(Published Sept. 25, 2007)
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.
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.
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.
“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.
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.
“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.
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.
Vanecko and Davis plan to use the pension money to redevelop some of Chicago’s most neglected neighborhoods.
Among those could be the area around Washington Park, site of a temporary Olympic stadium.
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.
Davis and Vanecko will also share in any profits from the real estate deals — along with a 3 percent fee on property they develop.
‘No one forced them’
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.
Msall questioned whether pension fund managers have the necessary expertise to “evaluate such highly speculative real estate investments.”
“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.
“It also raises concerns that some members of the pension boards were not aware of the principals and the possible conflicts with city officials.”
Vanecko’s pension fund deal marks the second time in a week that a Daley nephew has been at the center of controversy.
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).
“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.’ ”
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.”