Chicago Sues Company Over Corrupt Red Light Program
By David Kidwell
Mayor Rahm Emanuel's administration has sued Chicago's former red light camera operator, Redflex Traffic Systems, for more than $300 million on grounds the entire program was built on a $2 million bribery scheme at City Hall that has already led to federal corruption convictions.
According to court filings unsealed late last week, the Emanuel administration has joined forces with a former executive vice president at Redflex who says he helped orchestrate the scheme under orders from his bosses. The city moved earlier in August to intervene as a plaintiff in a whistleblower case filed under seal by the fired executive, Aaron Rosenberg, in Cook County Circuit Court more than a year ago.
The embattled program, which has raised more than $500 million in traffic fines since it began in 2003, has been beset with oversight failures, unfair ticketing practices and corruption allegations exposed by a series of Tribune investigations that began three years ago. Redflex's former chief executive Karen Finley pleaded guilty Aug. 20 in a conspiracy to bribe a former top city transportation executive who she says helped steer the contract to the company.
That official, John Bills, is set to stand trial in federal court in January.
The 20-page lawsuit seeks triple the $124 million Redflex collected on the Chicago contract both before and after it was fired by Emanuel amid the scandal, as well as a civil penalty of up to $10,000 for each time the company made a false statement to the city.
The case, first filed under seal by Rosenberg on April 15, 2014, named the city as a co-plaintiff in an effort to seek City Hall's intervention. Such a strategy could enable Rosenberg to collect a percentage of any judgment awarded to Chicago.
The lawsuit details an alleged conspiracy in which Redflex executives teamed up with Bills to orchestrate cash payments to him through a consultant acting as a bagman, as well as providing Bills with vacation trips, computers, golf outings and other perks. In exchange, according to the lawsuit, Bills coached Redflex on how to beat its competitors, orchestrated key votes at City Hall, manipulated field tests to favor the company, covered up problems with Redflex's performance and cost taxpayers millions by encouraging city officials to buy Redflex cameras instead of leasing them.
The suit refers to repeated declarations by company executives that it had conducted itself within the law and ethics code of the city of Chicago.
"Had the City known that these statements were false, the City would have canceled the contracts with Redflex," the suit alleges. "The City suffered damages in reliance of Redflex's false statements that it had not engaged in bribery or attempted to bribe any employee of the City."
The lawsuit alleges that the competitive bidding process was corrupted by Bills' actions to steer the contract to Redflex, and that his actions defrauded Chicago taxpayers by orchestrating a better deal for the vendor at taxpayer expense. For example:
"Although leasing the cameras was a better option for the city, Mr. Higgins directed Rosenberg to convince Bills to have the city purchase the cameras," the lawsuit says, referring to Bruce Higgins, a former Redflex CEO. "The city's purchase of the cameras would help Redflex with cash-capitalization issues and make it harder for the city later (to) change vendors from Redflex since the city would already own Redflex cameras." Higgins could not be reached Monday for comment.
Also, the lawsuit alleges, Bills orchestrated renewing the Redflex contract without going out to bid and was constantly looking for ways to expand Redflex fees because he got extra commissions for all work that went to Redflex outside the scope of its contract.
"Mr. Bills was always looking for out of scope work to be added to the project," the lawsuit says. "Indeed, Mr. Bills would say that his favorite words were 'out of scope.'"
Bills' attorney, Nishay Sanan, said he was unaware of the lawsuit but that his client has consistently denied the criminal allegations that have led to the guilty plea of Finley as well as admitted bagman Martin O'Malley, a longtime Bills friend.
"The city of Chicago is going to do whatever it has to do to show they had nothing to do with anything, but we all know that's not the case," Sanan said. "It was about revenue for them, it was always about the revenue."
In the wake of Tribune revelations, the city's contractor was fired, that company's top executives were ousted and federal prosecutors charged Bills, Finley and O'Malley on allegations that Redflex funneled as much as $2 million to Bills to help the firm build its Chicago business into the largest automated traffic enforcement program in the country. At its peak, the system had more than 380 cameras.
In O'Malley's guilty plea last year, he acknowledged that the scheme earned the men at least $1,500 for every new red light camera installed in the city.
While the alleged corruption largely dates to the administration of former Mayor Richard M. Daley, Emanuel has defended the red light program as a much-needed safety measure and used it to justify his launch of speed cameras.
After exposing the potential bribery scheme in a series of stories, the Tribune launched a 2014 investigation that documented how thousands of drivers were tagged during unexplained ticket surges at malfunctioning red light cameras. In response, the city inspector general reported that both the Daley and Emanuel administrations could not document how and where they chose to place cameras, abdicated their responsibility to ensure the camera system was working properly and instead focused on keeping the cameras rolling.
Emanuel shut down dozens of cameras, promised to improve oversight, played down the significance of the findings and sought to refocus public attention on safety benefits.
After the Tribune series, the city offered to review the tickets of some drivers caught in unexplained ticket spikes. Ultimately fewer than 200 tickets were refunded.
The city on Monday declined requests to interview Emanuel's top lawyer, Steve Patton, about the lawsuit and did not respond to questions about whether the city intends to use any potential award from the lawsuit to reimburse wrongly ticketed drivers. Instead, the Law Department issued a statement.
"The City has filed notice that it is intervening in a pending whistleblower lawsuit against Redflex Traffic Systems, Inc., which has been unsealed in state court," the statement said. "The suit is brought under the City's False Claims Ordinance and seeks damages, plus civil penalties, attorneys' fees and costs, as a result of Redflex's fraudulent conduct in obtaining its 2003 and subsequent contracts with the City ....
"This action is the latest example of the administration fighting on behalf of Chicago taxpayers."
Redflex, a subsidiary of the publicly traded Australian company Redflex Holdings, announced the city's legal action in a new report to stockholders.
"We understand that this legal action was previously commenced by Mr. Rosenberg, but by order of the court, the existence of the legal action was suppressed and was not brought to the company's attention until now," Redflex reported in its Aug. 31 statement to stockholders.
"The legal action makes certain allegations against RTSI relating to alleged breaches of city ordinances and bribery of public officials in the City of Chicago," the statement says. "Amongst other civil penalties, the legal action claims an award of damages treble the amount paid to RTSI by the City of Chicago under the now terminated contracts."
Redflex has previously acknowledged to stockholders that its top U.S. officials were involved in what authorities would consider bribery and the U.S. firm in 2013 fired and sued Rosenberg, blaming the scandal on his actions. Rosenberg countersued, acknowledging he was cooperating with federal investigators and alleging that he was following orders that involved similar practices across the country.
Shares of the company, which had traded at more than $4 apiece before the scandal, had plummeted to 17 cents per share Monday.
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