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Vrdolyak indicted on income tax evasion, impeding IRS

Edward R. Vrdolyak's attorneys are asking a judge to toss the criminal case against him. | Sun-Times file photo

The feds aren’t finished with “Fast Eddie.”

Five years after onetime powerhouse Chicago Ald. Edward R. Vrdolyak walked out of prison, federal authorities have quietly unsealed a new indictment outlining Vrdolyak’s role in a scheme to pocket millions from Illinois’ nearly two-decade-old settlement with tobacco companies.

The fact that the former 10th Ward alderman received money from the settlement isn’t news — it was revealed during his original sentencing hearing in 2009. But the new 19-page indictment alleges Vrdolyak was promised $65 million from the settlement even though he “did no work on the Tobacco Lawsuit.”

The federal grand jury ultimately charged Vrdolyak, 78, with one count of impeding the IRS and one count of income tax evasion. He faces a maximum prison sentence of eight years for allegedly trying to help his co-defendant, attorney Daniel Soso of Alsip, dodge federal income taxes in connection with the tobacco settlement.

Soso was first indicted in May 2015 for allegedly evading nearly $800,000 in income taxes. He now faces the same counts as Vrdolyak, as well as three counts of willfully failing to file tax returns. He has pleaded not guilty and faces a maximum of 23 years in prison.

Vrdolyak is due to be arraigned Nov. 22 before U.S. District Judge Amy St. Eve. His defense attorney, Michael Monico, said Vrdolyak would plead not guilty.

“We are very much saddened to see this,” Monico said. “It’s a very old matter. . . . And there is no loss at all. And it just surprises us that the government saw fit to bring this case.”

A member of the City Council from 1971 to 1987, Vrdolyak earned the nickname “Fast Eddie” for his back-room deals and reputation for dancing on the edge of the law. He was known for saying he always assumed anyone he was talking with might be wearing a wire.

A federal judge initially gave him a big break in 2009, giving him no prison time for his role in a financial scam with corrupt influence peddler Stuart Levine. But prosecutors appealed, and another judge ultimately sentenced Vrdolyak to 10 months in prison followed by 10 months of home confinement and work release.

During that first sentencing hearing in 2009, U.S. District Judge Milton Shadur asked about Vrdolyak’s ability to pay a $50,000 fine and noted, “he does have of course this tobacco settlement.” Monico acknowledged during the hearing that Vrdolyak received the money quarterly before the judge went on to say, “that’s at the level of some $30,000 a month, right?”

There was no further explanation. And it’s not clear from the new indictment exactly how much Vrdolyak received from the multibillion-dollar settlement. But it says Vrdolyak and Soso “were not appointed as Special Assistant Attorneys General” and were not authorized to represent the state of Illinois in the case.

The state of Illinois reaped $9.3 billion in the tobacco settlement, but it ultimately agreed to pay $188.5 million of that to outside law firms that helped with the litigation. Soso and Vrdolyak struck a secret deal with Washington attorney Steve Berman to collect a percentage of the fee, the new indictment indicates.

The indictment does not identify Berman by name, and he is not charged in the case. His firm did not immediately respond to a request for comment.

The deal evolved over time. But in May 1999, Berman allegedly sent Vrdolyak a letter on his firm’s letterhead indicating that Vrodlyak stood to collect $65 million. Vrdolyak soon agreed in writing to give a portion of it to Soso.

However, the feds say Soso was dodging taxes, and the IRS served Vrdolyak with a levy in 2005 and 2006 demanding Vrdolyak pay any money he owed to Soso to the IRS. Vrdolyak allegedly stopped paying Soso and told the IRS he owed Soso nothing.

Meanwhile, the feds say Vrdolyak and his law firm continued accepting money from Berman. And eventually, Soso asked Berman to pay him directly. Soso also allegedly hid that money in accounts belonging to his relatives and girlfriend.

Finally, in 2010 and 2011, the feds say Vrdolyak directed $170,242 to Soso and an unnamed recipient in connection with the tobacco settlement. It’s unclear exactly where those payments came from, but the exchange of money conflicted with Vrdolyak’s earlier statement that he owed Soso nothing.