McHugh Construction – a 115-year-old contracting giant with billions of dollars in government and private business – is at the heart of a federal investigation into minority- and women-owned business fraud on four of the biggest government construction projects in Chicago in recent years, a federal criminal complaint unsealed Tuesday revealed.
Elizabeth Perino, 57, of Willowbrook, is charged with mail fraud. She’s accused of acting as the owner of a “sham” woman-owned business that was hired as a subcontractor for McHugh on four major city contracts worth a total of $200 million: the overhauls of the CTA’s Red and Brown lines; the massive reconstruction downtown of Wacker Drive; and the rebuilding of the North Avenue bridge over the Chicago River.
But Perino’s companies didn’t do any work, instead acting as a “pass-through” so McHugh could “avoid requirements intended to benefit women- or minority-owned and disadvantaged business enterprises,” according to a statement from U.S. Attorney Patrick Fitzgerald’s office.
McHugh – whose current government deals include building a $53.7 million marina at 31st Street along Lake Michigan for the Chicago Public Building Commission – wasn’t charged with any crime.
Prosecutors identified McHugh in the complaint against Perino only as “Prime Contractor A, a construction and infrastructure firm that has contracted to work on billions of dollars worth of government and private construction projects.” City records, though, show McHugh won the four contracts referred to in the complaint, and those records also identify Perino’s companies as a subcontractor.
All four contracts involved federal funding.
By hiring Perino’s companies – Perdel Contracting and Accurate Steel Installers Inc., both in Lockport – McHugh was able to meet city requirements that construction contracts must set aside a portion of the business to companies owned by women and minorities, authorities said.
In a statement, McHugh officials said the company “has a long history of being a leader in mentoring and developing minority and woman-owned contractors and in 1968 was the first majority contractor in the city of Chicago to joint venture with a minority-owned firm. That commitment remains strong today on every project in which we are involved.”
The company declined to comment specifically on Perino’s case.
On her corporate website, Perino touts her experience as a registered nurse who once worked as director of materials management for the University of Chicago hospitals, “where she assisted clients with design development of the new $140 million Duchossois Center for Advanced Medicine.” U. of C. says Perino worked there more than 16 years ago.
She was arrested after being caught in a sting operation in which authorities said she agreed to be a phony, woman-owned street-sweeping company on a proposed city contract. McHugh subcontracted Perino’s companies to do a total of $6.7 million in city work on the North Avenue bridge reconstruction, plus $470,000 worth of steel for a CTA Brown Line project, the complaint alleges.
Additionally, Perino fraudulently agreed to serve as a street-sweeping subcontractor last June for a second company, Diamond Coring Co., on a proposed city deal that she thought would pay her $365,000, the complaint alleges.
Diamond Coring is owned by Anthony Cappello, who was cooperating with authorities at that time.
Cappello was in the room last June 29 when Perino told one of her employees that Diamond Coring wasn’t “going to give me $140,000 because I’m cute,” the complaint says.
The FBI agent who authored the complaint wrote that he took that to mean that Perino expected to kick back some of the money to Cappello.
Perino agreed to cooperate with the government after being caught in the sting. In the criminal complaint against her, Diamond Coring is named only as “Prime Contractor B,” and Cappello is referred to as “CW1.”
Separately, Cappello, 48, of Homer Glen, was charged Tuesday with mail fraud for allegedly using a company run by his wife to help him fraudulently land $2.3 million in subcontracts on Chicago, Cook County and state of Illinois construction jobs between 1999 and May 2006.
The Chicago Sun-Times revealed in February 2009 that Cappello was under investigation by federal authorities and the Chicago inspector general’s office as part of a joint probe of O’Hare Airport contracts awarded under then-Mayor Richard M. Daley.
Diamond Coring is a concrete sawing and drilling company based on Chicago’s Southeast Side. Cappello’s wife, Denise Morsovillo, once owned a company called The Stealth Group Inc., which had been certified by the Daley administration as owned and operated by a woman.
Federal authorities say Cappello orchestrated that certification so SGI could win work on government projects that Diamond Coring actually did. Morsovillo’s wife is identified as “Individual A” in the case against her husband, though state records listed her as being in charge of SGI.
“The charges allege that individuals on SGI’s payroll actually reported to Cappello and Diamond Coring,” according to the statement from Fitzgerald’s office. “In addition, Diamond Coring employees were dispatched to perform work in Diamond Coring trucks bearing SGI logos to conceal the fact that SGI was not a legitimate” woman-owned or minority business.
In response to the charges, Mayor Rahm Emanuel’s administration declared Perino’s and Cappello’s companies ineligible for city business while their cases are pending. McHugh remains eligible for city work because it isn’t facing criminal charges.
The charges against Cappello and Perino are similar to those leveled against Aurora Venegas and her husband, Thomas Masen, both of whom pleaded guilty and are awaiting sentencing after being accused of women-owned business fraud involving millions of dollars in O’Hare contracts.
In 2007, then-Gov. Rod Blagojevich wanted to appoint Cappello, a Democrat, to the Illinois Liquor Control Commission – a part-time job paying $32,806 a year – but dropped that plan because Capello’s appointment would have meant the panel would include too many Democrats, under state law.
Cappello and Diamond Coring had contributed $16,500 to Blagojevich’s political fund since 2002. Cappello’s company originally was incorporated by attorney Peter T. Vrdolyak, a son of former 10th Ward Ald. Edward R. Vrdolyak.
Contributing: Fran Spielman