The Watchdogs: Not a city employee, ex-Sen. Marovitz denied a city pension

Two weeks after former state Sen. William Marovitz settled federal insider-trading allegations last summer over his sale of Playboy stock, he gave up his work as an outside lawyer for two Chicago city pension funds – and applied for a city pension even though he wasn’t a city employee.

Marovitz – a lawyer and longtime Democratic Party leader in Illinois who is separated from his wife, former Playboy chief executive officer Christie Hefner – already gets a government pension of $102,480 a year for the 20 years he served as a state legislator and member of the Illinois Pollution Control Board.

He was seeking a second government pension – which would have paid an estimated $50,000 a year – for the 27 years he did legal work for two City Hall pension funds.

One problem: He was never a city employee, just a lawyer in private practice whose clients included two city pension funds.

That was the view of city pension officials including Mayor Rahm Emanuel’s two top financial advisers. They unanimously rejected Marovitz’s application for a city pension.

“We voted against Mr. Marovitz receiving a pension because there were serious questions about whether serving as a part-time, outside counsel satisfied the state law requirements that determine what defines an employee who is eligible for a pension,” Emanuel’s city comptroller, Amer Ahmad, and chief financial officer Lois Scott said in a written statement.

Ahmad and Scott also serve on the pension board.

Marovitz was seeking a pension deal similar to the one that was granted in 1998 to then-Mayor Richard M. Daley’s brother-in-law, Dr. Robert M. Vanecko, when Vanecko – then chief of staff at Northwestern Memorial Hospital – gave up his side job as the city pension fund’s medical adviser.

Vanecko, who still works at Northwestern, gets a $77,000 yearly government pension, which so far has paid him a total of $875,000.

So why did City Hall under Emanuel deny Marovitz the same deal Vanecko got from the Daley administration?

“Different board, different time,” says city Treasurer Stephanie Neely, one of the pension board members who voted against granting Marovitz a city pension. “Just because they did it doesn’t make it right.

“Should we make the same mistake?”

Only one of the seven pension board members – Carmen Iacullo – was involved in both decisions, voting to give Vanecko a pension but not Marovitz. Iacullo, who is president of the Chicago Laborers’ & Retirement Board Employees Annuity and Benefit Fund, declined to comment.

Marovitz and Vanecko didn’t return calls.

Political pedigrees

Like Vanecko, Marovitz has a political pedigree. The city’s lakefront golf course is named for his late father, Sydney Marovitz, who served on the Chicago Park District board under Daley’s father, Mayor Richard J. Daley. And Marovitz’s late uncle, U.S. District Court Abraham Lincoln Marovitz, administered the oath of office to both Mayors Daley.

“Billy” Marovitz, 67, has been an attorney at his family’s law firm since 1970. He was elected to the Illinois House in 1975 and to the Illinois Senate in 1981.

While in the Senate, he was charged with attempted extortion, accused of seeking $12,000 to fix a court case for a wrecking company. Marovitz – who said he was only seeking a retainer for his legal services – was found not guilty in September 1983.

Ten months later, Marovitz landed a new legal client when Mayor Harold Washington’s top City Hall lawyer appointed him to work for the Laborers pension fund while he served as a senator. He also began working for another city pension plan, the Municipal Employees Annuity and Benefit Fund.

Marovitz left the Senate in 1992 but continued to do legal work for the pension funds as he maintained his family’s law firm and became a well-known developer.

For most of his 27 years with the pension funds, Marovitz was classified as a “nonemployee” on the miscellaneous income statements known as Form 1099s that the pension funds issued to him and to the Internal Revenue Service. Those records show that the pension funds didn’t withhold taxes from his checks and that Marovitz made no contributions to the pension funds.

Three years ago, the pension funds began withholding income taxes and pension contributions from Marovitz’s checks, according to the W-2 wage-and-tax statements sent to him and the IRS.

Last year, Marovitz was paid a combined $63,604 by the two city pension funds.

He withdrew as their attorney on Aug. 18, 2011 – 15 days after the U.S. Securities and Exchange Commission sued him, accusing him in the civil complaint with engaging in insider trading to avoid losses on the stock he held in Playboy, the company long run by his now-estranged wife and his father-in-law, Hugh Hefner.

On three occasions, the SEC said, Marovitz knew in advance that Playboy’s stock was going to fall and sold thousands of shares, avoiding losses that would have totaled about $100,000.

Marovitz paid $168,352 to settle the case.

He then withdrew as lawyer for the city pension funds and later applied for the pension that the board rejected 7-0 on Nov. 15.

Neely says she voted no because Marovitz wasn’t on the pension fund’s payroll, didn’t have an office at the fund headquarters, had other legal clients and charged extra if he had to appear in court.

“He’s not an employee,” says Neely. “I view him as a vendor.”

Pension officials say they don’t know whether Marovitz will seek a refund of the $143,390 he made in pension contributions during the past three years.

A ‘non-employee’

Vanecko – who’s married to the late Mayor Daley’s daughter Mary Carol – began working as the Laborers’ pension fund medical adviser in September 1976, three months before Daley died.

At the time, Vanecko was head of surgical intensive-care at Northwestern, as well as an attending surgeon at Cook County Hospital and the Veterans Administration Lakeside Hospital, according to his curriculum vitae.

He kept working as the pension fund’s medical adviser – deciding whether city workers qualified for disability pay – as he rose to be first Northwestern’s vice chief of staff and eventually chief of staff. That was the post he held at the private hospital in June 1998 when he decided to leave the pension fund under an early-retirement program approved by the Illinois Legislature.

Like Marovitz, Vanecko was classified as a “nonemployee” on the Form 1099s the pension funds issued to him and the IRS. No taxes were withheld from his pension fund paychecks, but Vanecko did contribute $89,136 toward his pension.

Vanecko used the city’s early retirement program to buy an additional three and a half years of government service, then combined his time with the city and Cook County Hospital to give him 36.5 years of service so he could get a maximum pension equal to 80 percent of his average city salary of $66,756 a year. Since he retired, yearly cost-of-living increases have boosted his pension by 46 percent, to $77,000 a year. The city pays about 70 percent; the county pays the rest.

Marovitz, as the pension board’s attorney, was present when Vanecko’s pension was approved by a 5-0 vote. The five were: the second Mayor Daley’s chief financial officer, Walter Knorr; Daley’s city comptroller, Phoebe Selden; city Treasurer Miriam Santos; board secretary Iacullo; and trustee John Briatta, who, like Vanecko, is a brother-in-law of Cook County Commissioner John Daley. Briatta went to prison as a result of the federal Hired Truck Program investigation for taking bribes.

Vanecko, 76, has three sons. The oldest, also named Robert Vanecko, landed a deal to manage $68 million in city pension money that’s been under investigation by a federal grand jury. Middle son Mark Vanecko helped Lollapalooza concert promoters land a 10-year deal with the Chicago Park District under which they don’t have to pay city amusement taxes on the Grant Park festival. And youngest son Richard J. “R.J.” Vanecko was the subject of two investigations by the Chicago Police Department for throwing a punch that resulted in the death of David Koschman in 2004, though he wasn’t charged.

A former city pension official who spoke only on the condition of anonymity says the elder Vanekco “was never ever a full-time employee, even though he was paid like one. I didn’t understand how someone who was the chief of staff at Northwestern could also be a full-time employee for the city of Chicago.”