From the Chicago Sun-Times
Donor to gov reaps state contracts
July 11, 2004
BY CHRIS FUSCO, LORI RACKL AND DAVE MCKINNEY Staff Reporters
An investment banking executive at the heart of kickback allegations over hospital
construction in Illinois has ties to a politically connected company that has
been reaping millions of dollars in state business, records show.
The wife of Bear Stearns senior managing director Nicholas Hurtgen owns a 3.5
percent stake in Knight Infrastructure, a Chicago architectural and engineering
firm that has made political contributions to Gov. Blagojevich, including nearly
$30,000 in free airplane flights. Since the governor took office last year,
the firm has won many state contracts, including work for the tollway and the
University of Illinois at Chicago.
Hurtgen has not been charged with any wrongdoing, though federal prosecutors
are looking into whether he conspired with a member of a state hospital planning
board to steer financial work to Bear Stearns.
A Republican state senator who voiced concern about the board's votes earlier
this year called the connections among Hurtgen, Knight, Bear Stearns and campaign
cash to Blagojevich "amazing." They raise questions about whether
Blagojevich was rewarding contributors, she said.
"I never assumed all this would be in front of the governor's home, much
less at his door," said Sen. Pamela J. Althoff (R-McHenry). "The thing
that raises eyebrows is all of these relationships are now coming to light."
Hurtgen's wife owns her share of Knight through a trust, with the majority of
stock held by Kim B. Fox and Fox Capital Fund. Kim Fox is the wife of Peter
Fox, Hurtgen's friend and predecessor in Bear Stearns' Chicago office.
Both Hurtgen and Fox have strong ties to Republicans. Fox, a prominent real
estate developer in Downstate Champaign, worked for the Department of Commerce
and Community Affairs under Gov. Jim Thompson. Hurtgen, of Glencoe, was a top
aide to former Wisconsin Gov. Tommy Thompson, who is now President Bush's health
and human services secretary.
Those GOP ties haven't stopped Hurtgen and Fox from forging relationships with
Blagojevich, a Democrat.
Between Oct. 3, 2002, and Dec. 17, 2002, Knight Infrastructure provided Blagojevich
with $29,726 in free flights on a private plane. Fox, through another company,
contributed $10,607 to provide transportation for "political supporters,
contributors and campaign staff" on Aug. 12, 2003, the governor's campaign
finance records show.
Knight and people who own stock in the company have given $31,500 to the governor,
with some of the cash coming during a June 5, 2003, fund-raiser Fox hosted for
Blagojevich.
Cheryle Jackson, Blagojevich's press secretary, said the governor did not know
Hurtgen had a connection to Knight until recently. She defended the company's
work on state projects and said Blagojevich has no plans to return the campaign
cash unless it's proved the company did something wrong.
"If Knight has done anything wrong, then they should be investigated like
anyone else," Jackson said.
"Hurtgen also worked for Tommy Thompson. Does that mean we should not do
any business with the Department of Health and Human Services?"
Still, the June 5 fund-raiser for the governor at Fox's house raised eyebrows
because it came in the wake of state lawmakers' signing off on a $10 billion
pension bond deal that Blagojevich pushed through the Legislature. The bond
sale happened the same day as the fund-raiser, with Bear Stearns being the lead
underwriter and netting $8 million in fees.
A federal whistleblower lawsuit filed May 24 under seal -- but obtained by the
Chicago Sun-Times -- suggests that Bear Stearns might have obtained the pension
work "through kickbacks and illegal payments."
The state's inspector general -- at the governor's request -- has launched a
separate investigation into the pension bond deal, which Blagojevich and Bear
Stearns officials have insisted was aboveboard. A Bear Stearns spokeswoman has
declined to comment on Hurtgen's status with the company.
Meanwhile, Knight continues to be a contractor for the state on big-ticket projects.
Catherine Hurtgen's name is listed on company ownership documents obtained by
the Sun-Times, but a source familiar with the firm said she is not active with
the business. Nicholas Hurtgen, however, has been spotted at some of its meetings.
In January, the governor announced that Knight will be the construction manager
for the state's new $30 million World Shooting Complex, which is under construction
in Downstate Sparta and is set to open in 2006.
Knight also won a $2.25 million contract with the tollway in April to design
and inspect work on the Northwest Tollway. It continues to work under a long-standing
tollway contract that could pay it as much as $4.7 million for reconstruction
of oases.
Knight has also won jobs with the state's Department of Transportation, Capital
Development Board and UIC, records show.
Fox is a managing partner of Fox/Atkins Development LLC, which is developing
the University of Illinois Research Park under an agreement with the state.
Telephone calls to the Hurtgens, Foxes and Knight executives were not returned.
2 contributors named to panel soon afterward
Two members of the Illinois Health Facilities Planning Board made sizable political
donations last year to Gov. Blagojevich, who appointed them to the panel about
two weeks later.
Dr. Michel Malek, a Kankakee neurosurgeon, gave $25,000 to Blagojevich during
a July 25, 2003, fund-raiser, records show.
That same day, Blagojevich received a $25,000 donation from Foot & Ankle
Clinics of America. The clinic's founder and CEO, according to its Web site,
is Fortunee Massuda, a podiatrist who was appointed to the planning board, along
with Malek, last August.
Neither Malek nor Massuda returned calls.
A key Blagojevich fund-raiser, Tony Rezko, played a role in recommending appointees
to the board. But a spokeswoman for the governor said Blagojevich "had
no knowledge of either contribution" and insisted the donations didn't
influence the governor's decision to put them on the nine-member panel.
"These people were selected on their merits," Blagojevich spokeswoman
Cheryle Jackson said.THE SCANDAL SO FAR
Alleged hospital kickbacks: In a federal whistleblower lawsuit filed May 24,
Edward Hospital in Naperville said it was assured approval of a new hospital
and medical office if Edward hired Kiferbaum Construction Corp. as its contractor
and Bear Stearns & Co. to underwrite $200 million in bonds.
Edward balked, and the Illinois Health Facilities Planning Board all but killed
the project. A hospital that agreed to use both Bear Stearns and Kiferbaum saw
its plan approved, the suit claims.
The suit names Bear Stearns senior managing director Nicholas Hurtgen, construction
magnate Jacob Kiferbaum and former planning board member Stuart Levine, who
resigned last month.
Bond fraud? The suit suggests Bear Stearns might have become the lead underwriter
for a $10 billion pension bond deal last year "through kickbacks and illegal
payments." Bear Stearns vehemently denies the charges.
Conflicts of interest? Health facilities board Chairman Thomas Beck has done
consulting work for Bear Stearns, and his son works for the company. Another
board member, Bernard Weiner, and his son made more than $1 million in insurance
commissions from hospitals with business before the board.
The feds: Federal investigators have subpoenaed several members of the Illinois
Health Facilities Planning Board, as well as records from the agency. No criminal
charges have been filed.
The fallout: House Speaker Michael Madigan (D-Chicago) has introduced legislation
to fire the board. Gov. Blagojevich last week put a halt to planning board activities
and said the panel should be revamped with all new members