Juan Rangel — the former $275,000-a-year leader of the United Neighborhood Organization and its charter-school network — will pay a $10,000 fine to settle civil securities fraud charges without admitting wrongdoing, the federal Securities and Exchange Commission said Tuesday.
As the head of UNO and its taxpayer-funded charter schools, Rangel became perhaps the most powerful Latino political player in Chicago. He served as co-chairman of Rahm Emanuel’s 2011 mayoral campaign and had ties to other powerful politicians including Illinois House Speaker Michael Madigan, former Mayor Richard M. Daley and Ald. Edward M. Burke (14th.)
But UNO came under federal scrutiny and Rangel resigned in 2013 after the Chicago Sun-Times reported that the Hispanic community group and charter-management organization had paid millions of dollars out of a Madigan-backed state grant to companies owned by two brothers of a high-ranking UNO executive, Miguel d’Escoto.
The SEC said Tuesday that Rangel broke the law when he approved and signed documents related to an UNO bond sale in 2011 because those documents for potential bond buyers didn’t disclose the “conflicted transactions” revealed by the Sun-Times.
In 2009, UNO won legislative approval for the $98 million state grant for new school buildings. The grant — sponsored by Madigan, D-Chicago — is believed to have been the largest government subsidy in the country to publicly funded, privately run charter schools.
Under the grant deal, UNO was required to disclose any conflicts of interest with companies involved in the state-funded construction work. But the clout-heavy group didn’t tell state officials Rangel had directed his nonprofit group to enter into lucrative contracts with Reflection Windows, owned by Rodrigo d’Escoto, and d’Escoto Inc., headed by Federico d’Escoto. At the time, Miguel d’Escoto was the $200,000-a-year chief operating officer of UNO — Rangel’s top deputy.
The SEC said that documents filed in connection with UNO’s $37.5 million bond deal should have disclosed all of the contracts with the d’Escoto companies. Only the $1.9 million in UNO business with d’Escoto Inc. was disclosed. UNO did not tell potential bond buyers about its Reflection Windows contracts — worth about $11 million.
“We allege that Juan Rangel signed off on the offering document without even reading it,” said David Glockner, regional director of the SEC’s Chicago office. “This kind of negligent behavior is unacceptable in the securities markets.”
In a written statement, Rangel appeared to blame unnamed others.
“I take full responsibility for not reading the document and should have done more than rely upon others to brief me on its contents,” Rangel said. “Although questions were raised about UNO’s overall school construction and contracting processes, it is important to note that new schools were indeed built for our community.”
Because of the contracting scandal, the state froze the final $15 million of the $98 million grant.
In 2014, the SEC settled civil securities-fraud charges against UNO and its UNO Charter Schools Network.
On Tuesday, agency officials said they were bringing a civil case against Rangel and, at the same time, that he had “settled without admitting or denying the SEC’s charges.”
In addition to agreeing to pay the $10,000 penalty in four quarterly installments of $2,500 over the next year, Rangel will be “barred from participating in any future municipal bond offerings,” according to the SEC.
The settlement is subject to approval by a federal judge. Glockner, the SEC official, declined to comment further on the case.
Now 50 years old, Rangel was forced to step down from his position as chief executive of UNO in December 2013 and received a $206,250 severance.
He had been the group’s chief executive since 1996, leading it into the charter business with help from Daley, Emanuel and Chicago Public Schools officials. The charter chain has grown to serve more than 8,000 students at 16 campuses across Chicago. Almost all of the students at the UNO network’s schools are Latino.
The separately incorporated charter school board severed ties with its parent community organization last year.
In March, the Sun-Times reported that, even as UNO ran the network of charter schools for students in low-income neighborhoods across the city, Rangel and other UNO officials were piling up big bills for restaurant meals and travel at taxpayers’ expense. In the year before Rangel’s forced resignation, UNO spent more than $60,000 for restaurants on his American Express “business platinum” card, according to records that UNO fought for nearly three years to keep secret. That included $1,000-or-higher tabs at Gene & Georgetti, Carmichaels, Vivo Chicago, Rosebud Prime, the East Bank Club, Carnivale, a downtown hotel’s rooftop bar and Soldier Field’s concessions during a soccer game featuring Mexico’s men’s national team.
UNO also spent more than $60,000 a year on travel in 2010 and 2011, the internal records showed, with Rangel himself flying out of town 31 times in four years on taxpayers’ dime.
Rangel has kept a low profile since his resignation. Federal court records show he now runs a “consulting business that assists nonprofit organizations with public affairs and growth strategies.”