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Duff told mom to lie, U.S. says

He tutored mother to say she led business, filing says

By Matt O'Connor and Ray Gibson, Tribune staff reporters. Tribune staff reporter Laurie Cohen contributed to this report

November 23, 2004

Patricia Duff, the purported head of a politically connected janitorial firm, had to be tutored for about two weeks on how the business was run before a key 1999 meeting on whether the city should continue to treat it as a woman-owned company, according to new government allegations.

Duff's son, James, who prosecutors charge is the real owner, sat in on some of the tutoring sessions, yelling at his mother occasionally and telling her to concentrate if she messed up the details on how the business was run, prosecutors said.

A few days later, while his mother was being interviewed over the phone by a city inspector, James Duff sat next to her, coaching her and writing down answers for her, prosecutors alleged in papers filed Monday in federal court.

The younger Duff, 46, of Burr Ridge has been indicted on racketeering, fraud and other charges for allegedly setting up phony women- and minority-owned businesses to improperly get more than $100 million in city contracts over a dozen years.

The mother, 76, of Chicago has also been charged with falsely claiming to run the family janitorial firm, Windy City Maintenance Inc.

In addition, William E. Stratton, a Duff confidant and an African-American, is charged with posing as boss of Remedial Environmental Manpower Inc. (R.E.M.), another Duff-run business that won a lucrative subcontract from Waste Management of Illinois to operate the city's blue-bag recycling program.

For the first time, prosecutors alleged that an undisclosed official of Waste Management of Illinois, a friend and associate of James Duff's, knew that R.E.M. wasn't a bona fide minority-run business and had been told by Duff of the need to conceal his involvement in the business.

Waste Management said Monday the company official had resigned in the mid-1990s and that the company has been cooperating in the federal investigation.

According to the government filing, James Duff's wife, Ellen, while using her maiden name, posed as a part owner of R.E.M. without divulging that she was married to Duff. She hasn't been charged.

The filings come about two months before the Duffs, Stratton and four co-defendants are scheduled to go on trial Jan. 20. All have pleaded not guilty to the charges.

The indictment came down in September 2003 following a four-year investigation launched after a 1999 story in the Tribune alleged Windy City Maintenance was a fraudulent women's business enterprise and questioned whether Stratton really ran R.E.M.

One month after that story ran, an inspector for the city's Department of Purchasing showed up at Windy City Maintenance offices demanding to talk to Patricia Duff, according to the government filing.

Not wanting the inspector to know he was there, James Duff hid in the back of the office, prosecutors alleged.

Inspector rebuffed, filing says

On Duff's instructions and in his presence, his office manager called the city's deputy purchasing agent, whose name was not revealed in the filing, to have the inspector return later to talk to the mother, the filing revealed. The inspector left without talking to the mother.

Two days later, on Aug. 13, 1999, Patricia Duff was interviewed in Windy City Maintenance offices by several city officials. On a majority of the questions, the office manager either answered on Patricia Duff's behalf or prompted or corrected her answers, prosecutors alleged.

During the interview, Patricia Duff claimed her son did little work for the business and that she made or approved all major company decisions, according to the government.

For about two weeks before that meeting, the office manager, acting on instructions from James Duff, had tutored his mother on business operations in preparation for the city interview, scripting her answers, prosecutors alleged.

When James Duff sat in on the sessions, he sometimes lost his temper with his mother when she misstated details on how the business operated, the government said.

Before the interview, James Duff ordered that any connections to R.E.M. be removed from Windy City Maintenance offices and labels be switched on phones from "Jim's line" to "Mrs. Duff," according to the filing.

On Aug. 19, 1999, the city inspector who had been rebuffed on his visit to Windy City Maintenance--identified as Robert Cunniff in records obtained by the Tribune--talked to Patricia Duff by telephone while her son sat next to her, writing down answers for her to give, the government said.

But Cunniff, a city compliance officer, wasn't impressed by Patricia Duff's answers. In his report to bosses about the telephone interview, Cunniff wrote, "I asked about the cost of her services and she responded that `she didn't know.' Not only that, she didn't seem to know who did know . . . We're not discussing a minor detail here. This is the cost of her service!"

Later in 1999, 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.

The Duffs have a history of involvement in city politics. Duff family members have held at least two fundraisers for Mayor Richard M. Daley. Family members, its businesses and a union it controlled have contributed about $32,000 to Daley's campaigns.

In its subcontract with Waste Management of Illinois, R.E.M. made more than $74 million between 1995 and 2002 to sort recycling bags from garbage at sorting centers in Chicago.

According to the government filing, the Waste Management official who headed the bidding effort that won the initial city recycling contract in late 1991 was the James Duff friend who knew that Stratton was just the nominal owner of R.E.M.

Duff was explicit about the need to conceal his involvement in R.E.M., telling the Waste Management official: "I don't want to be out front," the filing said.

Duff instructed the Waste Management official to have other company officials deal with co-defendant Starling Alexander, an operations manager for R.E.M., instead of him, prosecutors alleged.

During a 1993 visit by a city inspector, Stratton falsely claimed to be in charge of R.E.M., and Duff's wife, using her maiden name of Niemeier, falsely claimed to handle bookkeeping and the office, the government said.

Unnamed official resigned

After R.E.M.'s initial request to be certified as a minority-owned company was rejected by the city in 1993, the Waste Management official personally introduced Stratton to the city's purchasing agent in summer 1994 at Duff's request, prosecutors said.

A short time later, the city certified R.E.M., according to the government.

Bill Plunkett, a spokesman for Waste Management, said the company has been fully cooperating with federal authorities.

Plunkett said the Waste Management official identified as Duff's friend had resigned from the company in the mid-1990s. "No current member of the company's management team was involved with the issue of R.E.M. referred to in the government document," he said.

In other court papers Monday, prosecutors sought to admit testimony that James Duff set two other women employees up in allegedly phony women-owned businesses and talked to a third about doing the same thing.

In one, Windy City Maintenance's office manager was listed as the president of Living Color Inc., a landscaping company that was owned by Duff, prosecutors said. State incorporation records identified Cathy Martinez as president of the business.

Duff, Stratton and three co-defendants also face charges in a separate insurance-fraud scheme by R.E.M. and another Duff-owned business, Windy City Labor Service Inc., that cost insurers more than $3 million.

Prosecutors have alleged that the Duff businesses misrepresented that the majority of their employees were clerical workers to reap huge savings in premiums paid for worker's compensation insurance.

According to Monday's government filing, the scheme was jeopardized in 1995 when a Waste Management official informed the insurer for Windy City Labor that the workers were actually in high-risk jobs such as a recycling sorter.

Copyright 2004, Chicago Tribune

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