Chicago's embattled red light camera vendor, Redflex Traffic systems, released a report Monday detailing improper and potentially criminal behavior by the company, a hired consultant and a former city official.
The report has prompted one alderman, Scott Waguespack (32nd), to call for a halt to the city's effort to seek a new five-year contract for its red light camera program.
The filing with the Australian Securities Exchange by Redflex Holdings, the parent company of Arizona-based Redflex Traffic Systems, summarizes a report by Sidley Austin, the company hired to investigate potential ethical issues brought to light by theTribune in October 2012.
Headed by former Chicago Inspector General David Hoffman, the report contends the company's relationship with former Chicago Department of Transportation Deputy Commissioner John Bills, who oversaw the city's red light camera program, was not only improper but "will likely be considered bribery by the authorities."
According to the report, Redflex paid for vacation-related expenses for at least 17 separate trips taken by Bills between 2003 and 2010. This included hotel rooms, airline flights, car rentals, meals and golf games. Bills also received a computer and played golf and ate meals locally on the company's dime here in Chicago, according to the report.
The investigation was able to prove at least $20,000 was improperly spent on Bills, who retired in 2011.
Redflex contends former Executive Vice President Aaron Rosenberg and Marty O'Malley, a consultant hired by the company, were at the heart of the improprieties. The two, according to the investigation, hid the gifts and trips provided by the company to Bills by purposely omitting details of those expenditures and often never filed proper paperwork.
O'Malley, in his role as consultant to Redflex, received more than $2 million in compensation between 2003 and 2012. The report said he received $1.57 million between 2007 and 2011, when the city greatly expanded the red light camera program.
Former CEO Karen Finley knew about most of the expenditures and their nature, and signed off on reimbursement requests for the expenses in question, the report claims.
"At the least, the two former Redflex officials most involved in the Consultant/City Program Manager arrangement (the former CEO and former EVP) had knowledge that would have made any reasonable person highly suspicious that this was a bribery scheme, and they acted improperly in allowing this arrangement to occur," the Redflex filing states.
Finley and two other high level Redflex executives resigned from their positions late last week. Rosenberg has been fired by Redflex, and the company has filed a lawsuit against its former vice president for alleged misappropriation of company funds.
While Mayor Rahm Emanuel's office had no comment on Monday's report, Waguespack is calling for the new red light contract to be delayed until hearings have been conducted.
Waugespack, along with Ald. John Arena (45th) and Ald. Bob Fioretti (2nd), has pushed for hearings on the red light cameras a few weeks ago. In the meantime, the city has issued a request for proposal for a new five-year contract for the city's red light camera program.
"Why not put a halt to that? In light of all this, I don't think we should be able to move forward with any contract," said Waguespack. "Don't rush and do another contract without a full accounting on the previous one. I don't think it's too much to ask to be able to question people from CDOT to see who else may have been involved and how deep this goes. I want people from CDOT and the Inspector General to tell me where the gaps were."
But delaying the implementation of a new red light camera contract or putting the entire program on hold is a problem for Emanuel. According to Waguespack, the mayor needs the revenue from the cameras to meet the city's budget goals.
"If they don't have these in place the mayor doesn't have his budget," Waguespack said.
The original scandal was uncovered by the Chicago Tribune in October. The newspaper first reported that Bills had received luxury hotel accommodations worth $910 in Arizona during White Sox spring training. The story was based on a leaked company memo that showed Redflex was aware of the ethical breach, but never reported it to the city.
At the time, Redflex told the Tribune the incident was isolated and pointed to its own investigation and another independent audit from 2010. Bills called the incident "a mistake" and said that he thought the company was finding him a room, not paying for it.
However, Sidley Austin's investigation found the original inquiry to be lacking.
Investigators interviewed every company employee and had access to all of the firm's emails from 2002 until now. The investigation examined 37,000 documents and collected 4 terabytes of data over at four-month period. Investigators did not interview O'Malley, Bills or the anonymous whistleblower despite attempts to do so.
“Today, and every day going forward, we intend to be a constructive force in the industry, meeting the needs of communities across the country and serving the public interest,” said Robert T. DeVincenzi, president and CEO of Redflex Holdings and CEO of Redflex Traffic Systems Inc.
Redflex Holdings said it is taking strong measures to ensure another ethical breach does not occur, including appointing new board members, creating improved contract processes, developing new training for employees, and hiring a new compliance manager.
“We recently announced new leadership and the enactment of the highest ethical standards," said DeVincenzi. "Those steps marked the dividing line between the past and where this company is headed. Our investigation into our Chicago contract revealed unacceptable conduct, and we will work, each day, to regain the trust of our clients, the public and our own employees."
Redflex has been the city's red light camera vendor since the program began in 2003 — a program that has grown to become the nation's largest, with 384 cameras dotting the city at 191 intersections. It has generated more than $375 million through 2012.
Redflex's Chicago contract is its single largest, accounts for nearly 14 percent of its annual sales and has generated more than $100 million in revenue for the company.
The scandal prompted Emanuel to ban Redflex from bidding on the new red light camera contract. The company's contract was supposed to expire Jan. 31, but was extended six months to allow the contract to be re-bid.
Redflex also was prohibited from bidding on the soon-to-be-awarded speed camera contract last October, when the first hint of impropriety was revealed. The company was considered a front-runner for that contract before the revelations.
In anticipation of Monday's report, Redflex requested last Wednesday that stock trading on Redflex Holdings be halted on the Australian Stock Exchange. The stock's value has fallen dramatically since recent revelations and was trading at $1.13 (AU) before trading was stopped. Trading resumes Tuesday morning.
