The feds may not be done with municipal bookkeeper Joseph Letke.
The U.S. Securities and Exchange Commission filed civil fraud charges June 24 against the City of Harvey and Letke, the community’s longtime financial consultant.
The federal complaint alleged that “from 2008 to the present, Harvey and its Comptroller, Letke, have engaged in a scheme to divert bond proceeds for improper purposes, including undisclosed payments to Letke.”
Now, we have learned the SEC is looking at other municipal financial transactions involving Letke. And that creates more potential problems for a group of south suburbs wanting to build their own water supply system.
The SEC issued a subpoena, dated April 30, to Amalgamated Bank of Chicago seeking copies of financial records relating to the South Suburban Joint Action Water Agency. Specifically, the bank was told to produce, among other things, copies of monthly account statements and withdrawal slips, checks, money orders and wire transfers totaling at least $500, according to a copy of the subpoena, obtained by the Better Government Association.
Amalgamated is where the water agency – comprised of Alsip, Blue Island, Harvey, Markham, Midlothian and Robbins – does its banking. A Letke-led firm is the water agency’s financial advisor.
An SEC spokesman declined to comment. But we have learned from a source that the subpoena was issued as part of the agency’s ongoing investigation into Letke’s dealings.
“I’ve been told they’re looking at anything he was connected with,” Markham Mayor David Webb, the water agency’s chairman, says about Letke. Referring to the bank documents, he adds, “We provided them with the info and we haven’t heard anything since.”
Amalgamated executives didn’t return calls.
The BGA previously reported that federal prosecutors have separately issued grand jury subpoenas to municipal governments in Dolton, Riverdale and Robbins seeking contracts, invoices, cancelled checks, and other documents relating to Letke and two of his south suburban companies.
Letke had been the comptroller in Riverdale and Robbins and performed financial audits in Dolton, but he no longer works with those towns. He didn’t return messages.
Letke is representing himself in the SEC matter because he “has been unable to retain an attorney for financial reasons,” according to a recent court filing.
Frustrated with Chicago’s rising water rates, the group of south suburbs banded together and in August 2012 borrowed more than $5.5 million through a bond sale.
The funds were to be used to study if and how the agency could build a system that would pump, treat and transmit water from the Indiana shore of Lake Michigan, at an estimated construction cost of $300 million.
At the time of the August 2012 bond sale, Letke was comptroller for two of the towns, Harvey and Markham, though Letke no longer works for either municipality.
A Letke firm, Public Funding Enterprises Inc., was paid $42,000 to serve as financial advisor on the bond deal. Additionally, the company was paid $191,200 at the sale’s closing for work it had performed up until that point, according to interviews and public records.
In all, the water agency has paid Letke’s companies more than $375,000 from August 2012 to January 2014, according to the most recent financial records.
The water agency now has approximately $2.6 million left in its coffers.
Officials say they’ll need more cash – as much as $3.5 million – to complete a still-unfinished feasibility study. Among the options are issuing another bond, or obtaining private financing.
What impact the SEC probe may have on those plans is unknown.
Already, the resolve of some water agency members is weakening.
There were originally seven south suburbs but Calumet Park recently withdrew and Blue Island and Midlothian have said they may follow, raising questions about the water agency’s future.
“I’d rather cut my losses,” Midlothian Mayor Sharon Ryback says.
‘A cash-strapped city’
Besides the SEC complaint, Harvey and Letke are co-defendants in another federal lawsuit, filed April 2012 by former Calumet City Mayor Jerry Genova.
If the name sounds familiar it’s because Genova was once a Golden Boy of suburban Democratic politics, elected mayor fresh out of Notre Dame law school.
There was talk that he someday would reach statewide office, but Genova’s meteoric ascension hit a wall when he was convicted in 2001 on federal charges he accepted $125,000 in kickbacks and used city workers – on city time – to aid his political campaigns.
After his release from prison, Genova worked for one of Letke’s companies for an annual salary of $100,000 plus a quarterly bonus of at least $10,000, according to the complaint, filed in U.S. District Court.
Genova alleges in that lawsuit that Letke fired him around April 2010 under pressure from Harvey Mayor Eric Kellogg who threatened to “remove Letke as Harvey Comptroller if Plaintiff’s employment continued” because Genova had supported one of Kellogg’s mayoral opponents.
After two years of legal wrangling the two sides appeared to be close to a settlement that involved Harvey reportedly paying Genova up to $400,000.
But the Harvey City Council recently rejected the deal, raising the possibility that Genova’s case will go to trial.
“We rejected it based on the fact that he was asking for too much,” Harvey Ald. Joseph Whittington says. “He doesn’t deserve that. We’re a cash-strapped city.”
Genova declined to comment.
This column – a new regular feature called The Public Eye, appearing on the Chicago Sun-Times’ political portal Early & Often – was written and reported by the Better Government Association’s Andrew Schroedter, who can be reached at email@example.com or (312) 821-9035.