Chicago Sun-Times - All2018-12-09T08:00:00-06:00https://chicago.suntimes.com/rss/stream/184089302018-12-09T08:00:00-06:002019-05-29T18:18:43-05:00Daley pension debacle: Where did $54 million go?
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<span class="DropcapEnhancement">I</span><div class="LargeTextEnhancement"> f there ever was any hope that five Chicago city workers pension funds would make any money by investing $68 million with then-Mayor Richard M. Daley’s nephew and one of his key political supporters, it didn’t last long. </div><p></p><p>Only months after the deals were made a dozen years ago, problems began to emerge.</p><p>The nephew, Robert G. Vanecko, and his business partner Allison S. Davis, a developer who gave campaign money to Daley and was appointed by the mayor to head the Chicago Plan Commission, started investing in a series of property deals that, by the time the last of them are unwound by the end of December, will have cost the city workers pension funds 80 percent of the $68 million they put in — $54 million in all.</p><p>Vanecko and Davis set up a company, DV Urban Realty Partners, and bought an apartment building that was riddled with code violations.</p><p>They invested in a vacant building that once housed the Chicago Defender, even as City Hall inspectors threatened to tear it down unless repairs were made.</p><p>They put city employees’ pension money into an old warehouse that sat on land so poisoned with arsenic and lead that the pension funds had to help pay $2.6 million for cleanup just to be able to unload it at a huge loss.</p><p>They lent millions of dollars to developers who personally guaranteed to repay the money but never did, costing the pension funds more than $5.6 million.</p><p>DV Urban broke a contract to buy a building in the South Loop, a decision that cost the pension funds another $4 million.</p><p>And somehow they even lost money — more than $11 million on the deal that built a busy Mariano’s supermarket in the North Side neighborhood of East Lake View, a location that has 90,000 people living within a one-mile radius.</p><div class="VideoEnhancement Enhancement" data-align-fullWidth><a class="AnchorLink" id="video-ec0000" name="video-ec0000"></a>
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<p>As the investments made with Vanecko and Davis plummeted in value, the pension funds still had to live up to their commitments to keep putting in the money they promised to DV Urban — which listed Davis, a developer who is African-American, as the 51 percent majority owner. That provided the pension funds with some cover for doing business with the mayor’s family, allowing them to say they had hired a minority-owned company, which historically they seldom had done.</p><p>Vanecko pulled out of DV in June 2009, as federal investigators were nosing around, issuing subpoenas regarding the pension boondoggle first exposed by the Chicago Sun-Times in September 2007. But that wasn’t until after he had played a key role in setting up all of the deals that cost the pension funds most of the money they invested, even as they guaranteed DV Urban a steady flow of management fees no matter how well or poorly the investments fared.</p><p>And Vanecko wasn’t the only Daley family member involved. Daley & George, the law firm headed by the mayor’s brother Michael Daley, worked on some of the projects. So did another mayoral nephew, Patrick Daley Thompson, a lawyer who is now alderman representing the family’s longtime power base, the 11th Ward.</p><p>After the first Sun-Times report appeared, headlined “Mayor’s nephew cashes in,” Daley’s press secretary said he had nothing to do with giving the city business to his nephew, saying, “He doesn’t do things like that. It’s just not his way.”</p><p>But three top city officials in Daley’s administration had a role in handing the millions of dollars in city employees’ retirement money to Vanecko and Davis. They had seats on four of the pension fund boards that agreed to invest with DV Urban.</p><p>Even now, years after the pension debacle was set in motion, representatives of the pension funds are reluctant to discuss what happened and whether they might still be able to recover any of the lost money.</p><p>One pension official is afraid the funds could be sued for breaching their fiduciary duty to their members — hundreds of thousands of retired and current Chicago teachers, police officers, garbage collectors, bus drivers and other city workers.</p><p>Some of those involved have laid blame for the financial losses on a factor they say was outside anyone’s control: the drastic downturn in the economy and the real estate market that hit as Vanecko and Davis started their business.</p><p>But insiders say there were other problems.</p><p>“This was a combination of bad deals and bad timing and not great management,” one says. “A basic thing you do when you manage a fund is you have audited financial statements, you have tax returns that you file with the investors. They didn’t file two or three years of tax returns or financial statements.”</p><p>That’s one reason it’s difficult to unravel the real estate deals Vanecko and Davis made and pinpoint how these five drastically underfunded city pension funds lost so much money.</p><p>There’s no question about what happened to $9 million of it: It went to Davis and Vanecko in fees, primarily for managing the pension funds’ money that they largely lost.</p><p>For more than a decade, the Sun-Times has been reporting on what an early story called “Daley nephew’s risky pension business.”</p><p>Now, based on thousands of pages of financial reports, property records, bankruptcy case files, lawsuits and other public records, here is a detailed look at the nine real estate deals Davis and Vanecko made with the pension funds’ money and, as much as it’s possible to determine, where the money went.</p><div class="RelatedList Enhancement" data-module data-align-center>
<div class="RelatedList-title">Related</div>
<ul class="RelatedList-items">
<li class="RelatedList-items-item">
<a class="Link" href="https://chicago.suntimes.com/2018/12/9/18644889/pension-robert-vanecko-richard-m-daley-allison-davis" target="_blank" >How the Sun-Times uncovered costly insider pension deals</a>
</li>
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<p></p><hr><p></p><h3>1212 S. Michigan Ave.</h3><h4>A 344-unit apartment building with stunning views of Lake Michigan</h4><div class="Enhancement" data-align-fullWidth>
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<div class="Figure-content"><figcaption class="Figure-caption"><p>1212 S. Michigan Ave.</p></figcaption><span class="line"></span><div class="Figure-credit"><p>Victor Hilitski / For the Sun-Times</p></div></div>
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<img class="Image" alt="Map of 1212 S. Michigan" srcset="https://cst.brightspotcdn.com/dims4/default/f59b3a8/2147483647/strip/true/crop/1000x561+0+219/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FDtWsz3Bj36u_SB8OFsyAXG9zAV4%3D%2F0x0%3A1000x1000%2F1000x1000%2Ffilters%3Afocal%28500x500%3A501x501%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16307264%2F1212mich2.jpg 1x,https://cst.brightspotcdn.com/dims4/default/7bc4dd6/2147483647/strip/true/crop/1000x561+0+219/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FDtWsz3Bj36u_SB8OFsyAXG9zAV4%3D%2F0x0%3A1000x1000%2F1000x1000%2Ffilters%3Afocal%28500x500%3A501x501%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16307264%2F1212mich2.jpg 2x" width="490" height="275"
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</div><p>Daley’s brother-in-law, Dr. Robert M. Vanecko, a former chief of staff at Northwestern Memorial Hospital, introduced his son to Davis, according to a deposition the younger Vanecko gave in a lawsuit filed over a pension fund deal.</p><p>The son, now 53, had been a lawyer with the firm Mayer Brown and an investment banker. Davis, now 79, ran a small law firm where future President Barack Obama got his first job after Harvard Law School and later became a developer of subsidized housing.</p><p>After securing investments of $68 million from five city pension funds — the Chicago Teachers’ Pension Fund, Chicago Policemen’s Annuity & Benefit Fund, Chicago Municipal Employees’ Annuity and Benefit Fund, Chicago Laborers’ Annuity and Benefit Fund and the Retirement Plan for CTA Employees — Davis and Vanecko made their first deal.</p><p>It was to buy a high-rise apartment building that had been sold less than two years earlier for $43.6 million.</p><p>Davis and Vanecko paid $65.2 million in September 2006 to buy the building. In addition to using $9.9 million of pension money, they got a $56 million loan from General Electric Capital.</p><p>Over the next five years, DV Urban reported, it sunk $16 million in pension money into the property, hiring a company owned by Davis’ son, Cullen Davis, to manage it.</p><p>In November 2011, DV Urban sold the building for $65.5 million — slightly more than it paid five years earlier.</p><p>According to a knowledgeable source, DV Urban turned a $6 million profit on the deal.</p><p>But the pension funds didn’t get a dime, losing at least $9.9 million on the building.</p><p>Five months ago, the building again was sold — for $92.5 million.</p><hr><p></p><h3>2400 S. Michigan Ave.</h3><h4>The former headquarters of the Chicago Defender in the historic Motor Row District</h4><div class="Enhancement" data-align-fullWidth>
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<div class="Figure-content"><figcaption class="Figure-caption"><p>The former Chicago Defender newspaper building at 2400 S. Michigan Ave.</p></figcaption><span class="line"></span><div class="Figure-credit"><p>Victor Hilitski / Sun-Times</p></div></div>
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<img class="Image" alt="Map of 2400 S. Michigan Ave." srcset="https://cst.brightspotcdn.com/dims4/default/cd31d85/2147483647/strip/true/crop/1000x561+0+219/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2F2HjgT6_PnAq7t_2suVhH_kuMdwQ%3D%2F0x0%3A1000x1000%2F1000x1000%2Ffilters%3Afocal%28500x500%3A501x501%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16307282%2F2400mich.jpg 1x,https://cst.brightspotcdn.com/dims4/default/64e2e04/2147483647/strip/true/crop/1000x561+0+219/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2F2HjgT6_PnAq7t_2suVhH_kuMdwQ%3D%2F0x0%3A1000x1000%2F1000x1000%2Ffilters%3Afocal%28500x500%3A501x501%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16307282%2F2400mich.jpg 2x" width="490" height="275"
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</div><p>This vacant building ended up in DV Urban’s portfolio after a pair of unusual transactions that inflated the price of the property by $413,000 in a single day.</p><p>It started with the estate of Lev Stratievsky, a Russian mobster who died while awaiting trial on charges that he was involved in money laundering for Ukrainian drug deals. The estate sold the property for $3,720,000 on June 8, 2007, to a business owned by Jeffrey Duerwachter, then 39, of Wilmette.</p><p>Duerwachter immediately flipped the property for $4,133,000 to a company owned by Matthew O’Malley, a friend of the Daley family who had been given sweetheart deals from City Hall to operate the Park Grill and Chicago Firehouse restaurants, and his partner, Brian J. O’Connell, a developer from La Grange.</p><p>O’Malley and O’Connell bought the building with a $3.3 million loan from First Chicago Bank & Trust, a $500,000 loan from Joseph Peterchak and Jeanne Picerene and $1 million in pension money from Davis and Vanecko. DV Urban guaranteed to repay the bank loan, while O’Malley and O’Connell personally guaranteed to repay DV for the $1 million loan as well as a second loan of $1,590,850 they got in May 2009 to repay Peterchak and Picerene.</p><p>Those two loans had an interest rate of 18 percent and have been in default since April 2011, with a total of $2,848,149 unpaid, according to yearly audits for the pension funds. There doesn’t appear to have been any attempt to collect on the personal guarantees made by O’Malley and O’Connell and recover money for the pension plans.</p><p>Three months after O’Malley and O’Connell defaulted on the pension fund loans, First Chicago foreclosed on the bank’s loan, resulting in a years-long court fight that ended when O’Malley and O’Connell sold the property in February 2014 for $4.26 million to repay the delinquent mortgage.</p><p>The sale came as City Hall filed another lawsuit against the property, demanding that the building be torn down if “the dangerous and unsafe conditions” weren’t corrected.</p><p>The five Chicago pension funds got $475,000 from the sale — about 18 percent of the pension money DV Urban put into the deal.</p><p>It’s unclear what O’Malley and O’Connell did with the money they borrowed from DV Urban. They never made any improvements to the former Defender headquarters, now known as Revel Motor Row and hosts private events.</p><hr><p></p><h3>217 N. Jefferson St.</h3><h4>A six-story office building in the West Loop</h4><div class="Enhancement" data-align-fullWidth>
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<div class="Figure-content"><figcaption class="Figure-caption"><p>217 N. Jefferson</p></figcaption><span class="line"></span><div class="Figure-credit"><p>Victor Hilitski / For the Sun-Times</p></div></div>
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</div><p>When the Uhlich Children’s Advantage Network moved out, Davis and Vanecko invested $2,650,000 of pension money in the property in July 2007, teaming with Terrapin Properties, an investment group that already owned half the building.</p><p>“They put up enough that we made them our co-general partner,” says Jake Geleerd who headed Terrapin with Michael Ezgur. “They were a co-general partner with us for the whole building.”</p><p>DV Urban ended up investing $4,495,555 in the building, and the partnership obtained several mortgages from a Highland Park bank, including one for $11.7 million in 2009.</p><p>Things got complicated in 2012, when the pension funds ousted Davis, leading to a court battle that continued until this summer.</p><p>The pension funds brought in Newport Capital Partners to take over DV Urban, with instructions to liquidate all of the real estate investments Davis and Vanecko made.</p><p>When Newport put the property up for sale, it discovered that Bank of America had a $2.7 million loan that needed to be repaid.</p><p>Eventually, the building was sold in March 2015 for $14.5 million. The pension funds got $4.5 million.</p><p>The money the pension funds got included $796,000 to cancel $2,730,094 in loans DV Urban had made to Terrapin, whose investors personally guaranteed to repay the money but didn’t.</p><p>Davis and Vanecko let the loans go into default in May 2008. They remained in default through 2017, according to an audit.</p><hr><p></p><h3>7100 S. South Shore Dr.</h3><h4>A 162-unit apartment building</h4><div class="Enhancement" data-align-fullWidth>
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<div class="Figure-content"><figcaption class="Figure-caption"><p>7100 S. South Shore Dr.</p></figcaption><span class="line"></span><div class="Figure-credit"><p>Victor Hilitski / For the Sun-Times</p></div></div>
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</div><p>This vintage apartment building had a history of housing code violations when Davis and Vanecko bought it for $11.5 million in July 2007, including $6.5 million in pension money.</p><p>The code violations continued after they bought it, records show, with City Hall suing, seeking fines of $8,000 a day until repairs were made.</p><p>The building was managed by DV Property Management, run by another Davis son, Jared Davis.</p><p>By the time the pension funds dumped DV Urban in 2012, their investment in the property topped $9 million. Newport Capital sold the building in March 2015 to a New York company for $6,750,000.</p><p>The five pension funds lost all of their original investment — plus $173,082 more to pay off a loan from Private Bank.</p><hr><p></p><h3>3508 S. State St.</h3><h4>Storefronts in a Chicago Housing Authority development</h4><div class="Enhancement" data-align-fullWidth>
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<div class="Figure-content"><figcaption class="Figure-caption"><p>3508 S. State Street</p></figcaption><span class="line"></span><div class="Figure-credit"><p>Victor Hilitski / For the Sun-Times</p></div></div>
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</div><p>After Daley tore down the Stateway Gardens housing project, his CHA board and its management firm, The Habitat Company, hired Allison Davis in 2001 to redevelop the property with townhomes and stores. The taxpayer-funded deal was to pay Davis — Daley’s plan commission chairman — and his company $2 million in development fees.</p><p>Davis and Vanecko bought the storefronts in August 2007 for $4.2 million in a deal that included $3.5 million from the pension funds.</p><p>DV Urban rented out the storefronts, which included a Starbucks and Jimmy John’s, but had difficulty keeping some of the stores leased. And Starbucks had concerns about violence in the area, a block from Chicago police headquarters, but eventually renewed its lease.</p><p>Newport Capital sold the stores for $2.4 million in December 2016. After repaying a bank loan, the pension funds got $1.1 million, a fraction of their original investment.</p><hr><p></p><h3>1411 S. Michigan Ave.</h3><h4>Former headquarters of the National Association of Letter Carriers</h4><div class="Enhancement" data-align-fullWidth>
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<div class="Figure-content"><figcaption class="Figure-caption"><p>1411 S. Michigan Ave.</p></figcaption><span class="line"></span><div class="Figure-credit"><p>Victor Hilitski / For the Sun-Times</p></div></div>
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</div><p>Hoping to cash in on booming development in the South Loop, the union decided to move, building a new home in Bronzeville that would largely be financed by selling the two-story building and surrounding parking on Michigan Avenue just south of O’Malley’s Chicago Firehouse, a restaurant close to Daley’s home.</p><p>On the union’s behalf, Ernest Sawyer, former Mayor Eugene Sawyer’s brother, reached out to see whether Davis was interested.</p><p>He was. Davis and Vanecko submitted the highest bid, a deal negotiated by two attorneys from the Daley & George law firm: Allan Kelly Ryan IV, husband of Vanecko’s cousin Anne Daley, whose father runs the law firm, and Dennis Aukstik, former brother-in-law of William Daley.</p><p>The Daley firm also worked on several other pension fund deals for DV Urban, according to Vanecko’s deposition.</p><p>Under the contract Davis and Vanecko signed in August 2007, DV Urban agreed to pay the postal workers union $8.5 million for the property, including nearly $4.7 million from the pension funds.</p><p>DV Urban gave the union a “predevelopment” loan of $400,000, earnest money of $850,000 and a $2.9 million line of credit — money the union needed to build its new headquarters and move.</p><p>Under the deal, DV Urban could back out if the newly elected alderman of the Second Ward, Robert Fioretti, didn’t OK their unspecified plans, which they said might include a hotel, condos or apartments.</p><p>In a deposition, Davis said he spent months trying without success to reach Fioretti before the alderman said he wasn’t prepared to sign off on their project.</p><p>The deal was still up in the air in June 2009 when Vanecko pulled out of the DV Urban partnership because the pension fund deals were causing strife in the mayor’s family.</p><p>A few weeks later, Jared Davis asked the postal workers to renegotiate. But the union refused, prompting him to send a letter canceling the deal and asking it to return the pension funds’ money.</p><p>The union refused. It sued DV Urban for breach of contract, a lawsuit that dragged on for years while the pension funds wrested control of DV Urban from Davis, turning the real estate fund over to Newport.</p><p>While DV Urban and the postal workers were fighting in court, the union sold its now-vacant headquarters for $3.1 million in October 2012 to a developer, who resold it in the spring of 2015 for $5.6 million.</p><p>Today, a 199-unit apartment building is going up on the property, which includes 40,000 square feet of commercial space that Rush University Medical Center has leased for $12 million in a 10-year deal.</p><p>After five years of litigation, the union’s lawsuit against DV Urban ended in September 2014 when the union and Newport Capital reached an out-of-court settlement. The deal returned just $41,844 to the pension funds.</p><p>“That’s what happens when you breach a contract,” says Elvin Charity, an attorney for the union. “DV wanted to renegotiate the price. They didn’t try to get the zoning. They didn’t know what they wanted to do. They tried to use the zoning issue to get out of the deal. I can’t speculate as to why they did it.”</p><hr><p></p><h3>3348 S. Pulaski Rd.</h3><h4>A decrepit warehouse on land that was tainted by arsenic and lead</h4><div class="Enhancement" data-align-floatRight>
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</div><p>A week after the Sun-Times reported that Daley’s nephew and his partners had been paid nearly $500,000 in rent by City Hall for the Pulaski Road property, Vanecko announced in June 2009 he would walk away from DV Urban, leaving the company to be run by Allison Davis and Jared Davis.</p><p>Vanecko said he was turning over his 49 percent stake to the Davis family. None of those involved ever disclosed how much money, if anything, Vanecko got for that.</p><p>Vanecko’s decision came amid reports of tension in the Daley family.</p><p>At one point, the mayor publicly rebuked his sister’s son: “While many of you have speculated that somehow I knew about Bob’s business relationship, I did not. When I found out, I made it very clear it was not a good decision, and he should end the business relationship immediately. But as an adult, Bob made a different decision, which leads to a very painful string of news stories that have indeed caused tension in my family.”</p><p>DV Urban’s investment in the Pulaski Road warehouse grew to $5.2 million in the fall of September 2011, a few months before the five pension funds ousted the Davises.</p><p>Newport got three bids for the property, including a $5.4 million offer from a joint venture of the California teachers pension fund and Panattoni Development in California. Panattoni hired Vanecko’s cousin, Patrick Daley Thompson, an attorney who then served on the Metropolitan Water Reclamation District of Greater Chicago, to lobby City Hall for a property tax break to develop the land.</p><p>After Ald. Rick Munoz (22nd) agreed to support the tax break, Newport sold the warehouse and surrounding land to PanCal in July 2014 for $5.4 million.</p><p>Newport settled an outstanding mortgage on the property while $2.6 million went into a fund to help PanCal to clean it up.</p><p>The pension funds reported they received $1.7 million.</p><p>PanCal agreed to pay Thompson and his law firm $100,000, according to city records, for obtaining the 10-year tax break, which could cut the property tax bill by $4.1 million.</p><p>PanCal tore down the warehouse, removed 70 tons of poisoned soil and built a new, 316,000-square-foot warehouse on the site that it sold to an arm of Prudential Insurance in December 2015 for $29.7 million.</p><hr><p></p><h3>3030 N. Broadway and 3012 N. Waterloo Ct.</h3><h4>Site of a Mariano’s grocery store, a Starbucks, a health club and a bank</h4><div class="Enhancement" data-align-floatRight>
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</div><p>It could have been Davis and Vanecko’s biggest deal, one that would make millions for the pension funds and offset losses from their bad investments.</p><p>Instead, it turned out to be DV Urban’s biggest flop, losing money building an upscale grocery store in one of Chicago’s richest neighborhoods, just blocks from Lake Michigan.</p><p>What’s now a Mariano’s once was the site of a Dominick’s that burned down in June 2005. Jon Zitzman of JFJ Development Co. and Michael O’Connor of Dionysus Development bought the land for $16 million, with plans to build 55 condos and a store that Dominick’s agreed to lease.</p><p>In January 2007, Zitzman and O’Connor got a $15 million loan from Vail Capital LLC, headed by Sheldon “Red” Mandell, chairman of National Wrecking Company, according to documents filed with the Cook County recorder of deeds.</p><p>But Mandell says he was never involved in any deal on this property and denies making any loans on the deal.</p><p>The Vail Capital loan was modified in February 2008 when Davis and Vanecko entered the deal, records filed with the county show. Using $3 million from the pension funds, Davis and Vanecko bought the Waterloo Court portion of the property that was part of the collateral on the loan Zitzman and O’Connor got from Vail.</p><p>Davis and Vanecko also tapped pension money to lend $912,930 to a company controlled by Zitzman and O’Connor, who personally guaranteed to repay the loan, which carried a 30 percent interest rate.</p><p>This loan, never repaid, has been in default since March 2009, according to a 2017 audit of DV’s investments.</p><p>At the time Vail agreed to the sale, Davis and Vanecko were taking over the $15 million loan from Zitzman and O’Connor in a deal negotiated by DV attorney Ryan, a son-in-law of Michael Daley.</p><p>Vail’s $15 million loan was reduced to $3 million and fully repaid a few months later, records show.</p><p>After Davis and Vanecko took over the Vail loan, Zitzman and O’Connor got a $10 million mortgage from First Bank. DV Urban gave them $7,925,969 in pension money to develop the build condos and a store on the Broadway property, next to the Waterloo Court site where DV Urban planned to build condos.</p><p>But the Broadway deal fell apart in June 2009 when Zitzman and O’Connor filed for bankruptcy as First Bank prepared to foreclose on the $10 million loan.</p><p>A bankruptcy court judge allowed DV Urban to buy the property in December 2010 for $8.5 million.</p><p>The deal was closed in Thompson’s law office. Now the 11th ward alderman, Thompson is a first cousin of Vanecko, who by this time had left DV Urban.</p><p>DV got a $6.5 million loan in March 31, 2011, from a Chinese company called Wanxiang America Real Estate Group, using the Broadway and Waterloo properties as collateral.</p><p>DV Urban already had invested $11.4 million in pension money in the project, according to a report Davis made to the pension funds.</p><p>The pension funds fired Davis a few months later.</p><p>Wanxiang foreclosed on the loan in September 2012, which could have cost the pension funds their entire investment.</p><p>With the Broadway project in jeopardy, Newport asked the pension funds to put in more money to try to save the original investments made by Davis and Vanecko. Four of the pension funds refused. The Chicago Teachers’ Pension Fund kicked in an additional $5 million, which allowed Newport to pay Wanxiang and keep the property.</p><p>Newport teamed with a developer, the Taxman Corp. of Skokie, landed a lease with Mariano’s and got a $45.9 million construction loan in February 2015 to build a four-story shopping center with two levels of parking. Mariano’s opened the following year.</p><p>The shopping center was sold in January 2017 for $81 million to an Ohio company, which reported gross income of $2.5 million during its first five months of ownership.</p><p>The sale netted $5.8 million for the five pension funds, records show — about one-third of the $16.9 million they had invested in the property since 2008.</p><p>The teachers pension fund got an additional $6.7 million from the sale because of the extra $5 million it invested to help Newport rescue the project.</p><hr><p></p><h3>More losses, little effort to recover lost money</h3><div class="Enhancement" data-align-floatRight>
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<img class="Image" alt="Photo of Charles Burbridge" srcset="https://cst.brightspotcdn.com/dims4/default/9e830f6/2147483647/strip/true/crop/433x243+0+94/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FR2ujbyNlsfMe0RYOS0KcwTMVJO0%3D%2F0x0%3A433x432%2F433x432%2Ffilters%3Afocal%28217x216%3A218x217%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16307329%2Fcharles_burbridge.jpeg 1x,https://cst.brightspotcdn.com/dims4/default/76673db/2147483647/strip/true/crop/433x243+0+94/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FR2ujbyNlsfMe0RYOS0KcwTMVJO0%3D%2F0x0%3A433x432%2F433x432%2Ffilters%3Afocal%28217x216%3A218x217%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16307329%2Fcharles_burbridge.jpeg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Charles Burbridge: “I don’t know if anything can be done to recover it.”</p></figcaption><span class="line"></span><div class="Figure-credit"><p>LinkedIn</p></div></div>
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</div><p>Besides losing $54 million of the $68 million they invested with Davis and Vanecko, the five city workers’ pension funds had to pay $1.7 million to Newport and affiliated parties to manage and liquidate the properties DV Urban acquired.</p><p>They also lost the ability to invest the money in other ways that might have proved to be profitable.</p><p>And beyond all of that, they had to hire lawyers to fight the lawsuits that Davis filed when he and his family were fired by the pension funds in 2012. Those legal bills ended up costing the pension funds $2.6 million.</p><p>Now, the pension funds say there isn’t much they can do to try to recover any of the lost money — including the $1.9 million in development fees that Davis and Vanecko collected on projects that never got off the ground, like the redevelopment of the letter carriers union’s former headquarters.</p><p>Or the $9 million in management and development fees the pension funds paid Davis and Vanecko — including $6 million for managing their money-losing investments.</p><div class="Enhancement" data-align-floatRight>
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<img class="Image" alt="Photo of Derrick McGavic" srcset="https://cst.brightspotcdn.com/dims4/default/632b62c/2147483647/strip/true/crop/200x112+0+44/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2F2InrvaX84knJyK69kOXZEGEkkKk%3D%2F0x0%3A200x200%2F200x200%2Ffilters%3Afocal%28100x100%3A101x101%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16307333%2Fderrick_mcgavic.jpeg 1x,https://cst.brightspotcdn.com/dims4/default/3fb9f88/2147483647/strip/true/crop/200x112+0+44/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2F2InrvaX84knJyK69kOXZEGEkkKk%3D%2F0x0%3A200x200%2F200x200%2Ffilters%3Afocal%28100x100%3A101x101%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16307333%2Fderrick_mcgavic.jpeg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Derrick McGavic: “The litigation costs far outweigh what can be recoverable.”</p></figcaption><span class="line"></span><div class="Figure-credit"><p>LinkedIn</p></div></div>
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</div><p>Or the loans DV gave to developers who promised to repay the money but never did.</p><p>“The loans were made by the general partners,” DV Urban, says Charles Burbridge, who became executive director of the Chicago Teachers’ Pension Fund years after the retirement fund invested $25 million with Davis and Vanecko. “I don’t know if anything can be done to recover it.”</p><p>Regarding the management and development fees DV Urban collected, Burbridge says, “That’s kind of water over the bridge. That was part of the litigation.”</p><p>Burbridge says the pension funds have never considered conducting a forensic audit to examine the investments DV Urban made or the liquidation deals Newport Capital made to determine whether the pension funds could recover additional money.</p><p>“Given the timeline and the contractual relationships, it would be unusual,” Burbridge says. “Some of the implications you presented are interesting, but as an investor on this side of the agreement, it’s not typical practice to do that kind of investigation on an investment that didn’t pan out.”</p><p>Derrick McGavic, managing partner of Newport Capital Partners, says, “The litigation costs far outweigh what can be recoverable.”<br></p>
https://chicago.suntimes.com/2018/12/9/18644818/robert-vanecko-daley-pension-54-million-allison-davisTim Novak2018-09-14T05:30:46-05:002019-05-29T17:37:26-05:00Chicago pension fiasco: $54 million lost on deal with Daley nephew, ex-Obama boss
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Robert G. Vanecko (left) and Allison S. Davis. | Sun-Times files</p></figcaption></div>
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<p>A dozen years ago, five financially strapped city of Chicago pension funds invested $68 million in a shaky real estate deal put together by a former boss of President Barack Obama and a nephew of Mayor Richard M. Daley.</p><p>It was a high-risk investment. Allison S. Davis — a longtime Daley ally who once headed a small Chicago law firm that gave Obama his first job out of Harvard Law School — and Daley nephew Robert G. Vanecko even warned in the prospectus that the pension funds could lose their entire investments.</p><p>But, with Daley in office and three top officials in his administration in on the decisions, the city pension funds agreed to give Davis and Vanecko’s DV Urban Realty Partners the money, which they said they would use to buy and develop properties in struggling Chicago neighborhoods.</p><p><a class="Link" href="https://chicago.suntimes.com/real-estate/richard-daley-nephew-robert-vanecko-allison-davis-dv-urban-chicago-city-pension-funds-september-23-2007/" target="_blank" >Eleven years ago, the Chicago Sun-Times exposed the deal,</a> which quickly turned sour. The mayor publicly distanced himself from his nephew, whose pension deals created friction in the Daley family.</p><p>Vanecko pulled out of the partnership with Davis and his family in June 2009 — 12 days after a federal grand jury issued subpoenas for DV Urban’s records.</p><p>Three years later, the pension funds dumped Davis and seized control of the real estate portfolio DV Urban had put together, with lawsuits filed in Illinois and in Delaware.</p><p>The pension funds are now out of all of the real estate deals that Davis and Vanecko put together, which included the failed redevelopment of the former Chicago Defender headquarters and the redevelopment of a burned-out Dominick’s supermarket in Lake View that’s now occupied by a Mariano’s.</p><p>And not only did the pension funds not make a profit, records show they will end up losing a combined $54.2 million for the retirement plans, which cover Chicago teachers, police officers, municipal workers, garbage collectors and bus drivers.</p><p>On top of that, they spent $2.6 million on lawyers to fight DV Urban in court, litigation that finally came to an end last month when the retirement plans also agreed to pay $14,400 in copying fees that the company incurred during the court battles.</p><h3>How much the city pension funds lost</h3><p>When the final accounting is finished by year’s end, each of the five city pension plans will have lost about 80 percent of the money they invested in the Davis-Vanecko deal, according to the Chicago Teachers’ Pension Fund, which lost the most.</p><p>“Clearly, this is a bad loss — like 80 percent of the original investment,” says Charles Burbridge, who has been the teachers pension fund’s executive director for three years, long after the DV Urban deal began.</p><p>“We don’t invest money expecting to lose it,” says Burbridge. “It’s one thing not to have a positive return. But it’s a whole ’nother thing when you have negative returns and actually lose your principal . . . DV Urban’s the worst that comes to mind.”</p><p>The teachers pension fund — the first retirement plan to invest money with Davis and Vanecko — will lose $19.7 million on its $25 million deal with DV Urban.</p><p>The pension plan for Chicago police officers will lose $12 million of its $15 million investment. The city’s municipal employees retirement plan, which also invested $15 million with Daley’s nephew and Obama’s onetime boss, also will lose $12 million.</p><p>The retirement plan for city laborers — which includes garbage collectors and sewer workers — will lose $8 million of its $10 million investment. And the CTA’s retirement plan will lose about $2.4 million from its $3 million investment.</p><p>But as big a debacle as the real estate dealings were for the city employee pension funds, they turned out to be quite profitable for DV Urban, pension records show.</p><p>DV Urban put $3.4 million into the real estate deals — including money the Davis family and Vanecko borrowed from a bank that has since been shut down by federal regulators.</p><p>Like the pension funds, DV Urban lost most of its investment — about $2.7 million.</p><h3>Fund managers got $9M in fees</h3><p>But that was more than offset by the $9 million the company was paid by the pension funds to manage the real estate deals, which included operating two apartment buildings, as well as the firm’s “development fees” on projects that never got off the ground. The $54 million loss includes those $9 million in fees.</p><p>DV Urban “received a total of $1,181,845 in development fees for construction costs that were never incurred,” Cook County Circuit Judge Moshe Jacobius wrote in a ruling on Aug. 28, rejecting DV Urban’s bid for even more in development fees from the pension funds for the failed deals.</p><p>As the court battles dragged on, the pension funds brought in other firms to manage the real estate holdings and ultimately sell them in an effort to cut their losses. Those firms got $2.3 million in fees, which were paid for out of the pension funds’ investments.</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="A lawyer for Stanley Wrice will not get to question former Mayor Richard M. Daley in connection with a police torture case. | AP file photo" srcset="https://cst.brightspotcdn.com/dims4/default/b12629f/2147483647/strip/true/crop/1024x575+0+97/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FVhwWmlo2QO0QmPm2r2CrHRSiV-M%3D%2F0x0%3A1024x768%2F1024x768%2Ffilters%3Afocal%28512x384%3A513x385%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16038889%2Fchicago_mayor_53817683.jpg 1x,https://cst.brightspotcdn.com/dims4/default/e84fedb/2147483647/strip/true/crop/1024x575+0+97/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FVhwWmlo2QO0QmPm2r2CrHRSiV-M%3D%2F0x0%3A1024x768%2F1024x768%2Ffilters%3Afocal%28512x384%3A513x385%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16038889%2Fchicago_mayor_53817683.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Former Mayor Richard M. Daley. | AP</p></figcaption></div>
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</div><p></p><h3>Vanecko: ‘Bad timing’ hurt deal</h3><p>Davis, 79, and his son and business partner Jared Davis didn’t return calls or emails on their dealings with the pension funds.</p><p>Vanecko, 52, wouldn’t discuss DV Urban’s real estate investments, which were all in place before he walked away from the company.</p><p>In a written statement, Vanecko said: “I left the DV Urban fund over nine years ago so I don’t think it is fair to attribute its results to me. The results of an investment are dependent on numerous factors. One of the most important is timing. DV Urban made many of its investments immediately before one of the worst downturns in history so obviously they were impacted by bad timing. Another factor is how the investments are managed after they are made. Since I left over nine years ago, I wasn’t involved in the management of the investments so I cannot comment on that factor.”</p><p>Three members of Daley’s administration — his chief financial officer Dana Levenson, City Comptroller Steve Lux and City Treasurer Judith Rice — served on the pension boards for cops and city workers, and they voted to invest money with DV Urban. Levenson, now living in Massachusetts, declined to comment. Lux, who’s now the Chicago Park District’s chief financial officer, and Rice, now an elected Cook County judge, didn’t respond to emails seeking comment.</p><p>The money that the pension funds lost exacerbates their “unfunded liabilities,” which range from $1 billion to $10 billion to pay future retirement benefits for their members.</p><p>While the $54.2 million loss amounts to only a small percentage of the pension funds’ assets, it still would, for instance, cover one year of payments for 720 retirees each getting annual pensions of $75,000. Another way of looking at it is that the $54.2 million loss is equal to all of the property taxes collected in a year from 13,500 homeowners with an average tax bill of $4,000. The pension funds get the bulk of their money from property taxes.</p><h3>Toll of political ‘non-financial’ decisions</h3><p>The pension funds lost money on all but one of the Davis-Vanecko deals, though it isn’t clear just how the money was lost. But, according to the funds’ records, here’s how the pension money was spent:</p><p>• $9.9 million that Davis and Vanecko put toward their $65.2 million purchase of a 344-unit apartment building at 1212 S. Michigan Ave. in September 2006. They later sold it for $65.5 million, but the pension funds got nothing from that sale.</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="1212 S. Michigan Ave. | Sun-Times files" srcset="https://cst.brightspotcdn.com/dims4/default/aaacb7b/2147483647/strip/true/crop/526x295+0+268/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2F_Cl1DQYa8bhj4w5Ros23CrwgCpc%3D%2F0x0%3A526x832%2F526x832%2Ffilters%3Afocal%28263x416%3A264x417%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16104293%2Fwatchdogs_022816_08_59585993.jpg 1x,https://cst.brightspotcdn.com/dims4/default/b3d991c/2147483647/strip/true/crop/526x295+0+268/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2F_Cl1DQYa8bhj4w5Ros23CrwgCpc%3D%2F0x0%3A526x832%2F526x832%2Ffilters%3Afocal%28263x416%3A264x417%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16104293%2Fwatchdogs_022816_08_59585993.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>1212 S. Michigan Ave. | Sun-Times files</p></figcaption></div>
</figure>
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</div><p>• $2.8 million lent to two developers who bought the Chicago Defender’s former home at 2400 S. Michigan Ave. The developers — Brian O’Connell and Matthew A. O’Malley, a politically connected restaurant owner who had gotten sweetheart deals from the Daley administration to buy a building and start the Chicago Firehouse restaurant and another one to operate the Park Grill in Millennium Park — later went into foreclosure and sold the Defender building. The pension funds recovered $475,000.</p><p>“We don’t have the records to tell you what that money was spent for,” Burbridge says. “It didn’t go to develop the property, obviously.”</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="The Chicago Defender’s headquarters at 2400 S. Michigan Ave. in 2006. | Sun-Times files" srcset="https://cst.brightspotcdn.com/dims4/default/94d6b48/2147483647/strip/true/crop/499x280+0+49/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2Fno0Q7Ek4bGMmKYxA-JQcHxl0xa4%3D%2F0x0%3A499x378%2F499x378%2Ffilters%3Afocal%28249x189%3A250x190%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16104295%2Fweb_4794957.jpg 1x,https://cst.brightspotcdn.com/dims4/default/5abf139/2147483647/strip/true/crop/499x280+0+49/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2Fno0Q7Ek4bGMmKYxA-JQcHxl0xa4%3D%2F0x0%3A499x378%2F499x378%2Ffilters%3Afocal%28249x189%3A250x190%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16104295%2Fweb_4794957.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>The Chicago Defender’s headquarters at 2400 S. Michigan Ave. in 2006. | Sun-Times files</p></figcaption></div>
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</div><p>• $2.65 million to help buy a small commercial building at 217 N. Jefferson St. for $11.7 million in 2007. It was sold for $14.5 million in 2015, netting $4.5 million for the pension funds in what appears to have been the only deal to turn a profit.</p><p>• $6.5 million toward the $11.5 million purchase of a 162-unit apartment building with a host of code violations at 7100 S. South Shore Dr. It was sold for $6.75 million in 2015, but the pension funds got none of their money back.</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="7100 S. South Shore Dr. | Sun-Times files" srcset="https://cst.brightspotcdn.com/dims4/default/8f5dac3/2147483647/strip/true/crop/743x417+0+304/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FB6Wr14pzQRl3lDt1nMpxGu9-4rA%3D%2F0x0%3A743x1024%2F743x1024%2Ffilters%3Afocal%28371x512%3A372x513%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16104298%2Fwatchdogs_022816_06_59585989.jpg 1x,https://cst.brightspotcdn.com/dims4/default/4d6a4ef/2147483647/strip/true/crop/743x417+0+304/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FB6Wr14pzQRl3lDt1nMpxGu9-4rA%3D%2F0x0%3A743x1024%2F743x1024%2Ffilters%3Afocal%28371x512%3A372x513%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16104298%2Fwatchdogs_022816_06_59585989.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>7100 S. South Shore Dr. | Sun-Times files</p></figcaption></div>
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</div><p>• $3.5 million toward the $4.2 million purchase of stores at 3508 S. State St. as part of the redevelopment of the old Stateway Gardens housing project. It has been sold, with the pension funds getting back $1.1 million — about a third of their investment.</p><p>• $16.9 million lent to two developers who planned to rebuild a burned-down Dominick’s at 3030 N. Broadway and adjacent land at 3013 N. Waterloo Ct. The developers defaulted on a separate bank loan and filed for bankruptcy. The property eventually was developed, with businesses including a Mariano’s. The pension funds recovered $5.8 million on the deal. In a separate deal, the teachers pension fund invested an extra $5 million in the property and expects to get $6.7 million back from that, offsetting some of its DV Urban losses.</p><p>• $4.2 million to Sydney Partners, which paid $10.5 million to buy a heavily polluted warehouse and surrounding property at 3348 S. Pulaski Rd., leasing part of it to the city water department. It was sold in 2014 for $5.4 million, with the pension funds getting $1.7 million.</p><p>• $4.5 million toward the planned purchase of the National Association of Letter Carriers’ headquarters at 1411 S. Michigan Ave., just south of O’Malley’s Firehouse restaurant. DV Urban backed out of that deal but couldn’t recover its money, which the union used to build a new headquarters at 3850 S. Wabash Ave. A lengthy court battle ensued, and the pension funds got back about $42,000.</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="The National Association of Letter Carriers’ then-headquarters at 1411 S. Michigan Ave. in 2010. | Sun-Times files" srcset="https://cst.brightspotcdn.com/dims4/default/920367f/2147483647/strip/true/crop/1024x575+0+53/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2F8bW47HM5vm6d1_AG8V3ePeQprvs%3D%2F0x0%3A1024x681%2F1024x681%2Ffilters%3Afocal%28512x340%3A513x341%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16104303%2F6_16_hale_watchdogs_2803_16935729.jpg 1x,https://cst.brightspotcdn.com/dims4/default/ab581b5/2147483647/strip/true/crop/1024x575+0+53/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2F8bW47HM5vm6d1_AG8V3ePeQprvs%3D%2F0x0%3A1024x681%2F1024x681%2Ffilters%3Afocal%28512x340%3A513x341%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16104303%2F6_16_hale_watchdogs_2803_16935729.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>The National Association of Letter Carriers’ then-headquarters at 1411 S. Michigan Ave. in 2010. | Sun-Times files</p></figcaption></div>
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</div><p>Burbridge says the teachers fund has taken steps to guard against such risky real estate deals, investing instead in “core real estate” such as existing office buildings. And its staff has been expanded to vet the companies that manage the pension fund’s money. One employee was hired to manage the real estate portfolio. And the pension plan ended its relationship with a consulting firm that signed off on the investment with DV Urban.</p><p>“We think we have controls in place to prevent it from happening again,” Burbridge says.</p><p>Laurence Msall, president of the Civic Federation of Chicago, says the DV Urban fiasco extends beyond the money the pension funds lost.</p><p>“We have insufficient oversight, and these are clear examples of the dangers of political or non-financial based decisions,” Msall says. “It’s not just the $68 million they lost, but it’s the money they didn’t make.”</p><div class="Enhancement" data-align-center><div class="Enhancement-item">
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https://chicago.suntimes.com/2018/9/14/18385091/chicago-pension-fiasco-54m-lost-on-deal-with-daley-nephew-ex-obama-bossTim Novak2016-10-09T06:00:20-05:002019-05-29T17:42:21-05:00Daley money pit
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<div class="Figure-content"><div class="Figure-credit"><p>Sun-Times Media</p></div></div>
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<p>Over the past nine years, two nephews of former Mayor Richard M. Daley have been involved in separate plans to redevelop a rundown warehouse on 15 acres of polluted land in Little Village just north of the Stevenson Expressway. It hasn’t turned out well for Chicago taxpayers.</p><p>First, taxpayers have to make up for $4.2 million in city pension money invested on behalf of teachers, police officers and other city workers that ended up squandered on failed development plans involving Daley’s oldest nephew, Robert G. Vanecko.</p><p>Now, taxpayers stand to lose another $4.1 million on the same property at 3348 S. Pulaski Rd.</p><p>That’s the amount of a property-tax break given to a second redevelopment deal for the site.</p><p>This one involves Vanecko’s first cousin, Patrick Daley Thompson, an attorney who helped the developers get the tax cut last year shortly before he was elected alderman of the 11th ward — the family’s power base for six decades.</p><p>It’s one of the largest tax breaks the Chicago City Council has ever given to an industrial property — about $1 million more than the tax break the Ricketts family will get from City Hall for renovating Wrigley Field, a designated Chicago landmark.</p><p>For obtaining the tax break and zoning changes for a California developer, Thompson and the law firm where he works stood to make as much as $100,000, according to records the Chicago Sun-Times obtained from City Hall. It’s unclear how much Thompson’s firm actually got paid, and he declined to say.</p><p>Thompson’s client wanted the tax cut as part of a plan to clean up the property and build a warehouse there — a project bankrolled by the California State Teachers’ Retirement System, one of the country’s largest public pension funds. His client took over the project after his cousin’s deal with the Chicago pension funds fell apart.</p><p>The Chicago pension funds got nothing when they unloaded the decrepit warehouse two years ago, dumping it on the California pension fund and its developer.</p><p>But the California retirement plan and the developer tore down the building, removed 70 tons of soil polluted with chemicals including arsenic and lead, erected a new warehouse and then flipped it to a branch of Prudential Insurance for $29.7 million last December — making $5 million to $8 million, according to sources and city records.</p><p>City Hall granted the tax break after Thompson and the developers promised the new warehouse would create as many as 250 permanent jobs.</p><p>For now, though, the 316,000-square-foot warehouse on Pulaski Road sits vacant, waiting for a tenant — the trigger that will start the clock on the 12-year tax break.</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="Three city of Chicago water trucks sit outside of a warehouse at 3348 S. Pulaski Rd. | Brian Jackson / Sun-Times" srcset="https://cst.brightspotcdn.com/dims4/default/da2b191/2147483647/strip/true/crop/1024x575+0+39/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FC4P2MtbLJFdi0lSOsGk0OzdYB1o%3D%2F0x0%3A1024x653%2F1024x653%2Ffilters%3Afocal%28512x326%3A513x327%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16103646%2F6_12_jackson_truck_8_131356791.jpg 1x,https://cst.brightspotcdn.com/dims4/default/147bb11/2147483647/strip/true/crop/1024x575+0+39/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FC4P2MtbLJFdi0lSOsGk0OzdYB1o%3D%2F0x0%3A1024x653%2F1024x653%2Ffilters%3Afocal%28512x326%3A513x327%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16103646%2F6_12_jackson_truck_8_131356791.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Three city of Chicago water trucks sit outside of a warehouse at 3348 S. Pulaski Rd. | Brian Jackson / Sun-Times</p></figcaption></div>
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</div><p>Thompson’s spokeswoman, Joanna Klonsky, says: “Ald. Thompson served as the attorney on this project prior to his 2015 election as alderman. The firm’s fees are between the client and the firm and therefore confidential.</p><p>Ald. Thompson’s firm was not involved in the acquisition of the property in question, and he was not privy to any information regarding the pension-fund investments in question.</p><p>He does not represent any clients on zoning matters in the city of Chicago, as it is prohibited by law.”</p><p>Vanecko didn’t respond to an email seeking comment.</p><p>The story of how the polluted Pulaski Road property became toxic for Chicago taxpayers begins in 2004, when Daley was still mayor. That’s when Vanecko — his sister’s oldest son — went into business with Allison S. Davis, the Chicago attorney who gave President Barack Obama his first job out of Harvard Law School, and Davis’ son Jared Davis.</p><p>Operating under the name DV Urban Realty Partners, their idea was to redevelop properties in some of Chicago’s most downtrodden neighborhoods. And they were aiming to get government pension funds to invest $100 million to bankroll their plans.</p><p>They had a hard time securing investments from pension funds, though, until the Chicago Teachers Retirement System agreed in early 2005 to put in $25 million of the money it held toward teachers’ retirement pay.</p><p>Then, the pension funds for police officers, municipal employees, city laborers and the Chicago Transit Authority also agreed to invest.</p><p>Altogether, the Davises and Vanecko wound up with $68 million from five public pension funds.</p><p>DV Urban had begun investing in real estate deals by the time the Sun-Times revealed in September 2007 that a nephew of the mayor stood to make millions of dollars from city-connected pension funds, with Vanecko asserting that he hadn’t used his family connection to get that business.</p><p>A Daley spokeswoman said at the time that the mayor hadn’t helped his nephew land the deals. But one pension board member, Judy Rice, who at the time was Daley’s city</p><p>treasurer and is now a Cook County judge, said she knew Vanecko was Daley’s nephew when she voted to invest city workers’ pensions with his company.</p><p>In November 2007, DV Urban invested $4.2 million of the pension money with Sydney Partners LLC, which then bought the Pulaski Road warehouse for $10.5 million.</p><p>Sydney — headed by Stanley and Joseph Weissbrot, Jeff Josephs and Anthony Burns — borrowed $7.85 million from LaSalle Bank. DV Urban later guaranteed to repay that loan.</p><p>That guarantee ended up preventing the city workers’ pension funds from being able to recover any of their money when the land was unloaded to Thompson’s client.</p><p>The warehouse on Pulaski — which formerly was home to Nu-Temp Corporation and Steel Sales Corporation—largely remained vacant during DV Urban’s investment, except for a month-to-month lease for a portion of the space with the Chicago water department. It used the property to park some of the trucks bought after Daley was forced to shut down the city’s Hired Truck Program when the Sun-Times revealed that City Hall had been paying nearly $40 million a year to lease dump trucks from favored companies that did little or no work.</p><p>Vanecko and Davis had collected more than $480,000 in rent from City Hall when the Sun-Times exposed the warehouse deal in June 2009. City Hall moved the trucks, and Vanecko announced he would walk away from DV Urban. Vanecko never explained whether he sold his stake in DV Urban.</p><p>In 2012, the five pension funds fired DV Urban. That set off a series of court battles in Delaware and Illinois that remain ongoing.</p><p>The pension funds hired Newport Capital Partners to sell the properties DV Urban acquired, including the Pulaski warehouse — a task Newport’s owner Derrick McGavic says should wrap up by year’s end.</p><p>The pension funds are likely to end up losing 75 percent of the money they invested with Davis and Vanecko.</p><p>It’s unclear where all of the money the pension funds invested went.</p><p>When the city pension funds invested $68 million with DV Urban, Davis and Vanecko put up an additional $3 million. Because of that small stake, DV Urban gets a share of any money Newport recovers for the pension funds by selling off other properties that DV Urban purchased.</p><p>In addition, DV Urban collected $8 million over the years in fees for managing the pension funds’ money.</p><p>During the fall of 2013, Newport got three bids for the Pulaski warehouse, including a $5.4 million offer from PanCal Pulaski LLC, a joint venture between the California teachers pension fund and Panattoni Development of Newport Beach, Calif.</p><p>Panattoni began negotiating a deal with Thompson — an attorney with the firm Burke, Warren, MacKay & Serritella — to lobby City Hall for the project. At the time, Thompson was an elected member of Cook County’s sewage-treatment agency, the Metropolitan Water Reclamation District of Greater Chicago.</p><p>On Jan. 17, 2014, Newport agreed to sell the Pulaski property to PanCal.</p><p>And Thompson and his firm were soon hired to lobby city officials about land-use uses and the tax break.</p><p>Thompson also submitted an application to Cook County Assessor Joseph Berrios seeking a tax break — under what’s called the 6(b) incentive program—to lower the tax on the industrial property by as much as 60 percent over 12 years.</p><p>That application, which remains pending with Berrios, estimated that PanCal would spend $16.3 million on demolishing the warehouse, cleaning up the soil and building a warehouse before it had any tenants signed up to lease the property.</p><p>After Thompson got Ald. Rick Munoz (22nd), whose ward includes the Pulaski site, to support the tax break, PanCal Pulaski bought the property on July 31, 2014, for $5.4 million.</p><p>The pension funds didn’t get any money from the sale. Instead, $3 million went to settle the delinquent mortgage that DV Urban guaranteed.</p><p>Another $2.4 million went into a fund PanCal could tap to clean up the pollution, which included four leaking underground storage tanks, according to the Illinois Environmental Protection Agency.</p><p>“The remediation fund approach is common in transactions such as this, when it is known that there will be some environmental clean up work that will need to be done of the property being conveyed,” says William Bullen, executive director of real estate investments for Panattoni.</p><p>Bullen says the real estate purchase was handled by a law firm in Denver, not Thompson’s firm.</p><p>A month after the sale, Thompson announced he was running for alderman but remained registered as a lobbyist for PanCal during his campaign.</p><p>He was forced into a runoff election on Feb. 24, 2105 —the same day Mayor Rahm Emanuel’s planning commissioner submitted a report estimating that PanCal’s tax break would cost local governments about $4.1 million over 12 years, including a $690,000 loss for City Hall.</p><p>Thompson won election as alderman on April 7, 2015. A week later, the City Council approved PanCal’s tax break.</p><p>Thompson has ceased his lobbying activities at City Hall, though his law firm still represents PanCal.</p><p>PanCal sold the warehouse for $29.7 million on Dec. 11, 2015, to PRII Pulaski LLC, a company managed by Prudential Insurance. It now stands to benefit from the tax break Thompson secured, once it finds someone to lease at least half the space.</p><p><i><b>Contributing</b>: Data Reporting Lab editor Darnell Little</i><br></p>
https://chicago.suntimes.com/2016/10/9/18384221/daley-money-pit-little-village-warehouseTim Novak2010-06-28T06:00:53-05:002019-05-29T17:41:48-05:00Another deal goes sour for Daley nephew
<p>For the last three years, Mayor Daley’s nephew Robert G. Vanecko has been a frequent figure in the news.</p><p>First, when the Chicago Sun-Times revealed that five city pension funds gave him $68 million to investment in risky real estate deals.</p><p>Later, when a federal grand jury began investigating.</p><p>Now, Vanecko’s real estate deals are falling apart, records show, potentially jeopardizing the money he got from the pension funds representing Chicago’s police officers, teachers, city employees and CTA workers.</p><p>And it turns out that other Daley family members were involved in one of those soured deals — a plan to build condos next door to the mayor’s favorite South Loop restaurant, the Chicago Firehouse.</p><p>The restaurant, opened 10 years ago in a former city fire station, is next door to the longtime home of the National Association of Letter Carriers’ Chicago branch.</p><p>Three years ago, union leaders decided to sell their two-story building, hoping to turn a profit so they could build a new headquarters elsewhere in the city.</p><p>Several developers were interested. The best offer came from Vanecko and his business partner, mayoral ally Allison S. Davis. They wanted to put up a 32-story building — either condos or hotel rooms — on the property at 1411 S. Michigan Ave. and agreed to pay $8.5 million for the land once the union built its new headquarters at 3850 S. Wabash.</p><p>They gave the union a down payment — and advanced millions of dollars in city pension funds so the union could buy land and build its new home.</p><p>To date, Vanecko and Davis have given the union more than $4.5 million in city pension funds — including an $850,000 down payment, a “predevelopment commitment’’ advance of $400,000 and a $2.9 million line of credit, records show.</p><p>Last summer, Vanecko walked away from the company that he and Davis created, DV Urban Realty Partners, soon after a federal jury issued subpoenas to the company and the pension funds. Then, Davis and his son Jared Davis told the union they no longer wanted to buy the property — and they wanted the pension fund money back.</p><p>The union said no and filed a breach-of-contract suit last September in Cook County Circuit Court against DV 1411 South Michigan Avenue LLC, the company Vanecko and Davis had set up to develop the property. DV 1411 filed a countersuit in March.</p><p>“They’re trying to back out of the deal,’’ said Mack Julion Sr., president of the National Association of Letter Carriers. “They say they couldn’t get the zoning they needed, but they had ample time to do that. . . . They’re pretty much leaving us holding the bag.’’</p><p>Neither Davis nor Vanecko responded to interview requests.</p><p>Vanecko has been a source of public embarrassment for his uncle, the mayor, who said last summer that he’d been unaware of Vanecko’s deal with the city pension funds until he read about it in the Sun-Times.</p><p>“When I did find out, I made it very clear that it was not a good decision and that</p><p>he should end the business relationship immediately,’’ Daley said then. “But, as an adult, Bob made . . . a different decision, which led to a very painful string of news stories that have, indeed, caused tension in my family.</p><p>‘‘I love my nephew. It’s difficult for me to have my disappointment in him made public.”</p><p>While the economy has hurt the real estate investments made by Vanecko and Davis, it hasn’t kept them from collecting more than $4 million in fees from the city pension funds since 2007.</p><p>Davis, 70, and Vanecko, 44, set up their real estate investment company in November 2004. They asked a host of government pension funds and businesses, including Commonwealth Edison, to invest in DV Urban but were only able to persuade five city pension funds to invest a combined $68 million, which they said they would use to redevelop neglected neighborhoods in Chicago.</p><p>Their first deal closed in September 2006 — a 344-unit apartment building at 1212 S. Michigan with a $56 million mortgage and about $9 million in pension money.</p><p>Over the next year, Vanecko and Davis bought another apartment building in South Shore and invested in two office buildings, including the former Chicago Defender headquarters that’s now owned by Matthew O’Malley, who also owns the Chicago Firehouse restaurant.</p><p>Then, they struck the deal to buy the letter carriers building next door to the restaurant on Aug. 29, 2007, a month before the Sun-Times exposed Vanecko’s deals with the city pension funds.</p><p>“It was the best bid, in terms of dollars,’’ says Elvin Charity, the union’s attorney.</p><p>“We were real clear that we were looking for the highest bids and whatever support we could get from the developers to finance a new headquarters.”</p><p>To negotiate the deal, Davis and Vanecko hired the law firm of Daley & George, founded by the late Mayor Richard J. Daley and now headed by Michael Daley, the current mayor’s younger brother. Michael Daley’s son-in-law, Allan “Kelly’’ Ryan IV, worked the deal with Dennis Aukstik, ex-brother-in-law of William Daley, another of the mayor’s brothers.</p><p>The deal gave the letter carriers union three years to relocate to a new headquarters, a move it made last fall.</p><p>Davis and Vanecko agreed to obtain City Hall’s approval for their project, including “all necessary zoning,’’ within one year. But they never formally sought city permission to develop the property because Ald. Robert Fioretti (2nd) didn’t support the project, according to court records filed by Davis’ attorney Edward T. Joyce, a relative of the mayor’s longtime political adviser, Jeremiah Joyce.</p><p>“The alderman’s unresponsiveness was a clear indication to DV that its [planned development] application would not be approved,’’ Davis says in court documents, explaining why they never filed those applications with City Hall.</p><p>Where the two sides disagree is whether Davis and Vanecko failed to act in time.</p><p>The union says Davis and Vanecko missed their one-year deadline but still have to come up with the remaining money to buy the property.</p><p>Davis argues that, since they couldn’t get zoning approval, the deal should be off and they should get their money back.</p><p>Davis’ son Jared says they would still be interested in buying the property — if the union would lower the the $8.5 million price.<br></p>
https://chicago.suntimes.com/2010/6/28/18441636/another-deal-goes-sour-for-daley-nephewTim Novak2009-08-10T06:00:21-05:002019-05-29T17:41:31-05:00Daley’s nephew gets break from city pension funds, gets to kick in less money
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<p>When they started their real estate investment company three years ago, Mayor Daley’s nephew Robert Vanecko and his partners made a promise to five city of Chicago pension funds they were seeking as investors:</p><p><i>We’ll put $7 million of our own money into the deal to show we believe in our high-risk strategy of investing city retirees’ pension money in developing inner-city neighborhoods.</i></p><p>That assurance helped the startup venture known as DV Urban Realty Partners quickly land $68 million from the city pension funds.</p><p>But now it turns out that Vanecko and his partners — Chicago developer Allison S. Davis and his son Jared Davis — will put in just $3.5 million, half of what they initially promised.</p><p>Despite some concerns, the city pension funds quietly agreed to rework the deal with Vanecko and the Davises last August, making changes that financially benefitted the mayor’s nephew and his partners, recently subpoenaed records show.</p><p>Vanecko — whose dealings have come under scrutiny by the U.S. attorney’s office in Chicago and the city’s inspector general — personally lobbied city pension officials to rework the deal with his company, records show.</p><p>Three of the five pension fund boards voted on and approved the changes — funds representing police, laborers and municipal employees.</p><p>Each of those pension fund boards includes high-ranking members of the Daley administration who voted to approve the reworked deal.</p><p>The approval of just three of the five pension fund boards was needed. So once those three agreed, the pension funds for Chicago teachers and CTA employees didn’t even vote on the reworked deal with Vanecko’s company.</p><p>Which apparently was fine with CTA pension board executive director John Kallianis, who wrote in an Aug. 22, 2008, e-mail to his counterpart at the teachers pension fund: “I was hoping we could sit on the sidelines.’’</p><p>Vanecko’s negotiations with the pension fund officials are outlined in e-mails and other documents that a federal grand jury recently subpoenaed. Authorities are</p><p>looking into how the pension funds decided to invest with the mayor’s nephew, even though his new company had no track record; acknowledged that, despite potentially big payouts, its investment strategy was high-risk and had been turned down by six other government pension funds.</p><p>Two weeks after the grand jury subpoenas were issued, Vanecko announced in June he would leave DV Urban by July 1. Neither the company nor pension officials would say if Vanecko has indeed left the company he started with Allison Davis, a longtime Daley ally in the city’s African-American communities.</p><p>Davis formerly headed a small Chicago law firm whose staff once included a then-young attorney named Barack Obama.</p><p>“We are continuing our discussions with Mr. Davis regarding Mr. Vanecko. In light of those ongoing discussions, we do not believe it is appropriate at this time to comment,’’ said Michael Fishman, an attorney representing the three city employee pension funds that approved the reworked deal with DV Urban.</p><p>Fishman was hired by John Gallagher Jr., executive director of Chicago’s police pension fund, who led the negotiations to redo the deal.</p><p>Gallagher cited potential federal tax liabilities that he said the pension funds could face if DV Urban’s real estate deals ended up turning a profit by the time the deal expires in 2014. So far, DV Urban’s investments have fallen in value, which it has blamed largely on the recession.</p><p>The new deal gives one key new benefit to the pension funds: They are now guaranteed that they will get back all of their initial investment before DV Urban is paid any incentive fees.</p><p>Under the revisions, DV Urban would still be able to collect as much as $8 million in management fees from the pension funds.</p><p>It also gets an extra year to invest the pension money, a quicker return on its investment, and the halved requirement for investing its own money, to $3.5 million.</p><p>The subpoenaed records show the city pension fund managers had concerns about reducing DV Urban’s initial promise to invest $7 million.</p><p>“We want DV to have as much skin in the game as possible,’’ James Mohler, of the municipal employees pension fund, wrote in a July 21, 2008, e-mail to the executive directors of all five pension funds.</p><p>Fishman wrote in an email that same day that the reworked agreement is “a much better deal’’ for the pension funds because DV “gets no money until we get paid.”<br></p>
https://chicago.suntimes.com/2009/8/10/18377100/daley-s-nephew-gets-break-from-city-pension-funds-gets-to-kick-in-less-moneyTim Novak2009-06-09T06:00:49-05:002019-05-29T18:49:32-05:00Daley in turmoil over nephew’s deals: sources
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Robert G. Vanecko (left) and his uncle, former Mayor Richard M. Daley.</p></figcaption></div>
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<p>The tightly knit Daley family is struggling to solve an internal crisis caused by a nephew who they say refused to stop embarrassing his uncle.</p><p>Sources said Robert Vanecko was told nearly two years ago that his uncle, Mayor Daley, wanted him out of a risky real estate venture involving city employee pension funds. Another Daley nephew, Patrick Thompson, was given the same directive one week earlier — and promptly dropped out as an attorney representing the Children’s Museum at heated community meetings on the controversial Daley-backed plan to build a new Children’s Museum in Grant Park.</p><p>Unlike his cousin, Robert Vanecko ignored the mayor’s advice — apparently until this week.</p><p>Vanecko “has resigned as a general partner for DV Urban Realty,” according to an e-mail sent Monday afternoon to police pension board members from John J. Gallagher Jr., executive director of the pension fund. “A press release will be issued [today] about this resignation, and other than that, no further information was provided at this time.”</p><p>It was unclear whether Vanecko can get completely out of the pension-fund deals because of the collapse of the real estate market.</p><p>Meanwhile, the Daley family is stuck with a headline that won’t quit and a federal investigation into how DV Urban won $68 million in pension investments in the first place.</p><p>“It’s a terrible situation. Everyone wishes this wasn’t going on. In hindsight, it looks bad. And it’s obvious this is gonna continue,” said one family member, who asked to remain anonymous.</p><p>“It’s not easy watching your nephew being trashed. We all feel sorry for him. But he’s finding out what we all learned 30 years ago — that if you stay around [government] long enough, you’re gonna get burned.”</p><p>Sources said other family members have been trying for some time to persuade Vanecko to dissolve his partnership with developer Allison Davis because of the perception that Daley family clout landed the deal.</p><div class="Enhancement" data-align-center>
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</div><p>Vanecko told them he was in the process of getting out, sources said.</p><p>But that apparently didn’t happen until this week.</p><p>Mayor Daley was described as livid and distraught about the controversy but dead-set against touching off a family feud by publicly criticizing Vanecko, the eldest of Richard J. Daley’s 22 grandchildren.</p><p>In September 2007, the Chicago Sun-Times disclosed Vanecko had formed a partnership with Davis and persuaded city employee pension funds to invest $68 million with their start-up company.</p><p>Davis and Vanecko are guaranteed $8 million in management fees — $2.7 million of it paid so far — under the deal that expires in 2014.</p><p>They can also share in any profits from their real estate investments.</p><p>They’ve invested pension funds in eight Chicago properties, but that portfolio has declined in value.</p><p>Attempts to reach Vanecko and Davis were unsuccessful.</p><p>Mayor Daley has insisted he had no control over how city employee pension funds invest their money — or over the professional lives of his nieces and nephews. “It could be any business. They could be in real estate. They could be in development. They could be anything,” the mayor said.</p><p>Asked whether city pension funds should be making such speculative investments at a time when they’re saddled with unfunded liabilities, he said, “I am not on that board. They make decisions.”</p><p>Last month, a federal grand jury subpoenaed pension fund records after pension officials refused to comply with similar subpoenas issued by Inspector General David Hoffman. It’s Hoffman’s second joint investigation with federal authorities into Vanecko’s businesses.</p><p>The other involves the undisclosed ownership stake Vanecko and the mayor’s son, Patrick Daley, held in a sewer cleaning company that won millions of dollars in no-bid contract extensions from City Hall.</p><p>Vanecko and Patrick Daley have said they sold their investment in the company in late 2004. That’s when Patrick Daley enlisted in the Army and Vanecko forged his partnership with Davis.</p><p>Last week, the Sun-Times disclosed City Hall has paid nearly $500,000 in the last 15 months to lease space at a South Side site owned by DV Urban, which bought the land with city pension money.</p><p><b>Contributing: </b><i>Tim Novak, Chris Fusco</i><br></p>
https://chicago.suntimes.com/2009/6/9/18463487/daley-in-turmoil-over-nephew-s-deals-sourcesFran Spielman2009-06-04T06:00:34-05:002019-05-29T17:40:16-05:00More city money for Mayor Daley’s nephew Robert Vanecko
<p>City Hall has paid nearly $500,000 in the last 15 months to lease space at a South Side industrial site owned by Mayor Daley’s nephew and his partners, who bought the property with city pension money.</p><p>Daley’s nephew Robert Vanecko and his partners — Allison S. Davis and his son Jared Davis — used $4.2 million of the money they manage for five city pension funds to help buy the mostly vacant warehouse and surrounding land at 3348 S. Pulaski.</p><p>The city’s Water Management Department was among the few tenants in the building when Vanecko and his partners bought it Nov. 27, 2007. The city has continued leasing space there, apparently on a month-to-month basis.</p><p>That lease has become more lucrative under Vanecko’s ownership group, according to city records.</p><p>But Vanecko’s partners insist City Hall has the same deal with them as it did under the previous owner.</p><p>The city paid $480,408 to Vanecko and his partners between March 17, 2008, and May 26 of this year, according to records on the city’s website. That’s far more than the $50,026 the city paid the previous owner during all of 2006 and 2007, records show.</p><p>This is the second time in five years that a Vanecko-owned firm has taken over a city contract whose value then skyrocketed. The first time involved a sewer-cleaning company whose investors included Vanecko and the mayor’s son, Patrick Daley.</p><p>Vanecko’s deals with the city are under investigation by federal authorities and the city’s inspector general. Vanecko and the mayor’s son have hired a criminal defense attorney, Charles Sklarsky, to represent them.</p><p>Mayor Daley’s press secretary and city leasing officials didn’t return phone calls about the lease with Vanecko’s group. The city’s website contains no information about when the lease began, when it ends, the monthly rent and the amount of space the city is leasing.</p><p>The lease, however, was “modified” twice this year, records show.</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="Daley nephew Robert G. Vanecko’s deals with the city are under investigation. | Richard A. Chapman / Sun-Times" srcset="https://cst.brightspotcdn.com/dims4/default/9c874a0/2147483647/strip/true/crop/665x373+0+146/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FtUkYXJqtiy9jbeVa35xO7kPrqt0%3D%2F0x0%3A665x665%2F665x665%2Ffilters%3Afocal%28332x332%3A333x333%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16139818%2Fchapman_vanecko_5_7363175_e1536948099504.jpg 1x,https://cst.brightspotcdn.com/dims4/default/5dd570a/2147483647/strip/true/crop/665x373+0+146/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FtUkYXJqtiy9jbeVa35xO7kPrqt0%3D%2F0x0%3A665x665%2F665x665%2Ffilters%3Afocal%28332x332%3A333x333%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16139818%2Fchapman_vanecko_5_7363175_e1536948099504.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Daley nephew Robert G. Vanecko’s deals with the city are under investigation. | Richard A. Chapman / Sun-Times</p></figcaption></div>
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</div><p>Water department trucks frequently travel in and out of the industrial property, which also is home to a truck and bus repair company.</p><p>“Our 3348 South Pulaski Road location, which ultimately will be redeveloped or sold, still has two of the four original lessees, including the Department of Water Management of the City of Chicago, which has a month-to-month lease dating back to the previous owner,” Jared Davis said in a statement.</p><p>His father, Allison Davis, is a longtime City Hall insider and business partner of convicted political fixer Tony Rezko. Davis also once headed a law firm where President Obama worked.</p><p>DV Urban Realty Partners — the company Vanecko and the Davises created to manage $68 million in city pension funds — owns 90 percent of the 15-acre site. The rest is owned by Sydney Partners, whose principals include Anthony Burns and Jeff Josephs.</p><p>Together, they paid $10.5 million for the property. It’s one of eight Chicago real estate deals DV Urban has done with city pension funds, and it’s the only one in which the city is a tenant.</p><p>“The terms of the month-to-month lease that were negotiated by the former owner continue to be the same today as they were prior to us owning the building,” Josephs said in an e-mail. “No terms have been renegotiated or changed. The city continues to be a tenant on a month-to-month basis occupying less than 25 percent of the entire facility.”<br></p>
https://chicago.suntimes.com/2009/6/4/18435523/more-city-money-for-mayor-daley-s-nephew-robert-vaneckoTim NovakChris Fusco2009-05-30T06:00:26-05:002019-05-29T17:39:33-05:00Subpoenas for Mayor Daley’s nephew; feds eye $68 million in pension money
<p>City pension officials have been hit with subpoenas from a federal grand jury trying to determine how a start-up company co-owned by Mayor Daley’s nephew won $68 million in pension investments.</p><p>The grand jury issued the subpoenas Wednesday, nearly two months after city pension officials refused to comply with similar subpoenas issued by the city of Chicago’s inspector general, David Hoffman.</p><p>Hoffman said Friday that he and federal investigators are now jointly investigating the pension fund investments with DV Urban Realty Partners, a minority certified business co-owned by one of the mayor’s top African-American allies, Allison S. Davis, and Daley’s nephew Robert Vanecko.</p><p>This is the second joint investigation that Hoffman and federal authorities are conducting into Vanecko’s businesses.</p><p>The other investigation involves the hidden ownership stake Vanecko and the mayor’s son, Patrick Daley, held in a sewer-cleaning company that won millions of dollars in no-bid contract extensions from City Hall. Vanecko and Patrick Daley have said they sold their investment in the company in late 2004 when Patrick Daley enlisted in the Army and Vanecko went into business with Davis.</p><p>Hoffman began investigating Vanecko and Patrick Daley in the wake of Chicago Sun-Times investigations into the mayor’s son and nephew during the last two years.</p><p>Davis, 69, and Vanecko, 43, set up their company hoping to get money from public and private pension plans for real estate investments.</p><p>But they were rejected by several private and government pension plans until 2006, when the five city pension funds agreed to invest $68 million with them.</p><p>Davis and Vanecko are guaranteed $8 million in management fees — they’ve been paid $2.7 million so far — under the eight-year deal that expires Dec. 31, 2014.</p><p>They can also share in any profits from their real estate investments.</p><p>They’ve invested the pension funds in eight Chicago properties, but all of their real estate deals have declined in value, partly because of the recession.</p><p>Davis and Vanecko are also trying to prevent the loss of $7.9 million in pension funds they invested in a stalled project to build a Dominick’s grocery store and condos at 3030 N. Broadway. They have been feuding with the developers, Michael O’Connor and Jon Zitzman, and are trying to find people to buy out O’Connor and Zitzman at an auction set for June 5 in the law offices of Patrick Daley Thompson, another mayoral nephew.</p><p>City pension officials refused to comply with Hoffman’s subpoenas, arguing he had no authority to demand records from them.</p><p>The federal grand jury stepped in, demanding records from the pension plans for Chicago municipal employees, laborers, police officers and firefighters, even though the firefighters pension fund refused to invest any money with Davis and Vanecko.</p><p>The other two pension funds that invested with Vanecko and Davis — Chicago teachers and the CTA — haven’t received any subpoenas from Hoffman or the grand jury.</p><p> </p><p> <br></p>
https://chicago.suntimes.com/2009/5/30/18458099/subpoenas-for-mayor-daley-s-nephew-feds-eye-68-million-in-pension-moneyTim Novak2007-09-25T06:00:27-05:002019-05-29T17:39:07-05:00Don’t blame me, I don’t control him, Daley says of nephew’s city pension deals
<p>Mayor Daley said Monday he has no control over how city employee pension funds invest their money — or over the professional lives of his nieces and nephews.</p><p>One day after the Chicago Sun-Times reported that the mayor’s nephew stands to make millions by investing city-connected pension funds in a risky real estate venture, Daley tried to distance himself from the matter.</p><p>The mayor was asked whether city employee pension funds should be making such speculative investments at a time when unfunded liabilities could saddle generations of Chicago taxpayers with a debt they can’t handle.</p><p>“Well, they have to make their professional decisions. I am not on that board. They make decisions. Pension boards do that every day. Public and private pension boards have to make quality professional decisions — and that’s what they do,” Daley said.</p><p>The mayor was asked whether he would have preferred that his nephew, Robert Vanecko, not be involved with pension funds whose board members include members of the mayor’s cabinet.</p><p>“It could be any business. They could be in real estate. They could be in development. They could be anything. These are professional young men, and he’s going to make decisions,” Daley said.</p><p>Sun-Times investigative reporter Tim Novak reported Sunday that Vanecko formed a partnership with developer Allison Davis and convinced city employee pension funds to invest $68 million with their company, DV Urban Realty Partners.</p><p>Vanecko and Davis plan to use the pension money to redevelop some of Chicago’s most neglected neighborhoods.</p><p>Among those could be the area around Washington Park, site of a temporary Olympic stadium.</p><p>Since the April 2006 investment, the pension funds have lost $1.5 million on the deal, largely because of the $1 million in management fees paid to Vanecko and Davis. The partners are guaranteed at least $3 million in management fees and could make as much as $8.4 million before the deal ends on Dec. 31, 2014.</p><p>Davis and Vanecko will also share in any profits from the real estate deals — along with a 3 percent fee on property they develop.</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="Robert Vanecko, Mayor Daley’s nephew, has a partnership that will invest $68 million of city employee pension funds in a venture to redevelop some of Chicago’s most neglected neighborhoods. | Richard A. Chapman / Sun-Times" srcset="https://cst.brightspotcdn.com/dims4/default/d709072/2147483647/strip/true/crop/1024x575+0+54/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FEE936Wlr5P-cSH-OOlGMAK0yQ3E%3D%2F0x0%3A1024x683%2F1024x683%2Ffilters%3Afocal%28512x341%3A513x342%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16120719%2Fchapman_vanecko_6_7363179.jpg 1x,https://cst.brightspotcdn.com/dims4/default/39840c8/2147483647/strip/true/crop/1024x575+0+54/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FEE936Wlr5P-cSH-OOlGMAK0yQ3E%3D%2F0x0%3A1024x683%2F1024x683%2Ffilters%3Afocal%28512x341%3A513x342%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16120719%2Fchapman_vanecko_6_7363179.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Robert Vanecko, Mayor Daley’s nephew, has a partnership that will invest $68 million of city employee pension funds in a venture to redevelop some of Chicago’s most neglected neighborhoods. | Richard A. Chapman / Sun-Times</p></figcaption></div>
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</div><p><b>‘No one forced them’</b></p><p>Civic Federation President Laurence Msall said the deal underscores the fact that years of pension underfunding have resulted in riskier investments in hopes of producing a greater financial return.</p><p>Msall questioned whether pension fund managers have the necessary expertise to “evaluate such highly speculative real estate investments.”</p><p>“The role of the pension boards is to maintain and build assets for beneficiaries. If you run the risk of losing your principal as a result of your investment, it’s something that should only be undertaken after extraordinary examination and a full understanding of the rewards and risks,” Msall said.</p><p>“It also raises concerns that some members of the pension boards were not aware of the principals and the possible conflicts with city officials.”</p><p>Vanecko’s pension fund deal marks the second time in a week that a Daley nephew has been at the center of controversy.</p><p>Last week, the Sun-Times disclosed that another mayoral nephew, attorney Patrick Thompson, represented the Children’s Museum at a series of heated community meetings. Thompson promptly withdrew as the museum’s attorney to avoid being at the center of a conflict between Daley and downtown Ald. Brendan Reilly (42nd).</p><p>“The mayor has a lot of nieces and nephews in this town. Are they not allowed to work?” said a mayoral confidante. “He can’t keep tabs on what they’re all doing. Can you imagine what would happen if Uncle Rich started telling them, ‘You can’t do this. You can’t do that.’ ”</p><p>Referring to the pension deal, the source said of Daley, “I’m sure he would prefer that [Vanecko] didn’t do this kind of work. But [pension board members] had a choice. There was a vote. No one forced them to do it.”<br></p>
https://chicago.suntimes.com/2007/9/25/18405556/don-t-blame-me-i-don-t-control-him-daley-says-of-nephew-s-city-pension-dealsFran Spielman2007-09-23T06:00:59-05:002019-05-29T17:33:09-05:00Daley nephew’s risky pension business; mayor’s nephew cashing in
<p>A nephew of Mayor Daley stands to make millions of dollars from city-connected pension funds.</p><p>In winning business from pension funds for city workers, cops, teachers and CTA employees, Robert G. Vanecko said he never told anyone he’s Daley’s nephew.</p><p>But officials with those funds knew who he was, interviews and documents show.</p><p>Vanecko and his partner, Allison S. Davis, a top mayoral ally, also asked pension funds outside Chicago to invest with DV Urban Realty Partners, a company they formed two years ago. None did.</p><p>It’s a risky venture, Vanecko and Davis warned potential investors.</p><p>Still, the city-related pensions opened their checkbooks, giving DV Urban $68 million. They did so even as they face growing financial worries, according to a recent state study.</p><p>Vanecko and Davis plan to use the pension money in a real estate venture to redevelop some of Chicago’s most-neglected neighborhoods.</p><p>Among those could be the area around Washington Park, which is central to Daley’s plans for the 2016 Olympics.</p><p>The pension funds represent 180,000 retired and current employees.</p><p>So far, they’ve lost money on the deal — $1.5 million since they invested in April 2006.</p><p>That’s to be expected, pension officials say, because real estate deals typically make money only when the property is sold.</p><p>The biggest reason for those losses is the $1 million in management fees Davis and Vanecko have gotten from the pension funds. They’re guaranteed at least $3 million in management fees and could make as much as $8.4 million before the pension deal ends on Dec. 31, 2014.</p><p>Besides those fees, Davis and Vanecko also will share in any profits from the real estate deals. And they can earn a 3 percent fee on property they develop. And their management company is now running the only building they have purchased so far, a high-rise apartment building in the South Loop.</p><p>Davis and Vanecko declined to be interviewed by the Sun-Times but offered this statement:</p><p>“We are confident that DV Urban will produce good returns for its investors over its long-term investment horizon. Our investors have partnered with us because of our track record and our focus on urban revitalization in Chicago.’’</p><p>The Chicago pension funds defended their investments, saying they invested a small portion of their assets with a minority-owned company that aims to build up struggling city neighborhoods.</p><p>Davis, who is African-American, owns 51 percent of DV Urban. Vanecko owns 49 percent.</p><p>Vanecko said he never told potential investors he’s Daley’s nephew. “As a matter of practice, I don’t disclose this relationship,’’ Vanecko wrote in an e-mail to the Sun-Times. “He is my uncle. I don’t trade on his name.’’</p><p>The mayor had nothing to do with his nephew getting city pension business, Daley spokeswoman Jacquelyn Heard said: “He doesn’t do things like that. It’s just not his way.”</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="Mayor Daley’s nephew, Robert G. Vanecko wants to revive struggling Chicago neighborhoods with $68 million from city pension funds. He has<br>his eye on areas near his uncle’s proposed Olympic stadium. | Richard A. Chapman / Sun-Times" srcset="https://cst.brightspotcdn.com/dims4/default/238eec3/2147483647/strip/true/crop/541x304+0+119/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FIKe0daFuHDRqWDnEsSIZ3jpIJaQ%3D%2F0x0%3A541x541%2F541x541%2Ffilters%3Afocal%28270x270%3A271x271%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16151113%2Fchapman_vanecko_5_7363175_e1536948099504.jpg 1x,https://cst.brightspotcdn.com/dims4/default/198b313/2147483647/strip/true/crop/541x304+0+119/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FIKe0daFuHDRqWDnEsSIZ3jpIJaQ%3D%2F0x0%3A541x541%2F541x541%2Ffilters%3Afocal%28270x270%3A271x271%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16151113%2Fchapman_vanecko_5_7363175_e1536948099504.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Mayor Daley’s nephew, Robert G. Vanecko wants to revive struggling Chicago neighborhoods with $68 million from city pension funds. He has<br>his eye on areas near his uncle’s proposed Olympic stadium. | Richard A. Chapman / Sun-Times</p></figcaption></div>
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</div><p>One pension official worried that investing with Daley’s nephew could draw criticism. “This relationship may prove troubling in today’s climate where the press is looking to attack any politician but especially Mayor Daley,’’ Kevin Huber, executive director of the Chicago Teachers’ Pension Fund, wrote in a Sept. 26, 2005, e-mail to his board members.</p><h4>The first grandchild</h4><p>Bob Vanecko is the first of the late Mayor Richard J. Daley’s 22 grandchildren. He’s the son of Mary Carol Daley and Dr. Robert M. Vanecko, a former physician for a city pension fund that has invested with his son. Vanecko was raised in Chicago’s tony Sauganash neighborhood and lives there with his wife and children.</p><p>Vanecko, 42, has a bachelor’s degree in economics from Yale University and a law degree from Northwestern University. He began his career in the early 1990s at Mayer Brown, a Loop law firm where his uncle, William M. Daley, was a senior partner. Vanecko joined Everen Securities in 1998 and became a vice president in real estate banking.</p><p>In July 2003, Vanecko joined Davis’ small real estate development company, the Davis Group, according to a corporate biography they gave city planners. Davis</p><p>is an attorney-turned-developer who builds low-income housing with tax subsidies from the city, state and federal governments.</p><div class="Enhancement" data-align-center>
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<img class="Image" alt="Allison S. Davis and his business partner Robert G. Vanecko warned the city of Chicago pension funds they pitched to invest with them that “investors must be prepared to lose all or substantially all of their investment.” | Sun-Times files" srcset="https://cst.brightspotcdn.com/dims4/default/cab7e50/2147483647/strip/true/crop/588x330+0+203/resize/490x275!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FxNM7up1f8ikEoJe8M-MGob4H_74%3D%2F0x0%3A588x736%2F588x736%2Ffilters%3Afocal%28294x368%3A295x369%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16151114%2Fallisonsdavis_e1536948377863.jpg 1x,https://cst.brightspotcdn.com/dims4/default/87f225e/2147483647/strip/true/crop/588x330+0+203/resize/980x550!/quality/90/?url=https%3A%2F%2Fcdn.vox-cdn.com%2Fthumbor%2FxNM7up1f8ikEoJe8M-MGob4H_74%3D%2F0x0%3A588x736%2F588x736%2Ffilters%3Afocal%28294x368%3A295x369%29%2Fcdn.vox-cdn.com%2Fuploads%2Fchorus_asset%2Ffile%2F16151114%2Fallisonsdavis_e1536948377863.jpg 2x" width="490" height="275"
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<div class="Figure-content"><figcaption class="Figure-caption"><p>Allison S. Davis and his business partner Robert G. Vanecko warned the city of Chicago pension funds they pitched to invest with them that “investors must be prepared to lose all or substantially all of their investment.” | Sun-Times files</p></figcaption></div>
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</div><p>Davis, 68, has a long relationship with the Daleys. The mayor appointed Davis to the Chicago Plan Commission in 1991 while Davis was running a small law firm. It’s the law firm where Sen. Barack Obama worked.</p><p>Davis gave up his law practice in 1996 to become a developer. He continued to serve on the plan commission until last January, while collecting millions in city subsidies for his developments.</p><p>Among his real estate partners was Tony Rezko, the businessman now facing federal charges that he demanded kickbacks from companies seeking state business under Gov. Rod Blagojevich.</p><p>Davis often turns to the law firm of Daley & George, run by the mayor’s brother, Michael Daley, to help his projects win approval from City Hall.</p><p>Despite his clout, Davis ran into trouble earlier this year, when city inspectors accused him of failing to clean up sewage in his New Evergreen/Sedgwick Apartments near Cabrini-Green. Davis owns the building. His son runs it.</p><h4>‘Take your chances’</h4><p>Davis and Vanecko created DV Urban in 2004. They initially were aiming to raise $100 million, primarily from pension funds, to redevelop Chicago neighborhoods, including abandoned industrial sites.</p><p>It’s a risky, but potentially rewarding, business, they noted in their sales pitches. “Investors must be prepared to lose all or substantially all of their investment,” Davis and Vanecko said in written pitches to pension funds.</p><p>Part of the risky nature of the investment, they noted, was that DV Urban is a startup business with no track record for developing property. But they touted</p><p>Davis’ development experience, saying some of his projects provided a 34 percent rate of return.</p><p>They approached each of the state’s top government pension plans, except for the Illinois State Board of Investment, because Davis is a member of that board, an appointment made by Blagojevich, on Rezko’s recommendation.</p><p>The board invests pension funds for state employees, legislators and all judges.</p><p>At least six government pensions — including those representing Chicago firefighters, Cook County employees and downstate teachers — rejected DV Urban’s investment pitch.</p><p>“Pay your money, take your chances,” a pension official said of the Davis and Vanecko plan.</p><h4>Follow the leader</h4><p>Getting the first investor is critical for a startup company. It took about a year for DV Urban to get its first investor — the Chicago Teachers’ Pension Fund.</p><p>On March 17, 2005, the teachers’ pension board voted unanimously to invest $25 million, contingent on Davis and Vanecko meeting their $100 million goal.</p><p>When Davis and Vanecko fell short, they convinced the teachers’ pension fund to stick with the $25 million investment, offering a greater share of profits and lower management fees.</p><p>“I had not a clue that one of the partners was related to the mayor,” said Connee R. Fitch-Blanks, then-chairman of the fund’s investment committee.</p><p>She was among three board members who said they never knew they were investing with the mayor’s nephew. All 12 board members were notified of the relationship six months after they voted to invest with Vanecko’s company. That notification came in an e-mail from Huber, the pension fund’s executive director.</p><p>“There is an additional issue that I feel needs to be shared with the trustees concerning this investment,” Huber said in the Sept. 26, 2005, e-mail. “One of the principals of DV Urban, Bob Vanecko, is Mayor Daley’s nephew.”</p><p>Huber asked board members if they wanted to reconsider the investment with Vanecko’s company because it carries “potential political risk” in addition to its “significant investment risk.”</p><p>They went ahead anyway. And other pension plans followed:</p><p>• On May 17, 2005, DV Urban got $10 million from the Laborers’ Annuity and Benefit Fund, which represents about 6 percent of City Hall employees. The fund’s board voted 5-0 to approve the investment.</p><p>Those voting for the deal included two members of Daley’s administration — then-city Comptroller Tariq Malhance and then-city Treasurer Judy Rice, both who were originally appointed to their jobs by the mayor. Also voting for the deal was John Briatta, a city Water Department dispatcher who’s a brother-in-law of Cook County Commissioner John Daley, another brother of the mayor. Briatta is now in prison after pleading guilty to passing bribes in the Hired Truck scandal.</p><p>• On Feb. 23, 2006, DV Urban got $3 million from the CTA pension fund.</p><p>• On April 20, 2006, DV Urban got $15 million from the Municipal Employees’ Annuity and Benefit Fund, which represents about 60 percent of City Hall workers.</p><p>The motion to invest came from pension fund board member Steve Lux, who is also the city comptroller, appointed by Daley.</p><p>Rice, the city treasurer, seconded the motion. It passed 5-0.</p><p>“I acted in the best interests of pension fund participants and beneficiaries, as well as Chicago residents,” Rice, now a Harris Bank official, said in an e-mail.</p><p>“In the case of DV Urban, the investment was meant to provide benefit in two ways — first and foremost, we expected a high level of return for pension fund participants over the life of the investment.</p><p>Secondly, we saw great benefit in growing pension fund returns while promoting real estate development in underserved areas of the city.”</p><p>• On April 25, 2006, DV Urban got its final investment, $15 million from the Chicago Policemen’s Annuity and Benefit Fund. On a motion from fund President Dana</p><p>Levenson — who was then the mayor’s chief financial officer — the board voted 7-1 to invest with DV Urban. Among those voting “yes” were Lux and Rice.</p><p>Three days later, DV Urban set up a $75 million investment fund — including $68 million from the pension funds and $7 million from</p><p>Davis and Vanecko, who originally planned to invest just $2 million of their own money.</p><p>If DV Urban’s real estate deals fail, pension officials say Davis and Vanecko could lose $7 million.</p><p>They still would get the millions in management fees from the pension funds.</p><h4>The first deal</h4><p>So what have Davis and Vanecko done with the money?</p><p>They made their first real estate deal last September, with about $9 million in pension funds and a $56 million mortgage to buy a 344-unit apartment building at 1212 S. Michigan. They set up another company to run it.</p><p>This building gave Davis and Vanecko control of the only two corners that can be developed at the intersection of Michigan Avenue and Roosevelt Road. In a separate deal not involving pension money, Davis and Vanecko are building a 46-story condo tower at 1160 S. Michigan on land they bought from City Hall.</p><p>DV Urban has also put pension money into two other deals:</p><p>• A $1 million loan to a company that owns the former Chicago Defender headquarters at 2400 S. Michigan. The owners include Matthew A. O’Malley, a restaurateur who had a baby with a top Chicago Park District official during negotiations to operate the Park Grill restaurant on prime land in Millennium Park.</p><p>• A West Loop office building at 217 N. Jefferson. DV Urban declined to reveal the amount of money invested in the project.</p><h4>Olympic dreams?</h4><p>DV Urban has other plans involving major City Hall projects, according to documents and emails Davis and Vanecko sent to pension officials.</p><p>They’re looking at investing in two Chicago Housing Authority developments that Davis is building as part of Daley’s plan to replace high-rise housing projects.</p><p>Davis is a partner in the redevelopment of Stateway Gardens, at 39th and State. “Subsequent phases of this $400 million development may provide financing opportunities for our new fund,” according to a Dec. 16, 2005, e-mail Vanecko sent to pension officials.</p><p>Vanecko mentioned another CHA project in an Oct. 2 e-mail to pension officials: “We have been selected . . . as the developer of the remainder of the Lakefront Properties site between 39th and 43rd Streets and Lake Park Ave. This project will create a mixed-income community on a former CHA site and consists of 269 units of housing, including CHA replacement, affordable and market-rate units.”</p><p>Davis and Vanecko also told police pension officials that they’re looking at projects in South Side neighborhoods around Washington Park — where Daley plans to build a temporary stadium if Chicago is chosen to host the 2016 Olympics.</p><div class="Enhancement" data-align-center>
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</div><p> </p><h2>Taxpayers on hook for city employee pensions</h2><p>For every dollar the city of Chicago collects in property taxes, about 47 cents goes toward pensions — for police officers, firefighters, garbage collectors and other city workers.</p><p>The amount of money in those funds is growing, but not as fast as the amount needed for current and future pensions.</p><p>These pension funds are invested in a variety of ways. How well those investments perform matters to taxpayers, as well as future retirees: If the investments</p><p>fare poorly, taxpayers could end up paying more in taxes.</p><p>Three of the four city pension funds have invested in a “highrisk/high-return’’ real estate company co-owned by Mayor Daley’s nephew Robert G. Vanecko. The only one that didn’t invest was the Chicago firefighters pension plan.</p><p>Vanecko’s company also got investments from the Chicago</p><p>Teachers Pension Fund and the CTA Employees Retirement Plan.</p><p>In a potential sign of trouble down the road, each of the pension funds — like most public pensions these days — faces a widening gap between its assets and the amount of money it expects to ultimately have to pay retirees.</p><p>Their investments are growing, but not as fast as the anticipated future pension payouts.</p><p>The CTA fund is in the worst shape of any public pension plan in Illinois, according to a recent state report.<br></p>
https://chicago.suntimes.com/2007/9/23/18462511/daley-nephew-s-risky-pension-business-mayor-s-nephew-cashing-inTim Novak