Chicago's embattled red light camera firm went to City Hall on Friday in its latest effort to come clean, acknowledging for the first time that its entire program here was likely built on a $2 million bribery scheme.
By its sheer size, the alleged plot would rank among the largest in the annals of Chicago corruption.
An internal probe of Redflex Traffic Systems Inc. and a parallel investigation by the city's inspector general — prompted by reports in the Chicago Tribune — have cost the company its largest North American contract and all of its top executives.
On Friday the company announced the resignations of its president, its chief financial officer and its top lawyer. The head of Redflex's Australian parent company conducted town hall meetings at the headquarters of its Phoenix-based subsidiary to tell employees there was wrongdoing in the Chicago contract and that sweeping reforms were being instituted to win back the company's reputation.
In separate, private briefings with the city inspector general and with Mayor Rahm Emanuel's top lawyer, Redflex attorneys acknowledged it's likely true that company officials intended to bribe a Chicago city official and that they also plied him with expenses-paid vacations.
The company's outside investigator, former city Inspector General David Hoffman, found that Redflex paid $2.03 million to a Chicago consultant in a highly suspicious arrangement likely intended to funnel some of the money to the former city transportation official who oversaw the company contract, according to sources familiar with the investigation and the Friday briefings to city officials.
The arrangement among the city official, the consultant and Redflex — first disclosed by a company whistle-blower — will likely be considered bribery by law enforcement authorities, Hoffman found.
Without subpoena power, it was not possible to check personal financial records of the city official or the consultant, who refused to cooperate, according to the sources familiar with Hoffman's findings. But Hoffman, a former federal prosecutor, said that under applicable law, authorities could consider the arrangement to be bribery even if the payments were not made, the sources said.
The bulk of the consultant's fees — $1.57 million — were paid during a four-year period beginning in 2007, the years the program really expanded in Chicago, Hoffman found.
In addition, the city transportation official was treated to 17 trips, including airfare, hotels, rental cars, golf outings and meals, the sources said. Most of those expenses were paid by the company's former executive vice president, Hoffman found. That official was fired late last month and blamed by the company for much of the Chicago problem.
But Hoffman found that Redflex's president also had knowledge of the arrangement that would have made any reasonable person highly suspicious that it was a bribery scheme, the sources said.
Hoffman also found that Redflex did not disclose its knowledge about the improper arrangement to City Hall until confronted by the Tribune in October. Even then, Hoffman found, company officials lied to Emanuel's administration about the extent of the wrongdoing.
Redflex's Australian parent company was expected to post a summation of Hoffman's findings in a Monday filing with the Australian Securities Exchange that will include the resignations announced to employees Friday.
"Today's announcement of executive changes follows the conclusion of our investigation in Chicago and marks the dividing line between the past and where this company is headed," Robert DeVincenzi, president and CEO of Redflex Holdings Ltd., said in a statement to the newspaper. "This day, and each day going forward, we intend to be a constructive force in our industry, promoting high ethical standards and serving the public interest."
The company will also announce reforms including installing new requirements to put all company employees through anti-bribery and anti-corruption training, hiring a new director of compliance to ensure employees adhere to company policies, and establishing a 24-hour whistle-blower hotline.
The actions mark the latest changes in the company's evolving accounts of the scandal.
Officials at the firm had repeatedly dismissed allegations of bribery in the Chicago contract since they were made in a 2010 internal complaint obtained last year by the Tribune. In October the Tribune disclosed the whistle-blower letter by a company executive and first brought to light the questionable relationship between former city official John Bills and the Redflex consultant, Marty O'Malley, who are longtime friends from the South Side.
Bills and O'Malley have acknowledged their friendship but denied anything improper about their handling of the Redflex contract.
"Totally false, but I appreciate you calling me," Bills told the Tribune on Friday when informed of the Hoffman findings. O'Malley did not return calls.
In the four-month investigation, Hoffman and his team conducted 58 interviews and reviewed more than 37,000 company documents including email traffic among company officials, sources said. Hoffman concluded that company officials used poor judgment and a serious lack of diligence in investigating the allegations contained in the whistle-blower memo.