submitted documentation of compliance with rules for participation by firms owned by minorities, women and persons with disabilities. Kutak Rock submitted the requested documentation on April 4, 2005. In 2003 and 2004, Kutak Rock made two separate donations totaling $4,000 to the 17th Ward Democratic Organization.

CHA informed the Legum and Norman management company (see story, same page) on May 13, 2004, that it was withholding a portion of its management fee because the company failed to meet its obligations under the rules for Section 3 and participation by firms owned by minorities, women and persons with disabilities. On May 11, 2005, CHA informed Legum and Norman that it had to provide the agency with documentation for some of its subcontractors to meet the same obligations. Legum and Norman gave the 17th Ward Democratic Organization $4,275 in six separate donations from 2002 to 2004.

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