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City Hall gives ‘emergency' sewer deal to clout-heavy company

6-18-04 Michael Smith, President of Benchmark Construction Co., Inc. and subject of Tim Novak and Steve Warmbir investigative story, at construction site along the Chicago River east of Columbus Dr. Ernie Torres/Sun-Times

Mayor Rahm Emanuel’s administration has awarded a $249,999 “emergency” contract to replace aging sewer pipes to Benchmark Construction, a clout-heavy company that the city formerly certified as being minority-owned and operated at a time that its African-American president had admitted in sworn testimony that his white business partner actually oversaw the company’s day-to-day operations.

Eight years ago, the Chicago Sun-Times reported that Benchmark got more than $25 million in city contracts earmarked for minorities, even though then-company president Michael Smith, who is African-American, had acknowledged in a court deposition that a white partner oversaw operations.

In the same document, Smith appeared confused about the meaning of the term “below-grade,” though the company does underground construction.

Also, though Smith was listed at the time as the president of Benchmark, then-Mayor Richard M. Daley, in accepting a campaign contribution from Benchmark, listed the company’s president as Michael Vondra, a construction and asphalt magnate who is white.

Benchmark got the emergency contract because the owner of another company, Diamond Coring, is charged in a minority-contracting scheme and City Hall declared it ineligible to work for the city, according to the Emanuel administration.

“When Diamond Coring was declared ineligible to contract with the city, it became necessary for us to quickly find alternate vendors to perform the same services, which include cutting, grinding and coring a pipe through concrete and other material,” said Kathleen Strand, a spokesperson for the city’s Office of Budget and Management.

Emergency contracts are temporary and limited to under $250,000.

By keeping the Benchmark contract a penny below that threshold – and soliciting bids from four vendors, generating two responses – Strand said City Hall ensured that the job of “replacing old pipe and renewing our infrastructure” would get done even as the city drafts a request-for-proposals to find a permanent replacement for Diamond Coring.

Last month, white-owned McHugh Construction, which is one of the city’s oldest and largest construction companies, was identified by federal authorities as having used two phony woman-owned “pass-throughs” as subcontractors for $200 million of city projects. Elizabeth Perino is charged with fraud for acting as the owner of a “sham” woman-owned business that McHugh hired as a subcontractor on four big contracts – overhauling the CTA’s Red and Brown lines and the reconstruction of Wacker Drive and the North Avenue bridge over the Chicago River.

Perino was arrested after being caught in a sting operation. Federal prosecutors say she agreed to be a phony, woman-owned street-sweeping company on a proposed city contract with Diamond Coring, whose owner, Anthony Cappello, was cooperating with authorities.

Cappello is charged with mail fraud. He’s accused of using a company run by his wife to help him fraudulently land $2.3 million in construction subcontracts with the city, county and state, though Diamond Coring actually did the work.

In response to the charges, the Emanuel administration declared Diamond Coring ineligible for city business.

During the 2004 controversy over Benchmark, then-chief city procurement officer Eric Griggs said he had determined that Smith was the “majority owner” of Benchmark, with 70 employees under his control.

Smith is no longer president of Benchmark. He was replaced in 2008 by Mark Atkins, a longtime company employee who is white.