The owner of a controversial fuel company funneled a $25,000 bribe, disguised as a ”finder`s fee,” to CTA board member Howard Medley to try to quash an internal CTA probe of fuel company improprieties, a federal grand jury charged Wednesday.
Medley, who said Wednesday that ”any penny I have anywhere, I have earned,” worked hard to deflect the CTA probe of Metropolitan Petroleum Co., a firm that had a $38 million fuel contract with the agency, the grand jury said.
Brian Flisk, chairman of the now-defunct Metropolitan, was also indicted for allegedly cheating the CTA out of $624,000 by overbilling. Medley was charged with racketeering, mail fraud and perjury. Flisk was accused of racketeering, conspiracy, wire fraud and obstruction of justice.
Medley, the owner of a moving company who has courted the favor of movers and shakers for three decades, leaned on a fellow board member and discredited an internal CTA report of fuel company irregularities, the grand jury declared.
Also indicted was Robert Buzil, Metropolitan`s controller, who at the behest of the government, secretly taped Flisk on a number of occasions, including Flisk`s wedding last summer when he married Buzil`s sister, sources said.
The indictment, announced by U.S. Atty. Anton Valukas and other federal law enforcement officials, charged that the bribe to Medley was paid by Flisk as part of a real estate transaction and sent to a Loop accountant, John Wilson, who arranged for the $25,000 check to be cashed.
Medley received $22,500 of the funds and Wilson kept $2,500 as a fee, according to sources familiar with the investigation. Wilson was not charged and was unavailable for comment.
Medley`s lobbying efforts in behalf of Metropolitan failed, the grand jury said, and the CTA eventually declared Metropolitan`s contract in default. As investigations by the CTA and the federal government intensified, Flisk, of 4114 W. 99th St., Oak Lawn, met with Buzil and urged him to lie to the grand jury, according to the indictment, prepared by Assistant U.S. Attorneys Ira Raphaelson and Jeffrey Stone.
The end result was a 41-count indictment made public Wednesday that outlined two separate fraud schemes orchestrated by Flisk and a series of charges against Medley, four Metropolitan employees and two former CTA workers.
The two CTA workers, Benjamin Gay and Anthony Scardina, were accused of accepting $18,000 in bribes to steer the phony bills through the CTA.
Buzil and three other Metropolitan employees were accused of assisting in the CTA fraud and a separate scheme that bilked Heller Financial Services, a company that lent money to Metropolitan, out of $5.6 million by overstating inventory and lying about the fuel company`s contracts.
And, the indictment charged that in addition to accepting the bribe from Flisk, Medley lied to a grand jury about it.
The indictment disclosed that during the investigation Medley was confronted by FBI agents who asked about the $25,000 fee, which was paid on a real estate transaction involving Flisk. Medley told the agents ”I thought in my mind it was wrong, but the law said no,” the indictment said.
Then, according to the charges, Medley later went before the grand jury and denied that he ever made the statement to the FBI.
Medley, insisted that he is innocent of any wrongdoing.
”I can tell the people of the City of Chicago, on the head of my grandbaby, that I have not taken any money from anybody,” he said. ”I know I have not accepted any money any way from anybody under any kind of crooked deal.”
The indictment charged that the $25,000 was ”deliberately intended to induce Howard Medley to assist Metropolitan . . . in disputes with the CTA.” Jeffrey Cole, Flisk`s lawyer, said, ”Heller knew of Metropolitan`s financial difficulties, but encouraged Metropolitan to continue borrowing, to enable Heller to reap exorbitant interest costs it was obtaining yearly.”
Cole also rapped the government for demanding that Flisk surrender within 24 hours and be held on a $400,000 bond because he may flee the jurisdiction. Cole characterized the bond request as ”vindictive, punitive and clearly unjustified.” Cole said he would appear Thursday before U.S. District Judge Charles Kocoras for a motion to reduce the bond.
The indictment alleged that Flisk, in an attempt to hide Metropolitan assets, siphoned $400,000 in cash from Metropolitan accounts and has failed to account for its whereabouts.
Those indicted, in addition to Medley and Flisk, were:
– Gay, 41, a former CTA employee responsible for approving CTA payments to Metropolitan, accused of accepting about $14,000 in bribes and merchandise from Flisk and failing to declare the payments on his income tax returns. Gay also was placed on the payroll of Michael Oil Co., a Metropolitan subsidiary, to cover the bribery payments, the indictment said.
– Scardina, 48, Gay`s former supervisor in the CTA accounting department, charged with accepting $4,000 in bribes and merchandise from Flisk and lying to FBI agents about the payments.
– Buzil, 38, former vice president and comptroller of Metropolitan, charged with filing false information with the Internal Revenue Service relating to Flisk`s personal use of Metropolitan`s credit cards and business automobile.
– Lawrence Sands, 62, of 10319 S. Normandy Ave., Chicago Ridge, a Metropolitan employee, charged with lying to the FBI about the alleged falsification of data submitted to Heller Financial.
– Kathleen Mitropoulos, 48, of 5922 W. Leland Ave., Metropolitan`s office manager.
– Jerry Coppola, of 5511 W. Higgins Ave., former president of Metropolitan.
Flisk, Coppola and Mitropoulos were accused of participating in the CTA fraud and the Heller fraud by creating false invoices, phony delivery tickets and bogus accounting records. In addition, the indictment charged, the defendants shredded Metropolitan records.
Serious questions about Metropolitan Petroleum were raised a year ago when CTA internal auditors charged that the company was guilty of providing diesel fuel that failed to meet specifications; that it used a minority hauling firm as a front to allow Metropolitan to meet CTA equal opportunity standards; and that Metropolitan intentionally presented bills late in a scheme to prevent the CTA from collecting a hefty ”prompt-payment” discount. Despite a call for cancellation of the contract by the auditors and by John Hoellen, a CTA board member, the board decided last April to let the pact stand.
CTA Chairman Walter Clark and other board members said on Wednesday that there were questions at the time whether fuel was contaminated before it reached the CTA or after it was deposited in authority tanks, some of which had leaks.
Months later, it was discovered that the CTA actually had overpaid Metropolitan more than $600,000 when the firm stopped listing the discount amount and added it to the amount billed.
Three workers in the accounts payable department, including Gay and Scardina, were fired in connection with the overpayments.
The CTA`s decision to withhold payment on new deliveries in an effort to recoup its money led to a severe cash shortage that put Metropolitan out of business last July.
Medley said Wednesday that he never sought to head off any action against Metropolitan at any time during the controversy over its contract. Clark, Hoellen and two other board members, who asked not to be identified, said they were never approached by Medley on the matter.
But the indictment charged that Medley did try to influence one board member on behalf of Metropolitan, and Valukas slipped at a Wednesday press conference by referring to the person as ”she.”
Natalia Delgado is the only female on the board.
Delgado, who is chairman of the board`s Committee on Purchases and Sales, declined all comment except to say, ”The CTA is cooperating fully with federal investigators, and has done so.”
CHRONOLOGY LEADING TO FEDERAL INDICTMENTS INVOLVING CTA
Events leading to Wednesday`s federal indictment of Metropolitan Petroleum Co.; several of its employees and officials; Howard Medley, a CTA board member; and two former CTA employees:
Feb. 28, 1987: The CTA says it has found irregularities in Metropolitan Petroleum`s billing practices and raises questions about the quality of diesel fuel it provided.
March 4, 1987: Based on a CTA internal investigation, CTA board member John Hoellen proposes canceling Metropolitan`s $38 million contracts to supply fuel to the CTA. Other board members suggest additional review.
March 18, 1987: Internal CTA report says a spot check of Metropolitan fuel deliveries showed that three of eight were substandard. Hoellen again recommends canceling CTA contracts with the firm.
April 15, 1987: CTA board member Natalia Delgado says the CTA board has concluded that many of the allegations made against Metropolitan are erroneous or flawed. CTA decides to continue fuel contracts with Metropolitan.
May 28, 1987: Sources reveal wide U.S. investigation of Metropolitan.
May 29, 1987: Cook County grand jury indicts five Metropolitan executives on charges that they cheated the state out of $515,000 in sales and fuel taxes.
July 2, 1987: Alphonse Martin, the CTA`s purchasing chief, says Metropolitan continues to deliver substandard fuel. Brian Flisk, chairman of the firm, says the fuel is fine.
July 8, 1987: CTA estimates it has overpaid Metropolitan $624,000 for past deliveries because of the billing irregularities and starts withholding payment for current deliveries.
July 9, 1987: CTA cancels fuel contracts with Metropolitan after firm says it can no longer provide the fuel. An attorney for the company says the workers have been laid off and Metropolitan is ”kind of moribund.”
July 27, 1987: CTA fires three employees in connection with previous overpayments of more than $600,000 to Metropolitan. CTA official says there is ”absolutely no indication that there was any dishonesty.” CTA sources name Anthony Scardina and Ben Gay as two of those fired.
April 6, 1988: U.S. Atty. Anton Valukas announces indictment.
