Feds accuse Duffs of $100 mil. scam

September 26, 2003

BY ANNIE SWEENEY, FRAN SPIELMAN AND SHAMUS TOOMEY Staff Reporters

Two members of the powerful Duff family, whose connections stretch from City Hall to organized crime, were charged Thursday with scamming the city out of $100 million worth of contracts earmarked for women and minorities.

A 30-count indictment accuses Patricia Green Duff, a 75-year-old grandmother, her son James M. Duff, and five other people of racketeering, conspiracy, mail fraud and money laundering for fraudulently securing janitorial and custodial contracts at such marquee locations as O'Hare Airport and the Harold Washington Library.

The scam involved several businesses owned by the Duff family and run by James Duff, officials said. The Duffs allegedly falsified City Hall paperwork claiming that Patricia Green Duff was the principal owner of Windy City Management, a janitor and custodial firm, and that William Stratton, an African American and a Duff family friend, ran Remedial Environmental Manpower Inc., a company that supplied laborers for the city's blue bag recycling program.

THOSE CHARGED James M. Duff, 45, of Burr Ridge: Head of the Duff family businesses. He is charged with racketeering conspiracy, money laundering conspiracy, wire fraud, mail fraud and money laundering involving both the contract fraud and the insurance fraud schemes. Patricia Green Duff, 75, of Chicago: Mother of James M. Duff. She is charged with mail fraud in the contract fraud scheme. William E. Stratton, 62, of Olympia Fields: Longtime Duff family friend and confidant, and employee for more than 18 years of Local 3 of the Liquor & Allied Workers Union, a union run by members of the Duff family. He is charged with racketeering conspiracy, money laundering conspiracy, wire fraud, mail fraud and money laundering in both the contract fraud and insurance fraud schemes. John J. Leahy, 48, of Westchester: President of Leahy & Associates, an insurance brokerage in Westchester. He is charged with mail fraud and wire fraud in the insurance fraud scheme. Edward Wisniewski, 55, of Niles: An insurance agent and later vice president of commercial insurance sales at Leahy & Associates. He is charged with mail fraud and wire fraud in the insurance fraud scheme. Starling Alexander, 46, of Crete: Operations manager at Remedial Environmental Manpower Inc. He is charged with one count of wire fraud in the insurance fraud scheme. Terrence Dolan, 52, of Hinsdale: He is an officer and director of Windy City Maintenance. He is charged with mail fraud in the contract fraud scheme. HOW THEY MADE MORE THAN $100 MILLION FROM THE CITY <?font>   Through Windy City Management *Subcontracted with Tishman Midwest Management Services to provide janitorial services between 1991 and 1994 at the Harold Washington Library: about $12 million. *Subcontracted with the Airport Property Management Group to provide janitorial services between 1993 and 1999 at the International Terminal of O'Hare Airport: about $16 million. *Subcontracted with the city of Chicago to provide janitorial service between 1996 and 1998 for the Office of Emergency Communications sites: about $1 million. *Contracted with the city of Chicago to provide janitorial services between 1998 and 2001 at the Office of Emergency Communications sites in Chicago: about $1 million. *Contracted with the city of Chicago to provide janitorial services between 1998 and 2000 for the Area 2 Police Headquarters: about $1 million. Through Remedial Environmental Manpower Inc. *Subcontracted with Waste Management of Illinois Inc. to provide manual laborers and supervisors between 1995 and 2002 to perform services in connection with the city's blue bag recycling program: about $74 million.

Over the years, Daley has accepted campaign contributions and political foot soldiers provided by the Duff family, which has also arranged fund-raisers for Daley. At least two members of the Duff family have alleged mob ties.

Four years ago, the Daley administration looked into whether the Duffs were lying about who really owned Windy City Management. The investigation turned up no fraud, but Thursday's indictment does not allege that the city probe was a whitewash. In fact, U.S. Attorney Patrick Fitzgerald said, ''The city is the victim here.''

"People who commit crimes as a family, we'll prosecute as a family,'' added Fitzgerald, who said the indictment should send a strong message to anyone else trying to cheat the system. "It may take a while to unravel, but we will bring charges, and those charges have serious consequences. If cheating doesn't offend you, maybe going to jail will.''

Also charged in the indictment were Stratton, 62, of Olympia Fields; Terrence Dolan, 52, of Hinsdale; John J. Leahy, 48, of Westchester; Edward Wisniewski, 55, of Niles, and Starling Alexander, 46, of Crete.

Both Duffs, Stratton and Dolan are implicated in the scheme to get the minority and women contracts.

In addition, James Duff, Stratton, Wisniewski, Leahy and Alexander are accused of defrauding insurance carriers of more than $3 million in unpaid premiums by misrepresenting the work of employers at a company called Windy City Labor Service Inc., which supplied unskilled temporary day laborers to wholesale liquor warehouses and refuse transfer/sorting facilities.

Finally, Stratton and James Duff are accused of laundering the proceeds of the scams by setting up a company called American Management and Consulting Services Inc., which received payments totaling $9.2 million from Duff-controlled companies.

Attorneys for the Duffs dismissed the allegations.

"Obviously Patricia's very disappointed by the government's actions today,'' said Joe Duffy, Patricia Green Duff's attorney. "She remains steadfast and resolved in her innocence that she did not engage in any conduct that was hurtful to the city of Chicago.''

Mayor Daley severed his ties to the Duffs after the federal investigation began, but he defended them during an anti-violence rally Thursday night.

"I know them, sure, you know that," he said. "They're hard-working people. It's an unfortunate incident."

Daley said he knew nothing about the Duff family's alleged mob ties. "Gee, I don't know about that.''

Windy City was formed shortly after Daley took office and was placed in the name of Patricia Green, wife of John Duff Jr., who has a criminal record. Duff Jr. and his son, John Duff III, have a history of ties to organized crime dating to the 1960s.

A no-bid contract to clean up Taste of Chicago started the ball rolling on $100 million in government contracts for Duff-controlled companies.

It all came to an abrupt end on New Year's Eve, 1999, when the city's Law Department stripped Windy City of its status as a woman-owned business after an internal investigation found that men actually ran the company. At the time, Corporation Counsel Mara Georges insisted there was no evidence of fraud because the ownership evolved when Patricia Green gradually withdrew from the company because of an illness.

But the federal indictment says the city was duped by the Duffs. Employees were told to lie about Mrs. Duff's involvement, and an office phone line was changed from 'Jim's line' to read 'Mrs. Duff' to give the appearance that it was her phone line.

Fitzgerald refused to say whether the city bungled its investigation into Windy City or whether Daley administration officials knew about the scams -- even though a contract compliance officer responsible for figuring out who was running the company reported he was "stunned'' by Patricia Green Duff's lack of basic information about the business.

Hours after the indictment was handed up, Georges faced a phalanx of television cameras to defend her investigation.

"We do not have subpoena powers. We cannot compel people to turn over documents to us,'' she said. "They found evidence files were removed from offices. They found evidence that phone lines were switched.''

She branded as "ridiculous" the notion that City Hall deliberately looked the other way because of the Duffs' longstanding relationship with Mayor Daley. "I am not embarrassed at all. ... What the U.S. attorney told you was that the work was done and the work that was done was the work that was billed for and paid for. ... The U.S. attorney told you about a very complex scheme that was undertaken to deceive the city, and the city was a victim."

In 2000, a court-appointed union monitor reported that Jack Duff III was involved in a mob-connected bookmaking operation, had ties to former top Chicago rackets boss Rocco Infelise and threatened to use his mob ties to kill a police officer's family.

The monitor's report also alleged Duff collected $172,930 from 1989 to 1991 from a no-show job as an international organizer with the Hotel Employees and Restaurant Employees International Union.

Last summer, Windy City was stripped of a contract to clean McCormick Place and Navy Pier that had paid the firm more than $50 million since 1996.

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