A politically connected business venture won a $38.4 million government contract to supply meals to Cook County Jail after one of its partners claimed disadvantaged “minority” status, a legal designation that boosted his group’s chances of winning the bid.
But the Better Government Association has learned the politically connected partner, Timothy Rand, doesn’t qualify as a disadvantaged minority enterprise under the law because he’s too wealthy.
To be considered a disadvantaged minority firm by Cook County government, a business owner’s personal net worth can’t exceed $2 million. Rand has said in court filings that his fortune tops that amount, and news reports have indicated he may be worth $20 million.
That finding is raising questions about why CBM Premier Management LLC – which Rand’s Airport Restaurant Management Inc. is part of – was awarded the massive taxpayer-funded contract, especially since its bid was $2.1 million higher than the losing proposal submitted by Philadelphia-based Aramark Correctional Services LLC, which disputed the county decision in court.
The CBM deal was recommended by Cook County Sheriff Tom Dart’s office, approved by the Cook County Board and signed by County Board President Toni Preckwinkle this past summer. The three-year contract, which took effect last September, aims to provide 30,000 meals a day for inmates at the 26th and California jail complex.
McMahon Food Corp. delivered milk to Cook County Jail for years as a subcontractor for Aramark Correctional Services LLC, which held government contracts to provide food for inmates.
Aramark lost its contract last summer but McMahon Food didn’t suffer – the clout-heavy firm is still delivering milk to the jail, this time for CBM Premier Management LLC, which took over the contract in September after beating Aramark in a bidding process.
How did it happen? Click here to learn more
McMahon Food, a Little Village-based dairy supplier, had agreements with Aramark and CBM, the only two firms that bid on the contract, says Frank Bilecki, a spokesman for Cook County Sheriff Tom Dart’s office.
That means no matter what firm the county picked (the sheriff’s office vetted the proposals, but the Cook County Board ultimately approved the deal with CBM), McMahon Food got a piece of the action.
The firm and its owners are well-known in political circles, having donated more than $380,000 to public officials including Dart, Cook County Commissioner Bridget Gainer and Ald. Edward Burke (14th), according to the Illinois State Board of Elections.
Bilecki says the sheriff had nothing to do with the firms’ decisions to use McMahon Food.
CBM picked the firm as a subcontractor because it was “price competitive and had the capacity to step in and supply [CBM] with the goods it needed,” says Grayson Mitchell, a CBM spokesman. Politics had nothing to do with it, he adds.
An Aramark spokeswoman didn’t return messages.
For years, McMahon Food was a certified woman-owned business enterprise, a designation that helped it win millions in government contracts.
But last year the company pulled out of the re-certification process in Cook County amid questions from the Chicago Sun-Times and Better Government Association about who really controlled McMahon Food – Frank McMahon or his daughter Bridget McMahon.
Frank McMahon died of natural causes Sept. 16. Three months later, on Dec. 10, the county re-certified McMahon Food as a woman-owned business, with Bridget McMahon listed on public records as its president. She didn’t return messages.
McMahon Food also is part of a venture that has a $20 million-a-year agreement to deliver milk to 600 charter and public schools across Chicago. The Chicago Public Schools’ inspector general started investigating the venture last year after the Sun-Times and BGA revealed the school system had been paying more for milk than many smaller suburban school districts.
Rand has been a generous campaign donor to Preckwinkle over the years, but county spokesman Owen Kilmer says CBM didn’t receive special treatment.
“This contract went through a valid and competitive procurement process,” Kilmer says via email.
The county was not required to accept the lower bid, Kilmer adds. In certain kinds of bid solicitations, public officials are allowed to take a number of factors into account – including but not limited to price – when vetting proposals.
But, the county’s rules require that the winning bidder direct at least 25 percent of revenues to contractors certified by county government (or city government, if a business owner’s net worth isn’t too high) as financially disadvantaged and owned and operated by blacks, Latinos or Asians.
Bidders that don’t meet the 25-percent threshold aren’t automatically disqualified, but they have a tougher hill to climb to secure a contract, county officials say.
When the County Board approved the CBM agreement in July, Rand’s Airport Restaurant Management Inc., or ARMI, was listed on bid papers as CBM’s only “minority-owned business enterprise,” or MBE.
The only problem: ARMI wasn’t a Cook County certified MBE at the time.
Rand is black and according to a recent court filing is ARMI’s president and majority owner. But ARMI’s Cook County MBE certification expired March 2012, four months before CBM was awarded the contract, and still has not been renewed.
Also, Rand is too wealthy to be considered disadvantaged, or for ARMI to be recognized as an MBE in Cook County.
Aramark also didn’t meet the 25 percent threshold in its proposal, though it hit 17 percent and sought a formal county waiver from the rest of the requirement, records show.
Government set-aside programs are intended to promote economic development among minority and woman-owned businesses.
The thinking goes that if not for such programs, the firms wouldn’t receive their fair share of public contracts.
Despite those good intentions, legitimate minority and woman-owned firms don’t always come out ahead. Too often the deals and dollars flow instead to firms that either pretend to be minority- or woman-owned, or do in fact have legitimate ownership but are what’s known as a “pass-through” and do no real work.
Read some of the noteworthy cases…
- Chicago Mayor Rahm Emanuel permanently banned Windy City Electric Co. from obtaining future city work last year after it was determined John McMahon and his brother, Anthony, a precinct captain for Ald. Ed Burke (14th), ran the firm. Windy City had won millions of dollars in contracts over the years by claiming to be woman-owned.
- Aurora Venegas, the owner of a certified minority and woman-owned supply company and her husband were sentenced in September to two years in federal prison. Azteca Supply Company was paid nearly $9.7 million for work on projects at O’Hare International Airport from 2001 to 2008. Authorities later determined that Azteca did no actual work.
- James Duff, who comes from a mob-connected family that was friendly with former Mayor Richard M. Daley, was sentenced to nine years in federal prison in 2005 for operating phony minority- and woman-owned “front” businesses that won more than $100 million in municipal contracts.
Since 2000, Aramark has supplied meals to Cook County Jail under different agreements; the most recent contract expired June 2011, though the company received several extensions and continued to supply meals until September, when CBM took over.
Aramark submitted a lower bid than CBM, $36.3 million versus $38.4 million.
But the sheriff’s office preferred CBM because of its local ties and plans to generate additional revenue through sales of specialty food items, says Alexis Herrera, Dart’s chief financial officer.
County officials say they didn’t realize until after CBM won the contract that the venture hadn’t met the 25 percent goal.
An Aramark spokesman didn’t return messages.
On Aug. 3, 2012, the company sued the county in federal court, alleging officials “acted improperly” in awarding the contract to CBM in part because the venture wrongly claimed ARMI was an MBE, according to a copy of the suit. The complaint was later dropped.
Rand didn’t return messages. His venture also consists of CBM Managed Services of Sioux Falls, S.D., and Berwyn-based Buona Cos., a caterer and local restaurant chain owner.
CBM spokesman Grayson Mitchell says neither Rand nor the venture deliberately misled anyone.
Rand “is not trying to cut any corners,” he says.
Rand and his twin brother Everett Rand are among Chicago’s better-known black entrepreneurs.
Their vast interests include food ventures, a liquor wholesaler and, in Timothy Rand’s case, a piece of a Downstate riverboat casino. Together, the Rands and their companies have donated more than $730,000 to elected officials over the years, including more than $21,000 to Preckwinkle.
A separate venture involving the Rands has a city contract to control 17,000 square feet of lucrative concession space at Midway Airport. In 2005, the brothers faced similar questions about their status as city-certified disadvantaged business owners.