In June, 1983, just two months after he had been elected mayor, Harold Washington vowed to make an example of Illinois Scrap Processing Co. and to try to cancel the firm`s contract with the city for the removal of abandoned autos and trucks.
That wasn`t suprising considering how many millions of dollars the supposedly money-making contract was costing the city and how closely the firm was connected with many of Washington`s worst political enemies.
What was ultimately surprising, however, was that Washington never carried through with his promises.
He never publicly blasted the contract as mayor and never used it as a weapon in his long-running battles with the council majority.
And he never moved to cancel the contract. His administration never even went to court to force Illinois Scrap to live up to the terms of its contract until April, 1985, and then only in reaction to a lawsuit that had been filed against the city by the firm.
Washington`s lack of action is a sharp contrast to his stated position.
In his mayoral campaign, he had consistently criticized the contract as
”stinky” and ”ridiculous” because of the firm`s extensive political contacts.
Most of the contacts were, as far as Washington was concerned, with all the wrong people: Mayor Jane Byrne, Chicago Park District Supt. Edmund Kelly, and, especially, Ald. Edward Vrdolyak (10th), head of the anti-administration city council majority bloc, which had coalesced after Washington`s election.
After his election, Washington promised to have his new corporation counsel, James Montgomery, seek to void the 1981 contract, and he promised to use the contract to illustrate his argument that the mayor, not the council, should control city contracts.
In making the promises, Washington had the strong support of his chief of staff, William Ware. Indeed, Ware was so interested in going after Illinois Scrap that he kept a file on the contract.
Montgomery was less enthusiastic. As ordered by the mayor, he studied the contract, but he took no action. In an interview in 1984, he said he didn`t think the city could break the agreement. Montgomery, who became Washington`s closest adviser after Ware`s death in 1985, resigned as corporation counsel Feb. 19 to return to private practice.
Last week, Matthew Piers, deputy corporation counsel in charge of litigation, said the city delayed court action against the company until 1985 because it was trying to settle the dispute informally.
Yet the result of Washington`s failure to carry out his promises was the continued loss of millions of dollars in revenue for the city.
And, curiously, as the city showed when it filed its counter-suit last April, there were apparently strong grounds all along on which to attack the contract.
In lobbying for the arrangement in 1980 and 1981, Seymour Pielet, the president of Illinois Scrap, guaranteed that the city could reap huge profits by changing its payment method for abandoned cars.
Previously, a scrap metal company would pay the city a flat per-vehicle fee for each abandoned car or truck that was removed from the city`s streets. The company would make its profits by shredding the vehicle for resale as scrap.
Pielet told city officials that Chicago could make a killing by retaining ownership of the vehicles and selling the shredded steel itself when prices were high. Illinois Scrap would act as its agent, he said.
He assured city officials in writing that Chicago could make as much as $60 million, because ”it is predicted that shredded steel scrap prices will range between $100 and $200 per ton,” averaging better than $150 a ton, over the next five years.
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But an industry analyst said this week that such predictions were hard to credit. ”One hundred and fifty dollars a ton! I`m amazed at that,” he said, noting that since 1981 the price of shredded scrap had risen no higher than $105 a ton and has dropped as low as about $60 a ton.
The Pielet proposal was included in a bid that Illinois Scrap submitted to the city in November, 1980. Other firms submitted bids, but all the bids were rejected.
But Pielet was persistent. And on Sept. 19, 1981, without seeking new bids, the city ”reactivated” the Illinois Scrap bid and awarded the firm a four-year contract.
But the contract didn`t turn into the money-maker Pielet had predicted.
In fact, the city has received no money because the shredded steel has been building up, unsold. It is estimated that, at the Illinois Scrap yard at 9331 S. Ewing Ave., there are 178,000 tons of shredded steel–the remains of 147,134 cars and trucks–that belong to the city.
The city contends that Illinois Scrap is holding the steel ”hostage”
and refusing to permit the city to sell the scrap. The firm argues that the city is the one refusing to sell.
The impasse has cost the city at least $10 million. That`s how much the city would have received if it had accepted the high bidders under the flat fee set-up.
In addition, the city contends that Illinois Scrap has removed more than $3 million in parts from the autos and trucks in violation of the contract.
The court battle over the contract is pending in the Cook County Circuit Court before Judge Joseph Wosik.
Yet, the Washington administration found itself this year in the position of rehiring Illinois Scrap for a temporary three-month abandoned-vehicle contract after the old contract ran out at the end of 1985.
The temporary measure was awarded to give the city time to sort through bids submitted for a long-range contract.
Unlike the 1981 contract, the temporary agreement and the new long-term pact return to the flat-fee arrangement. As it happened, Illinois Scrap, one of only two large scrap companies in the Chicago area, offered the highest per-vehicle payment for the interim contract, city officials said.
In 1980, when Illinois Scrap first bid on the abandoned-vehicle contract, it was a newly organized company. But the firm quickly developed political contacts.
Anton Valukas, for example, was an attorney for the firm in the early 1980s. Valukas, a protege of Republican Gov. James Thompson, is now U.S. attorney for Northern Illinois.
When a $200,000 bond was required from Illinois Scrap in connection with the contract, it was posted by Near North Insurance Agency, which is owned by County Board President George Dunne.
A consulting firm operated by Gerald Pfeiffer, a top aide to Park District Supt. Kelly, was paid at least $120,000 by Illinois Scrap for writing a single four-line letter to the city`s department of purchasing, asking that the 1981 contract be granted to the firm, according to a source familiar with a Cook County grand jury investigation into the contract.
Over the last five years, Illinois Scrap and related companies have donated at least $25,000 to Jane Byrne`s campaign funds.
But the one politician who appears to have been most helpful to Illinois Scrap is the one whom Washington would most want to damage politically: Edward Vrdolyak.
When Illinois Scrap needed a zoning variance to operate at the Ewing Avenue address in Vrdolyak`s ward, Vrdolyak dispatched a letter to the city`s Zoning Board of Appeals, arguing for the change. He said later the contract meant jobs for his ward.
When Illinois Scrap needed an attorney for the variance hearing, Vrdolyak recommended one, Pielet said.
When Illinois Scrap was sued over a $470,000 rail spur that the Chicago Port Authority built for the Ewing Avenue site, Vrdolyak`s law firm represented the company in court.
Finally, when some 10th Ward residents tried to oppose the zoning variance sought by Illinois Scrap, they were visited by Joseph Sallas, a city iron inspector and ward worker for Vrdolyak who was later convicted of conspiring to murder a Florida agriculture inspector.
The residents said Sallas told them he was working for ”Eddie” and that they should contact the alderman if they had problems.