By David Kidwell, Chicago Tribune reporter
February 9, 2013
Mayor Rahm Emanuel's administration dumped the city's longtime red-light camera vendor Friday following a Tribune report about new allegations that the company gave lavish sporting trips to a former city official and then lied about it to City Hall.
The action came just hours after the newspaper reported that the board chairman of Australia-based Redflex Holdings Ltd. resigned and that trading on company stock was halted amid a deepening scandal involving ties between its U.S. subsidiary, Redflex Traffic Systems Inc., and former city transportation official John Bills.
The findings of a company-sponsored investigation — including that Redflex officials treated Bills to thousands of dollars in free trips to a Super Bowl and White Sox spring training — directly contradicted what company executives told City Hall in October after a Tribune investigation forced them to acknowledge internal allegations of corruption.
"Redflex attempted to minimize its relationship with Mr. Bills and characterized the wrongful behavior as an isolated payment for one hotel stay," Emanuel's chief procurement officer, Jamie Rhee, wrote Friday in a letter to Redflex lawyers.
"It now appears that many of the statements made by Redflex to the city about this issue were not accurate," Rhee continued, citing the Tribune's disclosure of new revelations by investigators.
Emanuel, who inherited the red-light contract when he took office in 2011, had already disqualified Redflex from bidding on his new speed camera initiative after the October disclosures. The new announcement means Redflex will lose what it has described as its largest North American contract.
The mayor's office gave the company a six-month extension on the red-light business last month while it opened the contract to bids, but at that time it did not announce whether Redflex could compete to keep the business.
"Given these more serious allegations, we are declaring Redflex not responsible to bid on the new red light (request for proposals) when it is issued," Emanuel spokeswoman Sarah Hamilton said in an email to the Tribune.
The administration is also hiring an outside firm to audit Redflex books "for all past and ongoing activities to ensure Chicago taxpayers are not cheated in any way," Hamilton said in the email. "If there are any findings of illegal conduct or improprieties that show Chicago taxpayers were defrauded, the city will seek penalties to the fullest extent of the law."
The Redflex internal probe and a parallel investigation by city Inspector General Joseph Ferguson are also raising more questions about the company's hiring of a longtime Bills friend who received more than $570,000 in company commissions as a customer service representative in Chicago, sources said.
Bills did not return calls but has adamantly denied any wrongdoing. "I would never have intentionally accepted a dime from Redflex, I wouldn't do that," he told the Tribune in October.
The company did not immediately return calls.
On Wednesday, Redflex Holdings announced without explanation the resignation of board Chairman Max Findlay and another board director, Ian Davis, who were atop the list of recipients of the 2010 internal email that outlined allegations of wrongdoing in the company's relationship with Bills. On Thursday the company received a four-day suspension of trading on the Australian Securities Exchange "until the earlier of 10 a.m. on Monday 11 February 2013 or an announcement being made."
"The trading halt relates to an update regarding financial aspects and the ongoing investigation in the USA," wrote company secretary Marilyn Stephens. The company did not elaborate on the trading action.
Redflex lawyers told the Tribune in October that a previous company-sponsored investigation by an outside law firm in 2010 found no wrongdoing but for a single hotel stay one top executive paid for Bills. General Counsel Andrejs Bunkse also said that neither Bills nor his friend were interviewed as part of the company's probe. He acknowledged that the company's failure to notify the city of the allegations was a "lapse."
But in the wake of the newspaper's disclosure, the company announced it would pay for another outside review, this time by David Hoffman, a former city inspector general and federal prosecutor who is now a partner at the Chicago-based law firm Sidley Austin LLP.
Hoffman last week presented the audit committee of Redflex's board with a starkly different version of events, reporting that Bills received tickets to at least one Super Bowl and thousands of dollars in pricey hotel stays, including White Sox spring training trips, over the course of many years, according to sources. Hoffman's report implicated company executives in the wrongdoing and recommended that some be fired, the sources said.