Reporting Jay Levine
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CHICAGO (CBS) – Federal prosecutors have set their sights on one of the biggest fish ever, a huge and well-known construction firm with plenty of clout.
McHugh Construction – which has headed up projects like the reconstruction of Wacker Drive, a new Lake Michigan marina, replacing the North Avenue bridge over the Chicago River, and rehabs of the CTA Brown Line and Red Line – has been confronted with some serious allegations regarding some of its subcontractors.
CBS 2 Chief Correspondent Jay Levine reports federal investigators spoke to McHugh officials Tuesday, the same day several of its contractors were formally charged with fraud. Those subcontractors have been cooperating with the feds as part of a probe into minority- and women-owned business fraud.
McHugh officials warned against a rush to judgment as it prepares to defend itself against possible charges similar to those which have led to jail terms and millions of dollars in fines for owners and operators of other construction firms.
But all those that have been under the federal microscope before are dwarfed by McHugh, the politically-connected construction giant described in a federal complaint as Prime Contractor A.
McHugh boasts billions of dollars’ worth of government and private contracts.
McHugh spokesman Dennis Culloton said, “McHugh will respond to any requests for information from federal government, or city government, or anyone who wants to look into this matter.”
Tuesday’s criminal complaint charged several contractors that worked on McHugh projects with acting as no more than front companies on McHugh projects so that the construction giant could avoid requirements to provide work for minority- and women-owned businesses.
The feds alleged the subcontractors, owned by Willowbrook businesswoman Elizabeth Perino, did no work on McHugh projects, acting only as a pass-through for the main contractor.
Perino’s firms were listed as subcontractors on the Wacker Drive, North Avenue bridge and CTA projects, but federal authorities allege they did no actual work on those projects.
On Wednesday, a group of minority contractors who were meeting with Cook County Board President Toni Preckwinkle said if the allegations are true, McHugh had to know about it.
Omar Shareef, President of the African American Contractors Association, said something like this can’t happen without the general contractor’s knowledge.
“It cannot; unless they turn a blind eye to it, unless they’re Stevie Wonder or Ray Charles,” Shareef said.
After the federal charges, the city moved to suspend Perino’s firms from its set-aside program for women- and minority-owned businesses.
But McHugh wasn’t suspended along with Perino’s firms.
Mayor Rahm Emanuel said “First of all, it would be inappropriate … for me to comment on that case. Let it be known, and I think you have it, the procurement office cooperated with the federal authorities as they investigate this. So, we took the steps that I think is appropriate.”
But Preckwinkle said she would have gone further.
“I would go back, frankly, to McHugh. While we have focused, historically, on the sham contractors themselves, they do this at the behest of the prime (contractor), so I would focus, frankly, on McHugh.”
The feds themselves are focusing on McHugh, which has said due process should be allowed to play out.
“McHugh is a company that has been in the city of Chicago for more than 100 years and they’ve helped to mentor some really terrific minority- and women-owned businesses over the years,” Culloton said. “The facts will play out in this current case at bar and we can’t comment on the details off it.”
A statement late Wednesday from the Mayor’s office explained that a city ordinance permits the suspension of a contractor that has been charged, convicted, or admits committing a crime. McHugh is merely under investigation, so that provision does not apply.
As for McHugh’s other government contracts, the Illinois Department of Transportation said it will review contracts awarded to McHugh and take “appropriate action.”