News Column

Redflex Warnings Go Back Years

March 25, 2013

David Kidwell

Top officials in Mayor Richard M. Daley's administration were warned six years ago about preferential treatment in Chicago's red-light camera contract, a deal now embroiled in a federal corruption investigation of an alleged $2 million bribery scheme at City Hall.

Executives of a competing camera company and a powerful alderman whose help they enlisted complained the city was unfairly favoring Redflex Traffic Systems Inc., according to internal city records obtained by the Tribune and publicly disclosed for the first time.

Those 2007 records reveal there were concerns about the role of former city transportation official John Bills in overseeing the contract long before he emerged as the central figure in a scandal touched off by the newspaper's reporting last year.

The rare glimpse into power politics at City Hall raises new questions about where the evolving scandal might lead and whether one bureaucrat -- a lifelong political foot soldier -- had the juice to single-handedly steer a $100 million contract.

"I wouldn't think so," said Doug Yerkes, a top Daley purchasing official at the time. "Because a contract of that size has to clear so many different levels, and John was kind of a midlevel manager."

Following Tribune reports last year about the close relationship between Redflex and Bills, a company-sponsored internal investigation found that Redflex plied him with 17 vacation trips including airfare, hotels, rental cars, meals and golf outings. The company also acknowledged paying a longtime Bills friend, Marty O'Malley, $2.03 million as a Chicago consultant. Some of the money was likely intended for Bills, according to the findings, which said the arrangement will "likely be considered bribery by the authorities," according to the company's report.

Both Bills and O'Malley have denied any wrongdoing.

The Redflex investigation found that most of the money, $1.57 million, was paid starting in 2007, the year the red-light program blossomed. The scandal has cost Redflex its Chicago contract, its largest in North America and the one that made it a heavyweight in the U.S. robotic camera market.

When Redflex was establishing its foothold in Chicago, executives at one of its fiercest U.S. competitors -- American Traffic Solutions Inc. -- began complaining to City Hall about Redflex's unfair advantage, its ability to avoid bidding laws and minority hiring rules, and its cozy relationship to Bills, who was then the city official in charge of the red-light camera project.

The complaints were largely dismissed by the administration.

"It wasn't unusual that we would spend a substantial amount of time getting a lot of belly aching from losing bidders who were grousing about how unfairly they were treated," said Yerkes, who as Daley's acting chief procurement officer was involved in selecting Redflex. "It happened all the time, but I remember the red flags were going up all over the place on that one."

At the time, the Daley administration was moving to convert what had begun in 2003 as a $1.9 million pilot project into a full-blown, permanent red-light camera program. American Traffic Solutions -- along with its assembled team of Chicago subcontractors -- was hoping to get a piece of that business.

So the company executives sought help from 14th Ward Ald. Ed Burke, according to the records.

The dean of the City Council and chairman of its powerful Finance Committee, Burke is a decadeslong friend and political ally of one of American Traffic Solutions' subcontractors at that time, Tom Donovan. Donovan -- chairman of the advisory board for Quantum Crossings LLC -- was long ago a top aide and patronage chief for former mayors Richard J. Daley and Michael Bilandic. After that, he was a longtime chairman of the Chicago Board of Trade.

Donovan did not return calls for this report. Quantum Crossings representatives attended a pre-bid conference for vendors interested in replacing Redflex in March.

In one email to Burke's offices obtained by the Tribune, the president and CEO of American Traffic Solutions memorialized a Sept. 27, 2006, meeting he had with Bills to discuss what was then the city's nonexclusive contract with Redflex and the possibility that two vendors might be better than one.

"Mr. Bills opened with a disclosure that the contract between Redflex and the city had been converted/amended to be an exclusive contract," James Tuton said in the email to Burke's staff. "I asked when that occurred and he replied that the new, exclusive agreement had been executed a few weeks earlier. We were surprised."

Tuton, whose company is now negotiating with Mayor Rahm Emanuel's administration to operate the city's new speed camera program, declined to be interviewed for this report.

In a series of letters to top mayoral aides, Burke accused the administration of illegal procurement practices, "unfathomable" failures to meet minority hiring requirements, and labeled the relationship with Redflex Traffic Systems Inc. "suspect since its inception."

"That the Redflex contract negotiations fail on all of these accounts is unacceptable," Burke wrote in a seven-page letter to Daley's top lawyer and chief procurement officer Feb. 23, 2007. He demanded "that efforts to purchase additional systems be abandoned until an open and competitive procurement process is undertaken."

What followed was a yearlong war of words between Burke and Daley's top aides, where Corporation Counsel Mara Georges at first defended awarding the contract to Redflex without bidding it. Burke asked more questions and threatened to drag the Daley administration into the spotlight of public hearings before his committee.

"The concerns are of such gravity that they do not fall short of meriting a more formal, public inquiry when other measures fail to elicit a substantive response," Burke wrote to Georges on April 19, 2007.

By July 2007, the Daley administration reversed course and decided to open the contract to a competitive bid. Burke never held a hearing.

"Cooler heads prevailed," said Yerkes, the only former Daley official to return calls. Yerkes said that while he remembers Burke raising concerns he does not recall the complaints about Bills.

Bills, who retired from the city in 2011 and went to work as a Redflex-funded consultant, rose through the Daley administration to become the managing deputy commissioner of transportation after a 30-year career in city government. During that time, he was also a top precinct captain in the political organization of House Speaker Michael Madigan, D-Chicago.

Through his lawyer, Bills declined to comment for this story.

In 2003, when Redflex was first chosen for the red-light camera pilot project, Bills was a voting member for the city selection committee. In 2007, Bills was selected as a nonvoting member of the evaluation committee but played a key role in reviewing the four bidders.

In November 2007, the five voting members of the selection committee voted unanimously for Redflex, which scored 1,030 points to American Traffic Solutions' 714. None of the committee members returned Tribune calls Friday.

"We have been told that the evaluation team score sheets show that Redflex was given a perfect score," an ATS executive wrote in an email to Burke on Dec. 4, 2007. "It means that Redflex received flawless, perfect scores from every committee member in every category. We have never seen a perfect score from any selection committee anywhere."

The ATS executive suggested it was a "conflict of interest" for Bills to be checking the references of ATS at the same time he was listed by Redflex as their government reference in bids for new business around the country.

Burke forwarded ATS' complaints to Daley's Chief Financial Officer Paul Volpe, who is now the village manager in Elmwood Park.

"If the assertions contained in the attached memorandum are true, they are quite disconcerting," Burke wrote. "This series of questions is simply the latest of many that have riddled the contracting process with Redflex and made it suspect since its inception."

The contract stood and Burke never held hearings. He declined to comment for this report.

But last month, Burke issued a new call for City Council hearings into the Redflex contract, saying "somebody ought to be looking at whether the company is responsible for what happened."



Source: (c)2013 the Chicago Tribune Distributed by MCT Information Services


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