Duffs charged in contract probe
By Matt O’Connor and Ray Gibson
Tribune staff reporters
September 25, 2003, 10:40 PM CDT
The politically connected Duff family used its matriarch and a trusted black associate to pose as fronts for phony women- and minority-owned businesses in a massive, dozen-year fraud that garnered more than $100 million in contracts from the City of Chicago, a federal indictment charged Thursday.
Among those charged were James M. Duff, who concealed his role as the decision-maker in the family business interests; his mother, Patricia Duff, who falsely claimed to run the family janitorial firm, Windy City Maintenance Inc.; and William E. Stratton, a family confidant and African-American who posed as boss of Remedial Environmental Manpower (REM) Inc., another Duff-run business that won a lucrative subcontract to operate the city’s blue bag recycling program, prosecutors alleged.
Lawyers for the two Duffs and Stratton all said their clients would plead not guilty and fight the charges.
The charges come after a four-year investigation launched after a 1999 Tribune story alleged Windy City Maintenance was a fraudulent women’s business enterprise and questioned whether Stratton really ran REM, which purported to be a minority-owned business.
At a press conference to announce the charges, U.S. Atty. Patrick J. Fitzgerald spent much of the time fending off questions about whether the city had aggressively investigated the Duffs’ claims that the businesses were legitimate women- and minority-owned enterprises.
Fitzgerald characterized city taxpayers as victims in the scheme and said that the Duffs went to great lengths to deceive city investigators.
According to the charges, James Duff directed Windy City Maintenance employees to hide files, to coach his mother on how to lie to city officials on her exaggerated role in the business and even to switch labels on office telephones from “Jim’s line” to “Mrs. Duff” to make it appear she regularly worked at the office.
Pressed by reporters, Fitzgerald said it wasn’t in his role as a prosecutor to comment on whether politics played a part in the Daley administration’s certification of the Duff businesses as women- and minority-owned enterprises.
“I don’t condemn it. I don’t exonerate it,” he said. “We simply do criminal investigations. If someone commits a crime, we charge them with it. We’re not here to perform an audit function.”
Over the years, Duff family members have held at least two fundraisers for Daley and family members, its businesses and a union it controlled have contributed about a combined $32,000 to Daley’s campaigns.
Obtaining certification as a women- and minority-owned enterprises gave the Duff businesses a leg up in winning city business. Since 1990, the city has set a goal of awarding at least 25 percent of the total value of all city contracts to minority businesses and 5 percent to women-owned operations. In comments to reporters Thursday night, Mayor Richard Daley denied any involvement in the awarding of contracts to the Duff family and said the city had toughened the laws on women-owned businesses after Windy City Maintenance was decertified. In the last two years, more than 880 companies were denied certification by the city, he said.
“Yeah, I know them,” Daley said of the Duffs. “You know that. They’re hard-working people. This is an unfortunate incident.”
James Duff, 45, of Burr Ridge, and Stratton, 62, of Olympia Fields, each were charged with racketeering conspiracy and multiple counts of fraud and money laundering.
The indictment seeks to forfeit at least $10 million from the two defendants as well as both their residences and the business premises for Windy City Maintenance and REM.
Patricia Duff, 75, of Chicago, was charged with 11 counts of mail fraud. Terrence Dolan, 52, of Hinsdale, an officer and director of Windy City Maintenance, also was charged with fraud for allegedly lying to city officials about the extent of Patricia Duff’s role in the janitorial firm.
Dolan’s attorney, Michael Monico, said his client would plead not guilty. James Duff’s lawyer, James Streicker, said his client’s mother owned Windy City Maintenance and was involved in operating the company.
“The evidence will show the city did its own thorough investigation and determined there was no fraud in obtaining these certifications, and their findings in that regard were correct,” Streicker said.
Patricia Duff “was the president of the company,” Streicker said. “She made important decisions regarding the company. There were other women involved in the operation of that business as well as men.”
Attorney Joseph J. Duffy, who represents Patricia Duff, questioned the government’s motives for indicting an elderly woman whom he said was in poor health.
Fitzgerald defended the charges against her by saying the prosecution results from her alleged misdeeds. “We judge people on what they do . . . not upon their age,” he said.
Countered Duffy: “It would appear today that any concept of mercy or compassion has vanished from this Department of Justice.”
The indictment also charged James Duff, Stratton and three others in connection with a separate insurance fraud scheme by REM and another Duff-owned business, Windy City Labor Service Inc., that cost insurers more than $3 million.
According to Fitzgerald, the Duff businesses misrepresented that the vast majority of their employees were clerical workers to reap huge savings in premiums paid for worker’s compensation insurance.
Also charged in this scheme alone were John J. Leahy, 48, of Westchester, the owner of an insurance brokerage; Edward Wisniewski, 55, of Niles, a Leahy employee; and Starling Alexander, 46, of Crete, an operations manager for REM.
Leahy’s lawyer, Vincent Connelly, said his client would plead not guilty. Attorneys for the other two couldn’t be reached for comment.
By fraudulently claiming to be women- and minority-owned, the Duff businesses obtained in excess of $100 million in city contracts and subcontracts between 1990 and 2002, the investigation by the FBI, IRS and the U.S. Department of Labor alleged.
In a subcontract with Waste Management of Illinois, REM made more than $74 million between 1995 and 2002 to sort recycling bags from garbage at sorting centers in Chicago.
The giant garbage firm was sold and the city’s garbage contract was awarded to a competitor. Officials at Waste Management couldn’t be reached for comment on Thursday’s indictment.
With Patricia Duff purported to be at the helm, Windy City Maintenance obtained more than $37 million in janitorial work for the city at the international terminal at O’Hare International Airport, the Harold Washington Library, the 911 Center and Area 2 police headquarters, the charges alleged.
Windy City Maintenance was quickly certified by the city as a woman-owned business in 1991 and was soon awarded a contract to clean up after the Taste of Chicago.
That same year, the Daley administration was put on notice of the firm’s questionable status when a rival janitorial owner wrote a letter to the city in which he strongly questioned whether Windy City Maintenance was run by a woman.
In 1999, after a five-month investigation, the city concluded that Windy City Maintenance wasn’t run by Patricia Duff and decertified the company as woman-owned, costing it millions of dollars in city contracts.
REM’s initial request to be certified as a minority-owned company was rejected by the city in 1993 after an investigation found that Stratton appeared “to be substantially reliant” on James Duff. However, a year later, Stratton convinced city officials he owned the company, though city officials later said they had lost documents explaining why they approved the minority certification.
At a separate briefing Thursday, city Corporation Counsel Mara Georges said no one with the city has to be embarrassed by the charges.
“The city was a victim here, and the city took strong action against Windy City Maintenance as soon as (the ownership issue) came to our attention,” she said.
While the indictment of the two Duffs resulted from an investigation by two prosecutors assigned to the organized-crime unit, the charges made no allegations of mob connections.
For at least three years, Windy City Maintenance also had contracts with the state of Illinois, providing janitorial services at the James R. Thompson Center, according to state records.
Staff Reporters Glenn Jeffers, Gary Washburn and John Chase contributed to this story.
Copyright � 2003, Chicago Tribune