Ernest Sawyer, top CTA executive and brother of Mayor Eugene Sawyer, along with CTA board member Howard Medley, played key roles in the awarding of a no-bid contract to a Loop accountant accused of passing a $22,500 bribe to Medley, CTA records showed Thursday.
Accountant John E. Wilson, named but not charged Wednesday in a federal indictment as the person who passed a ”finder`s fee” to Medley, received a $48,000 contract in 1986 to study collection of exact fares. The contract was approved apparently in violation of internal transit agency regulations, the records showed.
In separate interviews Thursday, Sawyer and Medley each suggested that the other had championed Wilson at the CTA.
”Commissioner Medley recommended Wilson,” Sawyer said. ”We followed his recommendation.”
Medley`s recollection was different: ”I have known Wilson for a long time. But he was recommended by Sawyer`s staff. I voted for him. The recommendation came from staff.”
The indictment against Medley charged that in April, 1987, he received $22,500 from Wilson, who was involved in a real estate deal and collected a $2,500 fee for his services. The government charged that the money was a bribe orchestrated by Brian Flisk, the chairman of Metropolitan Petroleum Co. Flisk, Medley and six others were named in the 41-count indictment.
Sources familiar with the CTA investigation said Thursday that Wilson`s consulting contract, which was to study ”occurrences of fraud and illegal acts” in fare collections and which eventually went over budget by $6,698, is under investigation by the same federal grand jury that indicted Medley on Wednesday on charges of taking the payment.
In addition, invoices for another $14,000 in payments to Wilson`s firm were mysteriously purged from CTA computers, sources at the agency said.
Meanwhile, public records also revealed that a prominent Loop law firm, Katten, Muchin & Zavis, played a key role in the real estate transaction for which Medley received the ”finder`s fee.”
The details of the complicated real estate transaction, which centered on the sale of an option to buy a warehouse at 4800 S. Central Ave., Stickney, provide new insight into what the federal government says was a cornerstone of a conspiracy to bribe CTA officials.
Two members of the 229-member firm have been interviewed by the federal government, according to Don Egan, a firm partner. The two lawyers, Michael Zavis and Robert Sperling, are among the owners of the property involved in the transaction, Egan said.
”Mr. Zavis and Mr. Sperling were interviewed and they cooperated fully in the interviews,” Egan said. The two lawyers were unavailable for comment. The federal government is charging that at the time the real estate deal was consummated, Metropolitan had a $38 million CTA contract to supply the agency with diesel fuel. The firm, however, was under fire by CTA internal auditors who had suggested that Metropolitan overbilled the agency by more than $600,000. The indictment accused Medley of attempting to quash the CTA`s internal probe of Metropolitan in return for the bribe.
Indicted along with Flisk and Medley were two former CTA employees and four Metropolitan officials. The CTA employees were accused of taking bribes from Flisk to approve $624,000 in false billings and the Metropolitan officials were charged with helping orchestrate the CTA fraud and a separate $5.6 million fraud on Heller Financial Services, which provided operating loans to the oil firm.
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Flisk, 43, of 4114 W. 99th St., Oak Lawn, appeared in federal court Thursday and was released after posting $10,000 bail. Prosecutors argued that he should be jailed as a flight risk. Medley and the other defendants are to be arraigned on Monday.
Wilson, who has offices at 53 W. Jackson Blvd., was unavailable for comment.
CTA records showed that Wilson`s accounting firm first began doing work for Ernest Sawyer`s department in 1985. On Jan. 16, 1986, Greg Kenner, a member of Wilson`s firm, sent a letter to Sawyer with a bill for $3,973.79.
The bill included charges for time spent in two meetings with Medley and a trip to Philadelphia, according to CTA documents. Also attached was a draft of a ”letter of agreement” signed by Wilson that outlined ”the consulting services we will provide to the Chicago Transit Authority.”
The CTA requires that no-bid contracts be studied by an evaluation committee and that a written justification for granting a contract be filed. No such records were contained in the Wilson contract file, according to CTA sources.
”We did not go out to request (that) firm`s” offer bids, Sawyer said.
”Commissioner Medley had a special interest in this. This came directly from Medley.”
The letter stated that Wilson would provide consulting services to the Department of Planning and Development, which is headed by Sawyer in his position as deputy executive director. ”As requested from time to time, we will undertake assignments . . . as requested by Mr. Sawyer, Commissioner Medley or any appropriate designated Chicago Transit Authority official.”
The letter further stated, ”At no time will we engage in activities without the knowledge and approval of the project manager, Mr. Ernest Sawyer.”
Sawyer said that Medley and CTA board member John Hoellen sat on a board committee responsible for studying fare collection. Hoellen said Thursday that he had no recollection of Wilson`s hiring.
On Jan. 23, 1986, after Sawyer submitted the bill for payment, E.W. Tobin, then manager of materials management at the CTA, sent a memo to Sawyer stating that he should ”assume” that the $3,973.79 bill from Wilson was
”the total billing for the project and that Mr. (Lawrence) Pianto is aware of the circumstances involved,” according to the documents.
Pianto, former chief executive officer at the CTA, pleaded guilty earlier this year to charges that he accepted bribes from a CTA supplier in return for steering work to the firm.
Tobin ordered Sawyer to fill out a purchase requisition and include a paragraph explaining the justification for awarding no-bid work. He received a memo back from Sawyer asking for the $48,000 consulting contract, the records showed.
Tobin memoed back on Feb. 24 asking for a no-bid justification. Tobin received a note from Pianto the following day that declared: ”The Board selected him. Get it going, please.”
Meanwhile, records showed that four days earlier, on Feb. 20, Pianto approved a requisition for a $48,000 professional consulting contract to Wilson.
On March 26, Medley, acting as a committee member of the CTA board, approved the contract and recommended that the full CTA board concur, which the board did on April 9, according to the documents.
A former CTA purchasing official who raised questions about the contract at the time said Thursday, ”It was Sawyer`s department that wanted the contract, though it`s possible that Medley told Sawyer to order the contract.”
Medley said Thursday that he and Wilson were longtime acquaintances. ”We both worked together for (the late U.S. Rep. Ralph) Metcalfe,” Medley said.
He also said that he had arranged for Wilson to become involved in the real estate transaction that generated the $25,000 ”finder`s fee.”
Public records show that the warehouse was sold in 1986 in a $5.8 million deal to a partnership called G & K Partners. The general partners were Donna Kahan, wife of Donald Kahan, a real estate investor and property manager, and Gerald Gitles, a former partner in the Katten firm. Among the limited partners were Sperling and Zavis. Medley said he had been previously acquainted with Sperling, who in 1985 was paid $38,972 in fees for working as an outside lawyer for the CTA. Medley said he learned in 1987 that G & K owned the building.
Medley, the owner of a moving and storage company, said: ”I was looking for a building to expand my business. I looked at it, but it was too big for me. Sperling and Zavis told me I could get a 10 percent commission if I could find a buyer.”
Shortly thereafter, Medley said, he learned that Flisk, who at that time had the CTA fuel contract that was on shaky grounds because of the internal audits, was looking for warehouse space. ”I gave (Flisk) the phone number. Sperling and Zavis called me back. They said he wanted to buy the building.” Medley continued: ”They asked me if I wanted to be the broker. I said I ain`t got a license. So I asked Wilson to do it.”