ILLINOIS (WCIA) — Taxpayers are the proud, collective new owners of a seven-story, 172,723 square foot office building in Chicago’s West Loop neighborhood. And at the rate we’re paying our janitors, it had better be squeaky clean.
As of July 1st, 2017, the state of Illinois assumed possession of 401 S. Clinton Ave, the property that has housed government workers for decades. The building has long provided a workplace for Department of Healthcare and Family Services and Healthcare and Family Services.
In February of 1996, Bill Cellini’s Pacific Management Incorporation entered into a Certificate of Participation with the state of Illinois. The deal was set up as a sort of “Lease to Own.” Cellini’s company would manage the property, hire the janitors, take out the trash, shovel the snow and bill the state for the principal, interest and of course “management fees and payroll.”
Over the years, an estimated $29.7 million flowed from the state, through a trust account at U.S. Bank, to Pacific. That figure doesn’t include any extra fees incurred after a full accounting was last published in 2012.
The state took over the property when Pacific’s deal was up at the end of this June, but eight union employees were left in the lurch. For more than a decade, those six janitors and two engineers had maintained the property. Pacific collected an average annual management and payroll fee of $368,060 for their services. But state law requires Central Management Services to seek a competitive bid before awarding any new property management contracts.
When CMS posted the Invitation for Bid on May 26th, a second management company entered the picture. East Lake Management Group, owned by Chicago mega donor Elzie Higginbottom, outbid Pacific and was briefly awarded a two-year contract worth a guaranteed $4.4 million — a monthly management fee of $51,956 plus added expenses. The labor unions agreed to continue their services, but the workers would have to leave Pacific and become employees of East Lake. Except that deal didn’t last long.
In late 2011, Cellini was convicted on federal corruption charges. The Springfield power broker known as the ‘King of Clout’ was caught up in the scandal that brought down ex-governor Rod Blagojevich. Federal prosecutors convinced the jury that Cellini extorted a movie producer to donate $1.5 million to Blagojevich’s campaign fund. The longtime Republican returned to his Springfield home after his 2013 release from prison. Because state law prohibits convicted felons from conducting business with Illinois as a contractor or a subcontractor for a period of five years, Pacific Management had to untangle most of their existing contracts with Illinois.
As recently as April of this year, Cellini’s son-in-law‘s name appeared on the founding documents of a mysterious shell company that managed to win a lucrative above market warehouse lease with CMS. That lease remains under active investigation by the Office of the Auditor General. Those payments have been frozen until further review.
Elzie Higginbottom is a powerful political donor too. Though he denies any wrongdoing, the former Chairman of the Cook County Housing Authority was forced to step down from his post after one of his companies won a $3 million contract from a nonprofit called Turnstone. The Housing Authority created Turnstone at his direction before it steered the deal to one of Higginbottom’s many companies.
More recently, the high dollar donor who routinely contributed to candidates like President Obama, Hillary Clinton, former Chicago Mayor Richard Daley, former Governor Pat Quinn and Rod Blagojevich made headlines for a bizarre feud with Congressman-turned-convict Mel Reynolds, who accused Higginbottom of plotting to bribe a Zimbabwe dictator in an alleged diamond mining scheme.
Two days before the building at 401 S. Clinton was set to become state property, CMS notified Higginbottom’s East Lake Management Group they had won the contract, edging Pacific out of the building they had managed for 20 years. On July 21st, CMS nixed the deal, claiming “the solicitation did not provide for consideration of all factors of significance to the State.”
East Lake President Eileen Rhodes says the company started managing the Clinton Street property on July 5th – two days before the state would pass it’s first annual budget in two-plus years. “We were told we won the bid in a [Request for Proposal],” Rhodes said in a phone interview. Three weeks later, and running out of options, CMS scrambled to put a string of new deals together exempt from normal procurement rules.
THE PRICE TAG
The first was an $80,000 placeholder deal to cover East Lake’s first three weeks on the job. Because it falls under the new threshold of $100,000, the state classifies that as a “small purchase,” which exempts the bid from mandatory competition.
Later, CMS filed an “emergency procurement” which also allows the state to award a contract to a lone bidder; however, those deals are limited to a duration of 90 days. That second installment was worth $252,990 and lasted from August 15th through November 12th.
This week, CMS renewed a second “emergency” deal with East Lake, this time for $230,000, putting the running total at $562,990. That six month cost alone is greater than any single year of management fees and payroll on record during the Pacific Management arrangement, and it’s on pace to more than triple the average annual cost of janitorial services at the property. To date, the emergency contracts are costing taxpayers a premium of 45 percent more than the original deal CMS nixed back in July.
THE OFFICIAL STATEMENT
“Our primary concern is making our long-term contracts competitive, which is difficult with our current procurement and labor laws,” said CMS spokesman Rich Bossert. “CMS cancelled the initial solicitation to review both the legality and length of the requested proposals. This current emergency contract is a short-term, necessary solution to maintain the building as we work towards solutions that reduce the costs of managing our properties.”
According to the Illinois procurement code, “a purchasing agency may make emergency procurements without competitive sealed bidding or prior notice when there exists a threat to public health or public safety, or when immediate expenditure is necessary for repairs to State property in order to protect against the further loss of or damage to State property, to prevent or minimize serious disruption in critical State services that affect health, safety, or collection of substantial State revenues, or to ensure the integrity of State records.”