McHenry County Blog

The press release from the U.S. Attorney’s Office follows, but first look at some of what FBI Special Agent Brendan O’Leary wrote to get the arrests:

“According to the Illinois State Board of Elections website, [Dean] NICHOLS was a treasurer of the campaign committee for a former state senator (“State Senator”). While assisting State Senator’s campaign committee, NICHOLS helped steer State of Illinois grants to certain organizations, including:

1. a $50,000 grant to an organization operated by NICHOLS’s daughter from 2005 to 2006; and
2.  a $190,000 grant in 2007 to an organization operated by REGGI HOPKINS with the understanding that a portion of the proceeds would go to NICHOLS and State Senator’s nephew.

“According to a recording of NICHOLS on August 23, 2008, State Senator told HOPKINS, ‘whatever you’re gonna do, I want you to include’ State Senator’s nephew. NICHOLS stated that State Senator’s nephew was ‘gonna split the salary part.’

Former State Senator Rickey Hendon’s name is not in the Feds paperwork, but Dean J. Nichols is identified as Treasurer for Citizens To Re-elect Rickey Hendon and former Treasurer for Committee to Elect Rickey Hendon, both closed campaign committees.  Hendon was not charged in the scheme.

This appears later in the affidavit:

“On or about July 22, 2011, CW recorded a conversation in which he informed NICHOLS that CW had “run into a friend” who was working for ‘Health and Human Services.’ NICHOLS responded, ‘Yeah, that’s a federal agency.’

‘CW stated that his friend said that ‘they’re passing out fucking grants for like 25 grand a piece . . . . But he’s saying they’re passing [them] out like candy.’ After NICHOLS asked about the grants, CW said that they were for ‘drug rehab.’

‘NICHOLS asked if the grants were ’25 minimum or 25 maximum?’ CW answered that they were for ’25,000 a piece.’ CW said, however, that his friend could issue thirty grants and that ‘He can sign off on ’em.’ NICHOLS then asked, ‘And he can sign off here?’ CW responded, ‘Yeah.’

“In the same conversation, CW informed NICHOLS that his friend ‘only wants fucking, like 10 percent . . . you know, I mean there’s enough room for all of us.’ NICHOLS responded, that ‘if there’s volume, he’ll probably cut that [the amount of the bribe] down.’

“CW said that his friend would ‘gets his percent, his cut’ and that CW and NICHOLS would ‘get a cut . . . . Everybody gets their piece of the pie.’ NICHOLS said that CW and NICHOLS would ‘set it up’ with individuals they knew and that they would not ‘introduce [CW’s friend] to anybody.’

“NICHOLS informed CW that they had to ‘get people that we trust’ and asked whether CW’s friend could issue ‘more than one’ grant to ‘a single group?’ CW said that he did not know.”

The complete affidavit can be found here.  If you are interested in how the FBI developed the case, that’s where it is.

Here’s the press release:

SEVEN DEFENDANTS CHARGED WITH BRIBERY CONSPIRACY TO OBTAIN FICTITIOUS FEDERAL GRANTS AS PART OF FBI UNDERCOVER INVESTIGATION

CHICAGO — Federal corruption charges were unsealed today against seven defendants who were arrested and charged with bribery conspiracy for allegedly paying kickbacks to a purported federal agency official, who did not actually exist, in return for awarding purported $25,000 cash grants from the agency.

The charges stem from an FBI undercover investigation of the defendants, who include a campaign treasurer for a former Illinois state senator and two Cook County Sheriff’s Department corrections officers.

The defendants allegedly believed that they were able to obtain multiple $25,000 grants from the U.S. Department of Health and Human Services in exchange for returning $5,000 to the fictitious HHS official and others involved in the scheme.

In fact, there was no corrupt HHS official and no federal agency grants were involved. Instead, those elements were involved only as part of the scenario of the undercover investigation. Acting at the direction of law enforcement, a Cooperating Witness (CW) informed defendant Dean Nichols that the CW had a friend affiliated with HHS who was willing to provide $25,000 agency grants in exchange for kickbacks.

After being offered this opportunity, Nichols allegedly presented CW with several other individuals, including co-defendants

• Reggi Hopkins,
• Elliott Kozel, and
• Anthony Johnson,

who were allegedly willing to submit applications to obtain these grants in return for $5,000 kickbacks, which would be divided into $1,250 payments to four individuals:

• the fictitious HHS official approving the grants; an undercover FBI agent who was purportedly associated with the HHS official;
• the CW; and
• Nichols,

according to the criminal complaint unsealed today.

Similarly, Kozel, a Cook County corrections officer, allegedly presented several other co-defendants, including

• his supervisor, Mary Smith,
• along with Bryant Jessup, and
• Regina Hollie,

who were allegedly also willing to submit applications to obtain these grants in return for $5,000, which would be divided into $1,250 payments to the fictitious HHS official, the undercover agent, the CW and Kozel, the charges allege.

Nichols, 62, of Oak Park, was charged with three counts of bribery conspiracy, and Kozel, 51, Chicago, was charged with four counts. Hopkins, 43, of Chicago; Johnson, 59, of Chicago; Smith, 54, of South Holland; Hollie, 48, of Chicago; and Jessup, 51, of Chicago, were each charged with one count of bribery conspiracy.

All seven defendants were arrested today and were scheduled to appear this afternoon before U.S. Magistrate Judge Jeffrey Cole in Federal Court in Chicago.

The arrests and charges were announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

As background for the investigation, the complaint affidavit states that Nichols was a treasurer of the campaign committee for a former Illinois state senator.

While assisting the state senator’s campaign committee, Nichols allegedly helped steer State of Illinois grants to certain organizations, including

• a $50,000 grant to an organization operated by Nichols’ daughter from 2005 to 2006, and
• a $190,000 grant in 2007 to an organization operated by Hopkins with the understanding that a portion of the proceeds would go to Nichols and the state senator’s nephew.

The affidavit describes the CW as a Chicago police officer who began cooperating with the government in July 2008 during an investigation of public corruption and gun-trafficking in the Chicago area.

The CW is not yet facing any criminal charges but will likely be charged in the future with attempted extortion and firearms-related offenses, the affidavit states. According to the CW, he has known Nichols for more than 20 years and they met when Nichols was an accountant for an auto repair business owned by the CW’s family. In the early 1990s, the CW managed a bar owned by Nichols.

The CW and Nichols attempted to bribe a former Chicago alderman by offering $10,000 in exchange for the CW receiving a promotion within the Chicago Police Department, but, according to the CW and the former alderman, who confirmed the offer, neither the payment nor the promotion ever occurred, the affidavit states.

In July 2011, the CW recorded a conversation with Nichols in which the CW explained that the CW had “run into a friend” who was working for HHS and had authority to hand-out multiple $25,000 grants “like candy” in exchange for kickbacks. In discussing the opportunity, Nichols told the CW that they had to “get people that we trust,” the complaint states.

About a week later, the CW and Nichols met for lunch with the undercover agent, who was posing as someone working for a private agency that contracted with HHS to issue grants and who had the ability get $25,000 grants approved by bribing the fictitious HHS official.

The three then allegedly discussed the volume of grants they could obtain and how the grants would be broken into installment payments, with a $5,000 kickback being paid after the grant recipient received the first $10,000 installment.

In August and September 2011, Nichols allegedly provided the CW and the undercover agent with grant applications for

• “Edutainment Services, Inc.,” listing Hopkins as president, and
• “Children’s Athletic Program,” listing Kozel as president.

In a September 2011 recorded conversation, the CW told Nichols that Hopkins would be receiving the first grant and Kozel would receive the second grant. Nichols allegedly asked if the undercover agent could hand-deliver the checks instead of mailing them, and further conversation disclosed that Nichols was allegedly concerned about a federal investigation and avoiding federal mail fraud charges.

In a recorded meeting later in September 2011, Nichols allegedly provided the CW with 31 completed grant applications and said that he thought he and the CW could have as many as 40 grantees in total.

Nichols allegedly calculated that he and the CW personally would obtain $100,000 from 40 grantees, and added that, together, they could buy “a big summer home” in Michigan if the grants worked out, the charges allege.

The complaint describes in detail the purported installment payments that were made to the grantees recruited by Nichols and Kozel and the alleged kickbacks that the defendants then paid from the proceeds.

In November 2011, the CW audio and video recorded a meeting with Kozel in which the CW provided Kozel with a purported $10,000 grant payment, and Kozel said that he planned to take children who were purportedly going to attend his program “out for chicken wings, take them to Chucky Cheese“ and would also give them a tour of the Cook County Jail and talk about drugs, the affidavit states.

In addition to recruiting Smith, his supervisor, as a potential grantee, Kozel said another potential grantee was his girlfriend and he had “made up” an organization for her, according to the complaint.

Nichols allegedly provided the CW with a grant application for Johnson’s organization, Children At Risk. State records show that Children At Risk received a total of $65,000 in Illinois state grants from 2006 through 2008.

The affidavit cites a July 2008 published media report indicating that frequently no one could be found at an address for Children At Risk and quoted Johnson as saying the program was “in flux.”

Kozel allegedly provided the CW with a grant application for Jessup’s organization, the J.A.M.A. Center NFP, which also received approximately $65,000 in Illinois state grants from 2006 to 2008.

The government is being represented by Assistant U.S. Attorneys Brandon Fox, Margaret J. Schneider, and Michael T. Donovan.

Each count of conspiracy to commit bribery carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The public is reminded that a complaint contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

TWO AREA CONTRACTORS CHARGED WITH FRAUD INVOLVING MINORITY AND WOMEN SET-ASIDES FOR GOVERNMENT CONSTRUCTION CONTRACTS

• performing street sweeping work normally done by Prime Contractor B by placing Prime Contractor B’s employees on its payroll to do the work;
• using Prime Contractor B’s equipment to perform the work; entering into a sham contract to “purchase” the street sweeping equipment from Prime Contractor B;
• titling the equipment in Perdel Contracting’s name; and
• having a side agreement to give the equipment back to Prime Contractor B for $1 when the contract ended. 

Elizabeth Perino and her firm have made political contributions, but mainly to industry Political Action Committees.

Anthony Cappello’s Diamond Coring, on the other hand, have contributions amounting to $60,975 going back at least to 1998, when donations were made to

• George Ryan  – $500
• Dan Hynes  -$175

In 1999 contribution were made to

• 10th Ward Alderman John Pope – $1,500
• 45th Ward Alderman Patrick J. Levar – $1,000
• 23rd Ward Democratic Party Organization – $1,000

In 2000, the following donations were noted:

• Bill Lepinski’s All American Eage PAC – $1,500
• 45th Ward Alderman Patrick J. Levar – $2,250
• Coalition for Better Government (Ron Calicchio candidate) – $200
• Cicero Political Action Committee – $2,000
• 23rd Ward Democratic Party Organization – $500

In 2001, cash flowed to

• Coalition for Better Government – $600
• 47th Ward’s Eugene C Schulter – $200
• 10th Ward Alderman John Pope – $1,500
• 45th Ward Regular Democratic Organization – $750

In 2002,

• Paul Vallas for Governor (before the primary) – $1,000
• Rod Blagojevich (after the primary) – $5,000
• 47th Ward’s Eugene C Schulter – $500
• 33rd Ward Alderman Dick Mell – $1,500

For 2003, the numbers were

• 47th Ward’s Eugene C Schulter – $300
• 10th Ward Alderman John Pope – $750
• 33rd Ward Regular Democratic Organization – $900
• 45th Ward Regular Democratic Organization – $850
• 10th Ward Alderman John Pope – $1,000

In 2004 there was only one contributionL

• 14th Ward Alderman Ed Burke – $1,500

For 2005, again there was only one contriution:
9th Ward Anthony Beale – $300
Diamond Coring was more active in 2006:

• Tom Dart – $500
• Todd Stroger – $1,500
• Rod Blagojevich – $5,000

In 2007, here’s what’s in the records:

• 45th Ward Alderman Patrick J. Levar – $1,500
• 9th Ward Anthony Beale – $500
• 45th Ward Regular Democratic Organization – $1,000

In 2008, the numbers were

• Joe Berrios – $500
• Rod Blagojevich – $4,000
• 45th Ward Alderman Patrick J. Levar – $2,550
• 10th Ward Alderman John Pope – $2,800

In 2009,

• 10th Ward Alderman John Pope – $500
• 45th Ward Alderman Patrick J. Levar – $500

2010 saw the following contributions:

• 45th Ward Alderman Patrick J. Levar – $1,000
• In 2011, the following got contributions:
• Gery Chico – $1,000

Only one got money in 2011:

• 10th Ward Alderman John Pope – $8,600

Anthony Cappella also contributed from his personal check book–$5,300 in all to

• Richard M. Daley – $1,500
• Rod Blagojevich – $2,500
• Hoffman Estates Mayor William McLeod – $1,000
• IUOE Local 399 Political Education Fund – $300

A press release from the U.S. Attorney’s Office:

CHANNAHON VILLAGE PRESIDENT CHARGED WITH FAILING TO FILE

FEDERAL INDIVIDUAL AND CORPORATE INCOME TAX RETURNS

CHICAGO — The village president of Channahon, which straddles Will and Grundy counties approximately 50 miles southwest of Chicago, was charged with failing to file federal income tax returns for four years during which he allegedly earned approximately $250,000 in gross income from two public jobs and a private consulting business.

The defendant, Joseph Cook, 45, of Channahon, was charged in a six-count criminal information filed late yesterday, Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, announced today together with Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

Cook allegedly earned income

• as the president of the Channahon village trustees,
• as an employee of the Will County engineering department, and
• as the sole owner of a private engineering consulting business, Phase One Solutions, Inc.

He was charged with four counts of failing to file federal individual income tax returns for 2005-08 and two counts of failing to file federal corporate tax returns for Phase One for 2007-08.

All six counts are misdemeanors.

Cook will be ordered to appear for arraignment at a later date in U.S. District Court.

According to the charges, Cook earned gross income from at least three sources —

• Channahon,
• Will County and
• Phase One —

totaling approximately

• $69,672 in 2005,
• $82,542 in 2006,
• $60,304 in 2007, and
• $39,066 in 2008,

but did not file federal individual tax returns.

He also allegedly failed to file federal corporate tax returns for Phase One, which Cook incorporated in December 2006.

The government is being represented by Assistant U.S. Attorney Brandon Fox.

Each count of failing to file a federal income tax return carries a maximum penalty of one year in prison and a $100,000 fine. In addition, defendants convicted of tax offenses face mandatory costs of prosecution and remain civilly liable to the Government for any and all back taxes, as well as a civil fraud penalty of 75 percent of the underpayment plus interest. If convicted, the Court, must impose a reasonable sentence under the advisory United States Sentencing Guidelines.

The public is reminded that an information contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

= = = = =
For conviction of a felony, one loses public office in Illinois.

In searching the village web site, I found a “Citizen Action Center” page, which is something McHenry County municipalities might copy:

U.S. Attorney Patrick Fitzgerald’s press release is below and you can read Ike Carothers official biography here:

CHICAGO – Chicago Ald. Isaac S. Carothers (29th Ward) and a real estate developer who sought to transform a 50-acre former rail yard and industrial site on the city’s west side into a residential and commercial neighborhood, were indicted today on federal fraud and bribery charges, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois.

The developer, Calvin Boender, allegedly paid for approximately $40,000 in home improvements to Carothers’ residence and provided him with meals and tickets to professional sporting events, which Carothers allegedly illegally accepted, in exchange for Carothers’ official acts supporting successful zoning changes for Galewood Yards, which was the largest undeveloped tract of land within the city limits.

Approximately $6 million more was made from the sale of 25 acres of the land than would have been realized without the zoning changes, and Boender allegedly personally profited half of that amount, or approximately $3 million, according to an 11-count indictment returned by a federal grand jury today.

Carothers, 54, also known as “Ike,” who was first elected alderman of the city’s 29th Ward on the far west side in 1999, and Boender, 54, both of Chicago, will be arraigned at a later date in U.S. District Court.

Carothers, chairman of the City Council Police and Fire Committee and a member of the Committees on Committees, Rules and Ethics; Finance; and Zoning, among others, was charged with four counts of wire or mail fraud and one count each of accepting a bribe and filing a false federal income tax return. Boender was charged with four counts of wire or mail fraud, two counts of obstruction of justice, two misdemeanor counts of violating federal campaign finance laws, and one count of paying a bribe.

The indictment also seeks forfeiture of at least $40,000 from Carothers, representing the financial benefits he received in home improvements, and at least $3 million from Boender, representing proceeds he received from the sale and development of Galewood Yards based on the re-zoning, as well as his financial interests in RSD Galewood and Galewood Yards.

Mr. Fitzgerald announced the charges with Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation, and Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division.

“Using public office to obtain personal financial benefits violates the public trust and we will continue to vigilantly investigate and prosecute both corrupt public officials and businessmen who seek to profit by corrupting them,”

Mr. Fitzgerald said.

According to the indictment, Boender was at least a part owner of several companies, including Grand Central Center for Business, LLC, of Elmhurst, which purchased the Galewood Yards site in 2000.

The 50-acre parcel, located in both the 29th and 37th Wards, was zoned as a restricted manufacturing and commercial manufacturing district, and Boender sought to develop it for residential and commercial use.

Between 2004 and at least February 2007, Boender and Carothers allegedly participated in a scheme to defraud the City of Chicago and its residents of Carothers’ honest services by accepting financial benefits in connection with official acts to advance Boender’s financial interests in the development of Galewood Yards.

The commercial and residential development today consists of a 14-screen movie theater, a Laborer’s Union Training Center and 187 single-family and multifamily residences in a neighborhood known as Galewood Crossings.

Between June and September 2004, Boender allegedly paid for approximately $40,000 in home improvements for Carothers, including exterior and interior painting, and installing new windows, new exterior doors, and a central air conditioning system.

Boender directed unnamed Individual A, a general contractor who worked for Boender, to provide the home improvements without requiring Carothers to pay for them.

In addition, Boender paid for meals for Carothers and provided him with free tickets to several professional sporting events, including sky box tickets to at least one Chicago White Sox playoff game in 2005, the indictment alleges.

On Sept. 1, 2004, Boender caused Grand Central Center to file a zoning amendment application that would allow Galewood Yards to be developed entirely for residential and commercial use. In an attached disclosure statement, Boender allegedly falsely stated that he had not bribed or attempted to bribe a city official in the past five years, when he knew that he had bribed Carothers with the home improvements in exchange for Carothers’ support of zoning changes for Galewood Yards.

The indictment alleges that throughout 2004 and 2005, Carothers met with city officials, including employees of the Department of Planning and Development and other high-ranking officials, in an attempt to stop them from designating Galewood Yards as part of a Planned Manufacturing District (PMD), which would have prohibited Boender from developing the property for residential, commercial and mixed uses.

As part of the fraud scheme, Boender met with a high-ranking city official in an attempt to have that official support a residential and commercial re-zoning of Galewood Yards, representing to that high-ranking official that Carothers supported Boender’s proposal, the indictment alleges.

After the Planning and Development Department continued to support making Galewood Yards part of a PMD, Boender and Carothers negotiated a compromise in which the department supported a plan to re-zone Galewood Yards to allow approximately 15 acres to be developed for residential use and approximately 10 acres for commercial use. The indictment alleges that this plan allowed Boender to enter into separate contracts:

• with Company A to sell the 15-acre tract zoned for residential use to RSD Galewood, a new real estate development entity in which Company A and Boender were part owners. With the contract contingent upon Boender’s ability to secure residential zoning for the portion of Galewood Yards, Company A paid Grand Central Center a price that enabled Boender’s business to make a profit of approximately $4 million more than it would have received if the land remained zoned as a manufacturing district; and
• with Company B to sell the 10-acre parcel zoned for commercial use for a movie theater complex at a price that enabled Grand Central Center to make a profit of approximately $2 million more than it would have received if the land remained zoned as a manufacturing district.

On Feb. 16, 2006, Carothers signed an official letter to the Planning and Development Department stating that he had reviewed and had no objection to Boender’s planned development for Galewood Yards. Carothers also allegedly introduced, supported and voted in favor of City Council ordinances that amended zoning of Galewood Yards to allow for portions to be developed for manufacturing, commercial and residential uses. The indictment alleges that he took the following official actions to obtain zoning changes while failing to disclose publicly his financial relationships with Boender and failing to recuse himself from Galewood Yards matters that were pending before the City Council:

• on March 16, 2006, Carothers attended a Chicago Plan Commission hearing and spoke in favor of re-zoning Galewood Yards for manufacturing, commercial, and residential use;
• on March 23, 2006, Carothers attended a City Council Zoning Committee hearing and spoke in favor of re-zoning Galewood Yards for manufacturing, commercial, and residential use;
• on March 29, 2006, Carothers voted in favor of amending the Chicago Zoning Ordinance to allow Galewood Yards to be developed for manufacturing, commercial, and residential use;
• on July 5, 2006, Carothers applied for a technical amendment to the Chicago Zoning Ordinance that changed the boundaries of the Galewood Yard development. This amendment was introduced to the City Council on July 26, 2006; revised on Aug. 17, 2006; and enacted by the City Council on Sept. 13, 2006; and
• on Feb. 7, 2007, Carothers voted in favor of an ordinance authorizing and directing the approval of a proposed Galewood Residential Subdivision.

Carothers allegedly filed a false Statement of Economic Interest with Cook County and a false Statement of Financial Interest with the city, which failed to disclose that he received gifts in excess of $500 and income in excess of $1,200 from Boender.

To disguise and conceal the extent of Grand Central Center’s campaign contributions to Carothers, Boender allegedly directed an employee to make a $1,500 donation to Carothers’ New 29th Ward Democratic Organization and reimbursed the employee for the contribution.

The indictment further alleges that when Carothers asked Boender for his financial support of Candidate A, a relative of Carothers’ who was running for Congress in 2004, Boender curried favor with Carothers by making campaign contributions in excess of the $2,000 maximum allowed under federal election law.

To disguise and conceal contributions to Candidate A, Boender directed at least two individuals to make $2,000 straw donations and reimbursed them for their contributions.

The two campaign finance counts were initially brought against Boender in late February but that indictment remained sealed while the investigation was continuing until today when the superseding indictment was returned.

One obstruction of justice count against Boender alleges that in August 2007, knowing that a federal investigation of Boender’s financial relationship with Carothers was being conducted, Boender advised Individual A to provide a false version of events in any grand jury testimony about home improvements that Individual A had performed on Carothers’ home.

Boender specifically told Individual A that Individual A should falsely testify that an invoice was issued to Carothers seeking payment for the home improvements, when Boender knew that Individual A did not send an invoice to Carothers.

A second obstruction count alleges that in February 2008, Boender created a document that purported to be an invoice to Carothers, dated Sept. 8, 2004, knowing that no such invoice existed from that time.

The allegedly false invoice purported to bill Carothers for the home improvement work, and Boender allegedly attempted to cause the false invoice to be produced to the grand jury to corruptly influence the investigation.

The tax count against Carothers alleges that he filed a false individual federal income tax return for 2004, stating that he had total income of $144,281, and taxable income of $86,836, while knowing that those figures failed to include the additional gross income he received in the form of home improvements that were paid for by Boender.

The government is represented by Assistant U.S. Attorneys Brandon Fox and Manish Shah.

If convicted, Carothers and Boender each face a maximum penalty of 20 years in prison on each of the four counts of mail or wire fraud, and 10 years in prison on one count of bribery against each of them. Boender faces a maximum of 10 years in prison on each of two counts of obstruction of justice, and Carothers faces a maximum of 3 years in prison for filing a false tax return. Also, all of those counts each carry a maximum fine of $250,000 fine. The two misdemeanor campaign finance counts against Boender each carry a maximum penalty of a year in prison and a $100,000 fine. If convicted of the tax count, Carothers would be assessed mandatory costs of prosecution, as well remain liable for any back taxes, interest and penalties owed. The Court, however, would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Mentiioned specifically in the press release from the United States Attorney about corrupt sales practices to area governments are

• U46 School District out of Elgin,
• the City of Elgin and
• the Village of Rosemont.

There is a Woodstock connection in that Keogh, Inc., was based in Woodstock before it moved to Lake Bluff. (Anyone know if Lawrence Keogh, now 79, lived or near McHenry County?)

The company writing the incentive checks having been based at one time in Woodstock, I’d be surprised if this “incentive” program did not include local schools and governments.

Here is the U.S. Attorney’s press release:

Lawson Products to Pay $30 Million under Deferred Prosecution Agreement Involving Corrupt Sales Practices

CHICAGO – A suburban Des Plaines company has agreed to pay $30 million in forfeiture and restitution for the corrupt conduct of its sales agents in Chicago and elsewhere who systematically provided nearly $10 million in illicit purchasing incentives over 13 years to employees of its customers to buy more products at higher prices, federal authorities announced today.

Lawson Products, Inc., a publicly- traded company that sells tools, hardware and chemicals to entities in the public and private sectors, was charged today with mail fraud in a criminal information filed in U.S. District Court.

At the same time, the company entered into a deferred prosecution agreement under which the criminal case will be dismissed in three years so long as Lawson abides by all of the terms and conditions.

Separate criminal charges were also filed today against two former sales managers for Lawson and a third man who allegedly aided and abetted the corrupt incentive scheme, bringing to 19 the number of defendants who have been charged in connection with the Lawson scheme in Chicago and other cities since early 2007, said Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois.

Mr. Fitzgerald announced the charges with Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago; and Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division. The U.S. Attorney’s Office in Chicago coordinated the investigation nationwide, while the U.S. Attorney’s Offices in Dayton, Philadelphia and Springfield, Ill., assisted by handling cases in their respective jurisdictions.

All but one of the cases involve the recipients of bribes or kickbacks or commissioned sales agents for Lawson or its subsidiary, Drummond American Corp., which together with other Lawson affiliates have approximately $400 million in annual sales of systems, services and products.

Thirteen defendants, including seven former Lawson sales agents were charged in April 2007 in Chicago and other cities. Twelve of those 13 have been convicted so far.

All of the charges are part of an investigation that resulted in federal search warrants being executed in December 2005 at Lawson and Drummond offices at 1666 East Touhy Ave., and 2150 Frontage Rd., Des Plaines, and the offices of a third company, Keogh, Inc., in Lake Bluff and formerly of Woodstock.

Among the individuals charged today was Lawrence Keogh, president of Keogh, Inc., which administered one of the incentive programs used by Lawson sales agents.

According to the documents filed today, between at least 1992 and December 2005, the maintenance and repair operation of Lawson Products engaged in corrupt sales practices through its sales agents. These agents were permitted to negotiate with customers over the prices the customers would pay for Lawson’s merchandise. As a general rule, Lawson’s profits and the agents’ commissions were greater if they sold more products at higher prices. Lawson maintained programs through which its sales agents could provide items of value to individuals purchasing Lawson’s merchandise on behalf of those individuals’ employers. Among the illicit programs were “Winners Choice,” “Cavalcade of Awards,” “LPI” and “Spike Special.”

Lawson and its sales agents often provided a greater amount of incentive rewards through the illicit programs if the purchasing individuals ordered a greater amount of merchandise on behalf of their employers. Some Lawson agents received training suggesting that they provide customers’ employees with rewards totaling approximately four to five percent of the amount of the sale. Lawson set up “promotional funds” for each sales agent that allowed the company and the agents to split the cost of the illicit programs.

Through the Winners Choice program, which was administered by Keogh, Inc., Lawson provided approximately $9.7 million in Winners Choice checks to employees of Lawson customers to induce them to purchase and to reward them for purchasing merchandise from Lawson on behalf of their employers.

Under the program, sales agents would order “Certificates of Award” for designated purchasing individuals and Keogh would issue checks to those individuals. The certificates, often awarded in multiple $25 increments, entitled recipients to receive checks for a certain amount that could be used to purchase items at various retail stores. Keogh, Inc., would then issue the checks, often times in multiple $50 increments.

Under the deferred prosecution agreement, Lawson Products admits that it is responsible for the acts of its officers, employees and sales agents. The company agreed to continue implementing a compliance and ethics program designed to prevent and detect corrupt sales practices.

Lawson will fund a $30 million escrow account in three installments of $10 million payable now, in a year and in two years.

Those payments will fund an agreed civil forfeiture judgment of $29,177,639 that Lawson will not contest, as well as $822,370 in restitution payments.

The restitution will be paid to Lawson’s customers that

1. employed individuals who received more than $10,000 in Winners Choice checks;
2. employed individuals who have been or later are convicted of mail fraud as a result of receiving Winners Choice checks; and
3. purchased Lawson’s merchandise from sales agents who have been or later are convicted of mail fraud for providing Winners Choice checks to the customers’ employees.

Upon successful completion of the terms of the agreement, the Government will dismiss the criminal charges in three years.

In Chicago, the government is being represented by Assistant U.S. Attorneys Brandon Fox, Nancy Miller and Kruti Trivedi.

Details of the cases against the three new individual defendants follow. All three will be arraigned later in U.S. District Court. If convicted, restitution is mandatory and the Court would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines. The statutory maximum penalties are provided with each case.

The public is reminded that criminal charges contain only allegations and are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Lawrence Keogh, 79, of Lake Forest, was charged with aiding and abetting a tax evasion and tax fraud conspiracy. Keogh allegedly knew that Lawson Products did not issue or file any IRS Form 1099s to individuals who received more than $600 in a year in income from Winners Choice checks. Keogh also allegedly knew that Lawson improperly deducted the cost of the Winners Choice program as business expenses on its federal tax returns. If convicted, the charge carries a maximum penalty of 5 years in prison and a $250,000 fine.

Roger Cannon, Jr., also known as “RJ Cannon,” 38, of Palatine, who was a Drummond American sales agent, district manager and regional manager in succession between 1995 and January 2006, responsible for selling Drummond products to customers in the Chicago area, was charged with mail fraud. Cannon allegedly directed Winners Choice kickback rewards ranging from $650 to $3,550 to each of six employees of his customers. These included four employees of

• Illinois School District U-46, which encompasses Bartlett, Elgin, South Elgin, Streamwood, Hanover Park, Carol Stream and Wayne, as well as an employee of the
• Village of Rosemont and an employee of the
• City of Elgin.

Cannon received commissions totaling $54,302 on sales to these public bodies and the charges seek forfeiture of that amount. If convicted, the charge carries a maximum penalty of 20 years in prison and a $250,000 fine.

Leroy Wittle, 65, of Alexandria, Va., who was a Lawson district manager responsible for selling products to customers in the Washington, D.C., area, was charged with bribery for allegedly providing a $300 gift card to an unnamed public employee of a federal executive branch agency in return for the employee’s decision to purchase merchandise from Wittle and Lawson on behalf of the unnamed federal agency. If convicted, the charge carries a maximum penalty of 2 years in prison and a $250,000 fine.

Mentiioned specifically in the press release from the United States Attorney about corrupt sales practices to area governments are

• U46 School District out of Elgin,
• the City of Elgin and
• the Village of Rosemont.

There is a Woodstock connection in that Keogh, Inc., was based in Woodstock before it moved to Lake Bluff. (Anyone know if Lawrence Keogh, now 79, lived or near McHenry County?)

The company writing the incentive checks having been based at one time in Woodstock, I’d be surprised if this “incentive” program did not include local schools and governments.

Here is the U.S. Attorney’s press release:

Lawson Products to Pay $30 Million under Deferred Prosecution Agreement Involving Corrupt Sales Practices

CHICAGO – A suburban Des Plaines company has agreed to pay $30 million in forfeiture and restitution for the corrupt conduct of its sales agents in Chicago and elsewhere who systematically provided nearly $10 million in illicit purchasing incentives over 13 years to employees of its customers to buy more products at higher prices, federal authorities announced today.

Lawson Products, Inc., a publicly- traded company that sells tools, hardware and chemicals to entities in the public and private sectors, was charged today with mail fraud in a criminal information filed in U.S. District Court.

At the same time, the company entered into a deferred prosecution agreement under which the criminal case will be dismissed in three years so long as Lawson abides by all of the terms and conditions.

Separate criminal charges were also filed today against two former sales managers for Lawson and a third man who allegedly aided and abetted the corrupt incentive scheme, bringing to 19 the number of defendants who have been charged in connection with the Lawson scheme in Chicago and other cities since early 2007, said Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois.

Mr. Fitzgerald announced the charges with Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago; and Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division. The U.S. Attorney’s Office in Chicago coordinated the investigation nationwide, while the U.S. Attorney’s Offices in Dayton, Philadelphia and Springfield, Ill., assisted by handling cases in their respective jurisdictions.

All but one of the cases involve the recipients of bribes or kickbacks or commissioned sales agents for Lawson or its subsidiary, Drummond American Corp., which together with other Lawson affiliates have approximately $400 million in annual sales of systems, services and products.

Thirteen defendants, including seven former Lawson sales agents were charged in April 2007 in Chicago and other cities. Twelve of those 13 have been convicted so far.

All of the charges are part of an investigation that resulted in federal search warrants being executed in December 2005 at Lawson and Drummond offices at 1666 East Touhy Ave., and 2150 Frontage Rd., Des Plaines, and the offices of a third company, Keogh, Inc., in Lake Bluff and formerly of Woodstock.

Among the individuals charged today was Lawrence Keogh, president of Keogh, Inc., which administered one of the incentive programs used by Lawson sales agents.

According to the documents filed today, between at least 1992 and December 2005, the maintenance and repair operation of Lawson Products engaged in corrupt sales practices through its sales agents. These agents were permitted to negotiate with customers over the prices the customers would pay for Lawson’s merchandise. As a general rule, Lawson’s profits and the agents’ commissions were greater if they sold more products at higher prices. Lawson maintained programs through which its sales agents could provide items of value to individuals purchasing Lawson’s merchandise on behalf of those individuals’ employers. Among the illicit programs were “Winners Choice,” “Cavalcade of Awards,” “LPI” and “Spike Special.”

Lawson and its sales agents often provided a greater amount of incentive rewards through the illicit programs if the purchasing individuals ordered a greater amount of merchandise on behalf of their employers. Some Lawson agents received training suggesting that they provide customers’ employees with rewards totaling approximately four to five percent of the amount of the sale. Lawson set up “promotional funds” for each sales agent that allowed the company and the agents to split the cost of the illicit programs.

Through the Winners Choice program, which was administered by Keogh, Inc., Lawson provided approximately $9.7 million in Winners Choice checks to employees of Lawson customers to induce them to purchase and to reward them for purchasing merchandise from Lawson on behalf of their employers.

Under the program, sales agents would order “Certificates of Award” for designated purchasing individuals and Keogh would issue checks to those individuals. The certificates, often awarded in multiple $25 increments, entitled recipients to receive checks for a certain amount that could be used to purchase items at various retail stores. Keogh, Inc., would then issue the checks, often times in multiple $50 increments.

Under the deferred prosecution agreement, Lawson Products admits that it is responsible for the acts of its officers, employees and sales agents. The company agreed to continue implementing a compliance and ethics program designed to prevent and detect corrupt sales practices.

Lawson will fund a $30 million escrow account in three installments of $10 million payable now, in a year and in two years.

Those payments will fund an agreed civil forfeiture judgment of $29,177,639 that Lawson will not contest, as well as $822,370 in restitution payments.

The restitution will be paid to Lawson’s customers that

1. employed individuals who received more than $10,000 in Winners Choice checks;
2. employed individuals who have been or later are convicted of mail fraud as a result of receiving Winners Choice checks; and
3. purchased Lawson’s merchandise from sales agents who have been or later are convicted of mail fraud for providing Winners Choice checks to the customers’ employees.

Upon successful completion of the terms of the agreement, the Government will dismiss the criminal charges in three years.

In Chicago, the government is being represented by Assistant U.S. Attorneys Brandon Fox, Nancy Miller and Kruti Trivedi.

Details of the cases against the three new individual defendants follow. All three will be arraigned later in U.S. District Court. If convicted, restitution is mandatory and the Court would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines. The statutory maximum penalties are provided with each case.

The public is reminded that criminal charges contain only allegations and are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Lawrence Keogh, 79, of Lake Forest, was charged with aiding and abetting a tax evasion and tax fraud conspiracy. Keogh allegedly knew that Lawson Products did not issue or file any IRS Form 1099s to individuals who received more than $600 in a year in income from Winners Choice checks. Keogh also allegedly knew that Lawson improperly deducted the cost of the Winners Choice program as business expenses on its federal tax returns. If convicted, the charge carries a maximum penalty of 5 years in prison and a $250,000 fine.

Roger Cannon, Jr., also known as “RJ Cannon,” 38, of Palatine, who was a Drummond American sales agent, district manager and regional manager in succession between 1995 and January 2006, responsible for selling Drummond products to customers in the Chicago area, was charged with mail fraud. Cannon allegedly directed Winners Choice kickback rewards ranging from $650 to $3,550 to each of six employees of his customers. These included four employees of

• Illinois School District U-46, which encompasses Bartlett, Elgin, South Elgin, Streamwood, Hanover Park, Carol Stream and Wayne, as well as an employee of the
• Village of Rosemont and an employee of the
• City of Elgin.

Cannon received commissions totaling $54,302 on sales to these public bodies and the charges seek forfeiture of that amount. If convicted, the charge carries a maximum penalty of 20 years in prison and a $250,000 fine.

Leroy Wittle, 65, of Alexandria, Va., who was a Lawson district manager responsible for selling products to customers in the Washington, D.C., area, was charged with bribery for allegedly providing a $300 gift card to an unnamed public employee of a federal executive branch agency in return for the employee’s decision to purchase merchandise from Wittle and Lawson on behalf of the unnamed federal agency. If convicted, the charge carries a maximum penalty of 2 years in prison and a $250,000 fine.