Seeking to plug gaping holes in the credibility of its financial management operations, the scandal-ridden Chicago Housing Authority will appoint Chicago Building Commissioner Graham Grady as its chief operating officer, City Hall sources said Thursday.
The move was said to have been prompted by a personal appeal from CHA Chairman Vincent Lane to Mayor Richard Daley two weeks ago to allow him to hire away Grady to gradually replace Robert D. Whitfield.
Lane and CHA board members could not be reached for comment Thursday.
Kristen Anderson, a CHA spokeswoman, said, “There is a news conference scheduled for noon Friday with Vince Lane to discuss administrative changes. We don’t have a comment on anything else at this time.”
“I have no comment about my rumored departure from the Building Department,” was all Grady would say Thursday night.
Lane reportedly lobbied Daley for permission to hire Grady away last month while the first round of financial scandals involving millions of misspent housing dollars was being made public.
The scandals include claims by the Securities and Exchange Commission that John Lauer, the CHA’s director of risk management and benefits, and others had defrauded the agency’s pension fund of $14 million. Several days later, Lane disclosed that the agency’s own investigation had uncovered millions more in losses from schemes involving contractors, private security and its police force.
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Lauer was suspended, while 12 other top CHA employees were forced to resign or accept transfers in the wake of scandals involving millions of dollars.
When Grady’s CHA appointment is announced, sources said, Lane will declare that Whitfield’s departure was planned months ago and that he will remain with the agency for a time until his successor becomes familiar with its operations.
Grady, 37, is an attorney who worked as the city’s zoning administrator before being named to run the Building Department in January.
“He’s energetic, enthusiastic and ambitious,” a friend said. “And that’s not a bad thing, especially as chief operating officer of the CHA. Ambitious people will work very hard to do a great job. And that’s exactly what he will do.”
Other sources said Daley only reluctantly agreed to allow Grady to leave. He has a reputation as an ambitious but loyal political player.
During January’s cold snap, with CHA and private owners failing to provide heat to many tenants, Grady defended Daley while vowing to crack down on landlords ignoring heating regulations.
In a new development in the scandal involving the activities of Lauer, it was learned that the CHA official, who has been accused by federal securities regulators of stealing millions of dollars from the authority’s pension fund, has offered to negotiate a settlement of the charges.
Lauer’s attorney, Susan Getzendanner, told U.S. District Judge Wayne Andersen of her client’s decision at a hearing Thursday, a day after the SEC filed new court documents alleging that Lauer misappropriated far more money for his own use than had previously been claimed.
Those documents include new details about assets held by Lauer, 29. They show that he and his wife own a house in Wilmette, which the SEC documents say is up for sale for $595,000, as well as a $1.1 million house in Lake Forest where the SEC previously said the couple lived. A recent credit history for Lauer prepared by a bank pegs his net worth at $4.5 million.
Getzendanner said Lauer is willing to negotiate a permanent injunction, under which he would be barred from violating anti-fraud provisions of federal securities law. Attorneys for the SEC and the CHA are also expected to press for the return of any illicit profits and for penalties. The next hearing in the case is scheduled for Tuesday.
The U.S. attorney’s office is also investigating the CHA’s pension woes.
Anton Valukas, an attorney for the CHA, confirmed that housing authority officials have met with federal prosecutors who are involved in the investigation.
“They assured us this is a priority and they are aggressively pursuing it,” Valukas said.
Lauer was suspended from his CHA job after the SEC filed a complaint in June. The commission alleged at the time that Lauer placed $14 million, more than a third of the CHA’s pension fund assets, into non-existent securities offered by Lyle Neal of Lexington, Ky., and Joseph Polichemi of Ft. Lauderdale and London.
The money is still unaccounted for. Valukas said a court in Luxembourg has issued an order freezing a bank account where most of the money was allegedly wired, but the housing authority’s lawyers haven’t been able to examine the account.
Valukas also said the CHA isn’t sure whether another $3.2 million in pension fund money has been recovered. In the documents filed Wednesday, the SEC charged that Lauer placed those funds into another investment scheme involving bogus securities.