Windy City Electric Co., its owners and their politically connected husbands have been permanently banned from working for Chicago’s City Hall for orchestrating a fraud scheme that landed them millions of dollars in city contracts set aside for companies owned by women and minorities, Mayor Rahm Emanuel’s administration has announced.
The Emanuel administration is still investigating Daniel Hebert — the husband of one of Burke’s top aides, Michelle Murphy — who helped the McMahon brothers run Ace Mechanical Co., a plumbing company that also got city work and inexplicably paid more than $1 million to Windy City, according to a 16-page decision the city sent the McMahons last week. On its minority-owned business certification papers, Ace was supposed to be owned and run by a Hispanic man, but the city says Anthony and John McMahon handled its daily operations.
The McMahons could challenge the ban in Cook County Circuit Court. Their attorney, Thomas Needam, declined to comment.
Burke didn’t return a message seeking comment.
Windy City has been paid nearly $11 million since 2007 under an electrical-maintenance contract with the aviation department. Windy City will continue to work under that contract until a new company is found.
The McMahon brothers are part of an extended family that has reaped tens of millions of dollars in government deals — including electrical work at city airports and Chicago public schools, and delivering milk to the schools and the Cook County Jail. The family and its business partners have given more than $164,000 to political funds controlled by Burke, plus hundreds of thousands of dollars more to dozens of other politicians.
Windy City Electric operates out of a Little Village warehouse owned by the McMahons’ brother, Frank J. McMahon. Frank McMahon and some of his children own McMahon Food Corp., which has overseen milk delivery to the Chicago Public Schools for years.
An investigation by the Chicago Sun-Times and Better Government Association earlier this year found that Chicago schools pay more for milk than many suburban schools. Since then, the McMahons have agreed to cut their prices by a penny a carton for the 2012-2013 school year, which is expected to save the schools $750,000. The milk contract for the following year is to be rebid.
John McMahon’s wife, Nancy, and Anthony McMahon’s wife, Kathleen, incorporated Windy City Electric in 1989 and got certified by the city as a business that was owned and operated by women. That allowed them to win contracts set aside for women-owned companies.
But, in 2005, then-Mayor Richard M. Daley’s administration determined that Nancy and Kathleen McMahon had little involvement in the company, which actually was run by men. Rather than ban the company, city officials allowed them to drop out of the city’s women-owned business program and keep getting city deals.
Inspector General Joseph Ferguson’s office began re-investigating in 2009. Ferguson concluded that the sisters-in-law “were the owners of Windy in name only” and had submitted false documents to the city in 2004 claiming they ran the company.
Their husbands, along with Hebert, operated Ace Mechanical, the minority-owned business that the McMahons falsely claimed was run by a man named Jimmy Acevedo, according to City Hall. Ace is out of business. Acevedo was banned last spring. A lawyer for Hebert acknowledged his client is under investigation but declined to comment further.
City Hall began the debarment process in February. The McMahons fought back, arguing that the allegations were more than seven years old. Last week, City Hall rejected those arguments.
“I have a zero-tolerance policy when it comes to fraud and abuse of the system,” Emanuel said in a statement. “This administration will continue to expand opportunities for MBE and WBE companies so they grow and thrive, while rooting out the bad actors that are essentially stealing city business away from those it rightfully belongs to.”
Windy City has been paid $1.8 million so far this school year working for the Chicago Public Schools. CPS Inspector General James Sullivan said he will review City Hall’s action and decide “how it affects CPS.” Sullivan also continues to investigate Frank McMahon’s dairy business.
Windy City also is upgrading electrical systems at a Cook County office building, a deal that has paid it $468,540 since January 2011. County officials say they will review that contract in the wake of the city’s action.
This story was written and reported by the BGA’s Andrew Schroedter, and Chris Fusco and Tim Novak of the Chicago Sun-Times. The BGA’s Robert Herguth contributed. Schroedter can be reached at (312) 821-9035, or aschroedter@bettergov.org.
