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Monday, June 1, 2009

The Mayor's Nephew, Dominick's, and City Pensions

In June of 2005, a major fire destroyed the Dominick's, a local grocery story, on 3030 N. Broadway. (for full disclosure this is about three blocks from where I live) Since then the lot has continued to be vacant as city planners and private builders have haggled over what to put there next. Enter a man named Robert Vanecko. He is a co founder of the Real Estate Investment start up, DV Urban Realty Partners with Allison Davis. Vanecko also happens to be the nephew of Richard M. Daley, the mayor of Chicago.

He and Davis have successfully engineered one commercial real estate deal. Despite this, they were able to land a deal to build a new Dominick's in that space along with Condominium high rise of more than a hundred units. Not only this but this company was also able to use city pension funds as collatoral for this project. The project is worth in excess of $60 million with DV getting a commission of $8 million. Now, a grand jury is asking exactly how these two were able to use pension money for such a risky proposition.

City pension officials have been hit with subpoenas from a federal grand jury trying to determine how a start-up company co-owned by Mayor Daley's nephew won $68 million in pension investments.

The grand jury issued the subpoenas Wednesday, nearly two months after city pension officials refused to comply with similar subpoenas issued by the City of Chicago's inspector general, David Hoffman.

In fact, as the article continues to point out, this isn't even the first subpoena to be issued into a business associated with Vanecko.

This is the second joint investigation that Hoffman and federal authorities are conducting into Vanecko's businesses.

The other investigation involves the hidden ownership stake Vanecko and the mayor's son, Patrick Daley, held in a sewer-cleaning company that won millions of dollars in no-bid contract extensions from City Hall. Vanecko and Patrick Daley have said they sold their investment in the company in late 2004 when Patrick Daley enlisted in the Army and Vanecko went into business with Davis.

Let's put this into perspective. Pension funds should be as safe as possible. After all, they secure the retirement benefits of thousands of city employees. These are not funds meant for anything more risky than the bluest of blue chip stocks. In this case, not only were they used to secure a major real estate development during a real estate downturn, but they were used to back a brand new real estate investment company. This is the opposite of the sorts of investment a pension fund should invest in. So, how did it happen?

To me, to ask just how the mayor's nephew was able to secure $68 million in pension funds for such a risky investment is in fact a rhetorical question. He's the mayor's nephew and so all questions end there. That's how the city of Chicago works. Those with connections get city resources. Those that don't...well they don't. It's really all very simple. This is the Chicago Way. What's really shocking about all of this is just how ordinary this is.


scott ridgway said...

This is one fine article. I, too, am about as disgusted with the Daly's that one can get. I recently read that corruption costs 500 million in this state... this doesn't include, obviously, the billion dollars that the city was underpaid for the parking meters. KEEP UP THE WONDERFUL WORK.

Anonymous said...

When are we going to wake up and vote these corrupt people out of office.. I'm so tired of this machine that rewards family and the mob. Find one of the mayors family members who is not trying to rob the taxpayers of Chicago.. ENOUGH>>>> TIME TO VOTE>>>

Anonymous said...

City pension funds have always been shady. If a member has a question and you ask 7 different employees at the fund, you get 7 different answers.All pension fund board members should be investigated by the Feds, including Jim Capasso who has been around forever and is connected in many ways. He will also be double dipping on the pensions when he retires as he is in addition, a high ranking city employee.