Prompted by a Tribune investigation into allegations of wrongdoing in Chicago's red-light camera program, an Arizona-based firm has disclosed it paid a $910 luxury hotel tab for the city official in charge of its contract and failed to tell City Hall about the ethics breach for two years.
Lawyers for Redflex Traffic Systems Inc. said the firm disciplined the executive vice president involved and sent him to "anti-bribery" training after the incident, but did not report the violation to the Chicago Board of Ethics until this month, after the newspaper's inquiries.
The company also acknowledged to the newspaper it did not disclose internal allegations about ties between the city official and a Redflex contractor who received more than $570,000 in commissions — $1,500 for each of the 384 cameras the company installed in Chicago.
The company said an exhaustive probe by an outside law firm found no evidence of an inappropriate relationship, although neither man was questioned in the probe. Both men told the newspaper they've done nothing improper.
The disclosures add to a growing list of questions about Redflex, including its relationship with John Bills, the man at City Hall who oversaw the company's biggest U.S. contract from its beginning in 2003. The Tribune previously disclosed that after retiring from the city last year, Bills went to work as a consultant for the Redflex-funded Traffic Safety Coalition.
That group, run by a political ally of Mayor Rahm Emanuel, backed the mayor's successful push to expand the city's camera program to target speeders. The Emanuel administration now has the authority to pepper half the city with cameras that could tag speeders in school and park "safety zones" for tickets as high as $100. And Redflex is a top contender for the new business.
The stakes are huge — the business could be worth tens of millions of dollars to vendors, and the city has already reaped more than $300 million in camera fines since 2003. Emanuel is counting on up to $30 million in revenue next year from the new speed cameras, which the city hopes to begin testing late this year.
Redflex describes its Chicago camera contract as the "largest enforcement program in the world" and holds it out as a model in efforts to expand across the country.
A spokeswoman for Emanuel said late Friday that the mayor ordered the corporation counsel to review the allegations "that occurred before he took office" and the matter was also reported to the city inspector general's office.
"If true, the city will pursue all remedies, including permanent debarment of Mr. Bills and Redflex from ever doing business with the city of Chicago on any current or future contracts," said spokeswoman Sarah Hamilton. "The mayor has zero tolerance for this type of misconduct — from an employee or contractor — and will act swiftly and harshly whenever abuse is uncovered to protect Chicago taxpayers."
Many of the questions about the Redflex success in Chicago revolve around the friendship between Bills, who was the $138,000-a-year managing deputy commissioner for the city Transportation Department, and Marty O'Malley, who was retained by Redflex as its Chicago liaison at the outset of the red-light program in 2003.
The two men told the Tribune they were longtime acquaintances whose families lived in the same Southwest Side neighborhood near the St. Bede Catholic Church years ago. They said neither of them knew what the other's job was until they met in their official capacities with the fledgling Chicago program — Bills on one side as the overseer of the city contract and O'Malley on the other as the Redflex customer service representative.
Both Bills, 51, and O'Malley, 72, said their relationship played no role in O'Malley's hiring and in no way influenced Bills' management of the contract. Both said their friendship grew while working closely together on the program for nearly a decade.
Redflex general counsel Andrejs Bunkse said Thursday that the company was unaware the two men knew each other before O'Malley was hired. He said, "I do not know," when asked whether Bills played any role in O'Malley's hiring.
But in an Aug. 24, 2010, letter to the board of directors of the company's Australian parent company, a Redflex executive raised questions about Bills' relationship with O'Malley and said O'Malley's involvement in the program was unnecessary. The Tribune has obtained a copy of the letter, which alleged myriad internal problems at the company.
It also alleged Bills received "nonreported lavish" hotel accommodations "directly on the expense report" of Redflex Executive Vice President Aaron Rosenberg.
"This alone would nullify our contract arrangement with Chicago," the letter said.
Bunkse said the company was rocked by the serious allegations and the board of directors ordered an outside investigation by the Chicago law firm of Quarles & Brady. He said the three-week "deep-dive" probe included employee interviews and an extensive review of company expense reports. The investigation discounted most of the allegations in the letter, Bunkse said, with the notable exception of the one-time hotel tab for Bills.
Bunkse further cast doubt on the letter by claiming the executive wrote it while under investigation by the company for substantial abuse of a company expense account.
Rosenberg was warned by Redflex's top executives "that this was a potential conflict of interest issue and a violation of company policy and a follow-up event would result in his termination," Bunkse said. "And we put him through anti-bribery training."
The company also overhauled its expense account procedures, including appointing an outside agent to handle travel and hotel arrangements.
"It was unacceptable, and we put in many more measures in addition to that as a result," said Bunkse. "But at the time we did not tell the Board of Ethics about it, it was an oversight and a lapse."
Allegations about an improper relationship between Bills and O'Malley were unfounded, Bunkse said. The company told the Tribune its investigators didn't interview Bills because he was a city employee and also didn't interview O'Malley. The firm said it spoke with O'Malley last week, after the newspaper's inquiries.
The company also sought reimbursement from Bills after the Tribune inquiry. The company declined to provide its 2010 investigative report, Rosenberg's expense reports or the filing last week to the city ethics board.
Bills, in an hourlong interview with the newspaper, said he first learned there was a problem when he received a call from Rosenberg in the first week of October.
"He told me there was some kind of internal audit and they discovered a discrepancy," Bills said. "Apparently they inadvertently paid some expenses for me, at a hotel, and he wanted me to take care of it."
"So I remember I called Aaron and asked if he could do anything," Bills said. '"He said he would see what he could do. He called me back and said he booked me a room and that all I would have to do is pay for it."
Bills said he presented his credit card at the hotel and the room tax and incidental expenses were charged to it. He said he never noticed that the hotel room was never charged to his card. "It was a mistake," he said.
Bills acknowledged he told his ex-wife the Arizona trips were for business. "I might have told her that, just to stay out of trouble at home," he said.
Bills said he cut a check to reimburse Redflex after the call from Rosenberg and immediately reported himself to the ethics board. City ethics rules ban employees from taking such gifts or contractors from giving them.
"I never would have intentionally accepted a dime from Redflex, I wouldn't do that," said Bills.
As to his relationship with O'Malley, Bills said, "I did not recommend him for the job at Redflex and had nothing to do with him getting hired.
"I have never taken a dime from Marty," Bills added. "I was a strong proponent of the system, it works. It was never about the money with me."
In a separate interview, O'Malley told the Tribune he was hired by Redflex after answering a classified employment ad for a customer service representative.
"They flew me out to Phoenix for the interview," said O'Malley, a resident of south suburban Worth who said his previous employment included work for an environmental abatement company in Louisiana. "Redflex knew nothing about the city of Chicago. I don't know what they saw in me, but in the environmental business I negotiated a lot of high-priced contracts."
O'Malley said the interview went well.
"I told them about Chicago, how it is a city of 50 aldermen and it is like an orchestra of soloists. You have to listen to each one or you don't have a chance," O'Malley said.
He attributed his lucrative pay arrangement to his negotiation skills.
"I have been a commission salesman a lot," O'Malley said. "I threw out the idea that I should get 3 percent of every ticket, but it was just laughed at. I tried to negotiate the best deal I could."
In the end, he said, he negotiated $50,000 in annual pay and $1,500 commission for every camera installed in the city. "I'm sure had they known at the time how big it was going to get they would have never given me so much," he said. "I made out pretty good."
Bunkse, the Redflex general counsel, said such a commission agreement is not unusual for the company.
"I know he's been paid a great deal of money; we've also generated a great deal of money from the program by a wide margin compared to any other program," Bunkse said.
O'Malley said his neighborhood ties to Bills had nothing to do with him getting the job and Bills' name never came up in the interview with Redflex.
"I never talked to him about it," O'Malley said, adding they didn't know each other well before working together on the contract.
"My wife's girlfriend's son ran around with John Bills," O'Malley said. "The name of the Bills family was familiar. We were in the same neighborhood, went to the same church, but I didn't really know them that well. It was proximity more than anything else."
Bills and O'Malley said there was never a financial connection between them, but they became good friends while working together on the contract.
"We worked together constantly every day, of course," O'Malley said. "Yes, I went to his daughter's graduation. I went to his father's wake. John has a real passion to make the program work. I had a passion to make the program work."