Opinion ID: 712197
Heading Depth: 2
Heading Rank: 2

Heading: The Schemes of Corruption

Text: 15 The evidence presented at trial, including extensive testimony from Nicholas LoBue, revealed that Mayor Panici, Commissioner Gliottoni, and Commissioner Marshall abused their positions for personal financial gain while serving in public office. 16 In 1976, many residents of Chicago Heights complained of a rust coloring in their drinking water, due to soluble iron present in the well water. To combat this rust color, the city contracted with Gulf Coast Laboratories, a local chemical company. Gulf Coast supplied the city with tri-polyphosphate (commercially known as Tri-Lux), a chemical that reacts with iron particles in the drinking water and eliminates the discoloration. However, Gulf Coast's agreement to supply the city with Tri-Lux included illegal payoffs to city officials. 17 At trial, Donald Gipple, the owner of Gulf Coast Laboratories, and Nicholas LoBue testified that the bribery scheme operated as follows. From 1977 to 1979, the city ordered shipments of 35,000 pounds of Tri-Lux from Lobue's company, A.A. Arken. However, instead of delivering 35,000 pounds of Tri-Lux, A.A. Arken arranged for the private delivery of only 24,000 pounds of the chemical from Gulf Coast. The city paid Arken for the full 35,000 pounds; Arken paid Gulf Coast for only 24,000 pounds; and LoBue, the owner of Arken, retained the difference and distributed the overpayment between Panici, Gliottoni, himself, Ralph Galderio, and a friend of LoBue's, Mike Constabile. From 1977 to 1979, the city ordered the delivery of Tri-Lux three or four times a year, and the distributed pay-off on each delivery amounted to between $700 and $1000 per person. 18 In 1979, LoBue joined Panici's Concerned Citizens ticket and was elected to the city council, replacing another commissioner. To avoid exposure of the Gulf Coast arrangement, LoBue wrote a letter to the city council claiming that he could no longer sell Tri-Lux to the city because of his conflict of interest. At trial however, LoBue admitted that the letter was a sham and that he met with Gulf Coast officials and arranged to continue the over-billing and kickback scheme. As a result of LoBue's arrangement with Gulf Coast, the city began ordering shipments of Tri-Lux directly from Gulf Coast, bypassing Arken. The overpayment on each of these shipments was between $5,700 and $6,900. 19 In 1979, the city council was considering awarding a contract to provide cable television to the city and, according to city procedure, the council solicited bids from cable television companies. Mayor Panici advised LoBue that he and Gliottoni would be taken care of if they would vote to award the contract to Telecommunications Inc., a franchise owned by Panici's acquaintance. In a city council vote of May 1981, LoBue and Gliottoni voted as Panici had requested and each of them in turn had their palms greased with a $35,000 payoff. 20 In 1977, Marty Wondaal owned Fitzpatrick Brothers Disposal, a garbage disposal business, managed by Charles Fitzpatrick. Fitzpatrick Brothers Disposal submitted a bid for the 1977 residential trash pickup contract with Chicago Heights. Although Fitzpatrick Brothers was the low bidder, Commissioner Gliottoni told Charles Fitzpatrick that in order to secure the contract, the company would have to make a payoff. Marty Wondaal refused and the contract was awarded to another disposal company. 21 In 1980, Fitzpatrick Brothers again bid for the residential trash pickup contract, except this time the company made the payoff and was awarded the three-year contract. It was agreed that the first payment would be made to Don Prisco, the mayor of the neighboring city of South Chicago Heights and a close friend of the defendant Panici. Prisco gave the money to Panici, LoBue and Gliottoni. Altogether, Panici, LoBue, Prisco, and Gliottoni received $20,000 to $30,000 on the residential trash pickup contract. 22 In the early 1980s, Fitzpatrick Brothers bid on the residential trash pickup contract for 1983 to 1986, and was awarded it. Soon after the contract was awarded to Fitzpatrick Brothers, Albert Tocco, a Chicago Heights organized crime figure, see United States v. Crockett, 979 F.2d 1204 (7th Cir.1992), cert. denied, 507 U.S. 998, 113 S.Ct. 1617, 123 L.Ed.2d 176 (1993), bought the company from Wondaal, after threatening Wondaal with violence to accomplish the sale. In return for the residential trash pickup contract, Tocco agreed to kickback $900 a month to LoBue and Panici. 23 In 1984, the city council voted to increase garbage disposal service from weekly pickups to twice-weekly pickups and doubled the contract payment to Tocco. Accordingly, Tocco's kickback increased from $900 to $1800 per month. To hide the increased payoffs, A.A. Arken, LoBue's company, billed Tocco's garbage disposal company $1800 a month for pest control services at Tocco's company, which were never provided. LoBue deposited Tocco's payoff checks in the Arken company account and then endorsed a check payable to himself for $1800, giving $900 to Mayor Panici. 24 In 1980, Charles Fitzpatrick and Wondaal decided to form a corporation named Fitz-Mar, in hopes of securing a contract with Chicago Heights to operate the city's landfill. Fitzpatrick and Wondaal met with Don Prisco and negotiated the amount of payment required to secure the contract. Prisco informed them that 10 percent of the total revenues would be paid to the city, as legitimate royalties, and 10 percent would be paid to the boys, in addition to a $20,000 payment up front. Although the Fitz-Mar company had no experience in operating land-fills, the city council awarded them the contract. Accordingly, Wondaal made the payoff with one-ounce gold coins, delivering them to Prisco who in turn gave them to Lobue. Under Panici's instructions, Lobue divided the gold coins among Panici, LoBue, Galderio, and Ernie Molyneaux, an individual on the landfill recommendation commission. After the initial payoff, Wondaal made monthly cash payments to LoBue, and they were divided among LoBue, Panici, and Prisco. 25 Wondaal fell behind in his payoffs, until he was $68,000 arrears in payments to the boys. Unrelated to the extortion, concerns arose that the landfill was leaking toxins into the drinking water, and the Environmental Protection Agency ordered the shut down of the landfill operation and brought in a consulting engineer to address the problem. At that time, Mayor Panici told LoBue that the landfill would not reopen unless and until Wondaal brought his payoffs up-to-date. Wondaal paid $30,000 as directed in gold coins to comply with his illegal agreement, with 50 percent going to Mayor Panici, and 25 percent each to Prisco and LoBue. 26 In 1981, a tavern owner in Chicago Heights requested that the hours of his liquor license be extended. Mayor Panici, as head of the liquor commission, was responsible for the control of liquor licenses, including the extension of hours of operation. The tavern owner was instructed by a friend of LoBue, John Graham, to write a letter to Mayor Panici and enclose a $4000 cash payment, which he did; the extension of the operating hours was granted. Graham, LoBue's friend, gave the cash to Ralph Galderio, and the money was split between Panici, Galderio, and LoBue and used to finance a trip to Las Vegas. At trial, city records for the granting of extended hours were produced and reflected only a receipt of $750, the standard fee. 27 In 1983, the city decided to construct a pipeline to carry water from Lake Michigan, rather than drawing it from local wells. The cost of the project was projected to be $14 million and was to be funded by a bond issue. According to LoBue, the city's retained legal counsel, Jim Creswell, overbilled his time in preparing the bond issue, and split the difference between himself, Panici, and LoBue. 28 Robinson Engineering, a local firm headed by Dante DeSantis, joined with a number of contractors to form a joint venture to secure the contract. Mayor Panici instructed LoBue that there was a need for a kickback from the project, up to 1 or 2 percent of the contract. LoBue met with DeSantis, who spoke with the other contractors and they all agreed to make a combined payment of $100,000 to the city council. LoBue testified that when Louise Marshall became aware of the arrangement, she contacted him and inquired about the payoffs because the project came under the control of the department she supervised, the water department. Mayor Panici instructed LoBue that the payoffs would be split among Panici, LoBue, Gliottoni, and Marshall. DeSantis delivered the money in cash to LoBue, who in turn delivered $25,000 to each of the commissioners at their homes, as well as to Marshall at her home. 29 According to the testimony of LoBue, the water meters located in an older section of Chicago Heights were underground and in parkways, making them inaccessible and difficult for city workers to read and service. (Tr. at 910). In 1983, the water department determined that the water meters would have to be excavated, replaced, and made more accessible by attaching them to the individual homes. Eugene Wuest, the owner of a plumbing company, prepared a bid and met with LoBue, who advised Wuest that 12 percent of the gross contract would have to be kicked back and split four ways. Wuest agreed and began work, submitting periodic invoices to the city for payment. Wuest then returned 12 percent of the city's payments to LoBue, who split the proceeds with Mayor Panici, Gliottoni, and Marshall. The project continued on for several years and the kickbacks totalled approximately $80,000. 30 In the summer of 1989, when the water-meter project was nearing completion, Wuest realized that there was a need for additional work to complete the project and he approached Marshall concerning the problem. According to Wuest, Marshall instructed him to do the work and bill the city as miscellaneous meter work, but that he should make the kickback payments directly to her and not to LoBue because she hadn't gotten a fair share or a share in the past. Wuest did the work, billed the city, and gave the entire 12 percent ($9,763.60) kickback to Marshall. After delivering the payoff to Marshall, Wuest told her that there was additional water work to be done and Marshall instructed him to finish the project, bill the city, and kickback 7 percent to her. 31 In 1984, Curtis Schultz approached LoBue and inquired whether he might broker a health insurance contract to cover the city's employees. Schultz told LoBue that he earned 7 percent commission on premiums paid. LoBue told him that he would have to kickback 25 percent of the commissions to LoBue. LoBue took the proposal to Mayor Panici, who agreed and presented the health insurance proposal to the city council who awarded the insurance contract to Schultz. Schultz made the annual payoff, commencing in November 1984 with the writing of a check to cash, delivering the proceeds to LoBue. The kickback was approximately $9000, split between Panici and LoBue. After three years, Schultz suggested that the city switch to an HMO healthcare provider, and the city council approved. The payoffs continued until March 1991. 32 In 1989, the city acquired a federal government subsidized, low-income apartment complex in Chicago Heights. Although Commissioner LoBue was in charge of it, LoBue testified that Mayor Panici made all the decisions regarding the complex. An outside management firm, BNR Management owned by Rod Costello, a cousin of LoBue's, was appointed to manage the apartments on a day-to-day basis. 33 Sixty days after Costello took over management of the complex, he was approached by LoBue who told him that Panici and Gliottoni had demanded a $10,000 payoff. Although Costello initially balked at the proposition, he stated that because he was afraid of losing the account he made the payoff. Costello testified that two weeks after the payment he came in contact with Panici at a local restaurant and Panici advised him to Do what we want or you're gonna have more trouble. Costello also stated that Panici interfered with the management of the apartments and made employment decisions, including replacing the security firm Costello had hired and putting Ralph Galderio on the payroll as a Rehabilitation Coordinator and Code Enforcement Officer. Costello testified that Galderio in fact performed no duties, other than to run a weekly bingo game.