CHICAGO — It’s one of City Hall’s busiest woman- and minority-owned contractors. And, for the last two years, Azteca Supply Co. has been the target of a federal investigation that led to charges last month that the company is a sham “front” that fraudulently was awarded millions of dollars in government contracts.

This is the story of a Hispanic woman who found she could make millions by selling goods to government agencies eager to do business with women and minorities — and did so with the help of some of Chicago’s most well-connected Hispanic leaders, including a former chief of staff to Mayor Daley.

But there was one problem: Federal authorities say Aurora Valadez Venegas lied to the city to obtain certification as a woman- and minority-owned business so she could get government contracts set aside for women and minorities.

To get that certification, they say, Venegas “falsely represented to the City of Chicago . . . that she performed a commercially useful function” and wasn’t there just to allow the city and its contractors to take credit for doing business with minorities and women.

Instead, they say she acted merely as a conduit, passing along orders from the city and other governments to the companies that actually produced and supplied the goods. And, in some cases, they say, she didn’t even take the orders, which instead went directly to the suppliers.

Helping Venegas to keep that key city certification: Gery Chico, a Daley insider who has served as the mayor’s chief of staff and also as president of the Chicago Board of Education and of the Chicago Park District and now is chairman of the board of the City Colleges of Chicago.

For the last six years, Chico, a lawyer and lobbyist, has repeatedly — and successfully — urged city officials to renew Azteca’s certifications as a “minority business enterprise,” a “woman-owned business enterprise” and a “disadvantaged business enterprise.” That status as an MBE, WBE and DBE has made Azteca a popular government contractor and subcontractor.

Azteca doesn’t make anything. Nor does it keep much in stock, federal authorities say.

But it still has managed to get government contracts to provide everything from chemicals to treat Chicago’s drinking water, to concrete pipes for O’Hare Airport’s new runway. It has done work on the CTA Blue Line, Stroger Hospital and the Dan Ryan Expy. It has also gotten $638,000 to supply and dispose of feminine-hygiene products at O’Hare restrooms.

Chico — whose law firm has been paid $10,000 by Azteca since 2004, according to lobbyist reports he filed — doesn’t want to talk about the company.

But his firm, Chico & Nunes, says it “has never participated in or advised any client to perform improper activities — nor would we. … We are surprised by the allegations made in the indictment against Azteca, and our firm has not been contacted by any investigators.”

Venegas, 61, created Azteca Supply in February 1991 with $10,000 she borrowed from her 401(k) retirement fund from a clerical job she had at Edward Hospital in Naperville, city records show.

A year later, Azteca landed a lucrative deal, becoming the Chicago area’s “permanent exclusive distributor” for National Concrete Pipe Co., a Franklin Park business owned by John Esposito. Venegas worked for Esposito’s company in the 1970s, and her husband and co-defendant, Thomas Masen, is the comptroller of Esposito’s company.

Esposito often supplies the pipes that are used on government projects, such as O’Hare’s new runway. But the pipes can be purchased only through Azteca.

The Illinois Department of Transportation questioned that arrangement two years ago, when Venegas sought to renew her DBE certification with the agency. An IDOT official, Brian Su, visited the offices of Azteca and National Concrete Pipe in June and July 2008. Su concluded that Azteca was nothing more than a “pass-through,” an unnecessary middleman driving up the cost of buying materials that are made and stored at National Concrete Pipe.

“Mr. Masen explained their transaction process with Azteca: When Azteca phones in an order, NCPC transfers standard items immediately to Azteca’s lease space, which is just a few feet away from the [National Concrete Pipe] plant yard,” Su wrote in an IDOT report that also went to City Hall.

“Azteca does not have a necessary and useful role in the transaction,” Su wrote. “. . . The firm’s role is a superfluous step added in an attempt to obtain credit toward [DBE] goals.”

A few weeks after Su’s visit to National Concrete Pipe’s yard, two FBI agents showed up on July 17, 2008, and Esposito ended up attacking one of the agents and getting arrested. Esposito, 65, of Lake Forest, has pleaded guilty to a misdemeanor. He isn’t charged in the case against Azteca.

According to the indictment against Azteca, Venegas and Masen, Esposito’s company often took orders directly from Azteca’s customers — including Kiewit/Reyes, a contractor that needed concrete pipes for O’Hare’s new runway. It has paid Azteca more than $10 million, records show. Masen would determine how much money his wife’s company should charge for the pipes and other materials, according to the indictment — and how much profit she would make.

“None of this is true,” said a tearful Venegas, in a brief conversation at her Aurora home before referring questions to her criminal attorney, Joseph Duffy, who didn’t respond to a request for comment.

Over the last three years, city records show, Azteca and its seven employees have done a total of more than $30 million in business with City Hall — part of the Daley administration’s goal of giving at least 30 percent of every city contract to companies owned by women and minorities.

Azteca has also worked for other city contractors, including Walsh Construction and BCI Roofing, which was owned by Chris Kelly, the former adviser to and campaign fund-raiser for Gov. Rod Blagojevich who committed suicide last year, days before he was due to go to prison on a federal tax conviction.

As its government business has grown, Azteca has become a more-active political fund-raiser, contributing more than $137,000 to political funds including that of Daley’s now-defunct Hispanic Democratic Organization. Azteca also helped organize three fund-raisers for state Rep. Edward Acevedo (D-Chicago), one of HDO’s leaders.

Azteca’s certifications as a MBE, WBE and DBE were renewed Jan.1, 2009 — about six months after the FBI agent was beaten up during the Azteca investigation — and expire in April 2012, according to city records.

City Hall has now moved to bar Azteca, Venegas and her husband from getting any more city work.

“We are shocked at the lengths these few individuals went to defraud the city and investigators and to hide their front company, including writing up dummy invoices and filling a warehouse full of supplies and materials that were not actually owned by the company,” says a statement from the mayor’s purchasing department.

>> Read the partner story in the Chicago Sun-Times.