License deal tied to graft, file says

From the Chicago Tribune

License deal tied to graft, file says
By James Janega
Tribune staff reporter
Published January 6, 2005
For an example of the alleged graft during George Ryan's tenure as secretary of state, look no further than the annual registration stickers found on Illinois license plates.
According to a document from the U.S. attorney's office unsealed this week in Chicago, a lobbyist and friend of George Ryan's approached the Chicago firm that made the decals and suggested it could lose its contract if the firm failed to hire him.
The same friend--Lawrence Warner--then warned state employees that Ryan would be angry if they failed to continue contracts with the company he now represented, the document said. Ryan later allegedly made phone calls on Warner's behalf.
Thus did the former American Decal and Manufacturing Co. keep a contract with the secretary of state's office to print license plate renewal decals, federal prosecutors say.
In a 2000 indictment, Warner is said to have made more than $3 million in corrupt deals with the state, including the one involving ADM.
In 114 pages, federal prosecutors lay out much of their case against the former governor during his time as secretary of state in the 1990s. But in a tale of greed that reads like a primer on how to commit a shakedown, pages 19 to 37 show what it allegedly took to do business with the secretary of state's office.
ADM held the $1 million annual contract to print the decals for 12 years, but did not hire a lobbyist before Ryan became secretary of state. Things got more complicated in the spring of 1991, months after Ryan took office, when Warner called ADM president Thomas O'Brien "out of the blue," according to the new federal court document.
The document alleges that by way of introduction, Warner said he was "close friends" with the incoming secretary of state--while also falsely claiming to ADM that its principal competitor, 3M of Minnesota, had an inside track to have ADM's decal-contracting specifications rewritten so as to shut ADM out in the future.
"Warner offered to provide his assistance to ensure that did not happen," the document alleged. "Warner assured O'Brien that with his connections, he could guarantee the specs would not change and thus that the contract would stay with ADM."
His fee: $2,000 a month, starting immediately, according to the filing. More was promised in writing on July 17, 1991, when O'Brien further agreed the fee would increase to $3,000 a month the following year, the document said.
The filing said Warner then called ADM with an offer for another state contract the next month: to produce the laminated security strips for vehicle titles. Until then, 3M held the contract.
"Prior to Warner's involvement, that contract was not a piece of business ADM was pursuing," said the federal document, known officially as a Santiago proffer.
In advising ADM to seek the second contract, Warner said he could make the $250,000-a-year deal happen if ADM could find an additional $67,000 upfront--$33,500 in two payments in August and September 1991, the filing said.
ADM agreed to pay extra for a chance at the second contract, and the laminate specifications were changed in its favor that fall, allowing ADM to get the work, the filing said. The company, formerly of 4100 W. Fullerton Ave., kept both contracts throughout Ryan's tenure as secretary of state.
Pressure tactics alleged
Pressure from Warner and Ryan also was applied to secretary of state employees, the proffer alleged.
In April 1991, Ryan appointed James Covert to head the secretary of state Department of Vehicle Services, which oversees vehicle licensing. Warner first visited Covert in May 1991, according to the filing.
Warner told Covert that he was "very close" to Ryan, that he was getting money as a lobbyist from ADM and that Covert's office should continue doing business with ADM, the document alleged. He also suggested to Covert that the Department of Vehicle Services should stop doing business with 3M, the filing said.
Warner told Covert to meet with him and Don Udstuen, another longtime Ryan friend and adviser, about "new initiatives" coming out of Covert's department, the filing said. Covert was told to bring several items to the meeting, "including samples of the SOS title laminates and a copy of ... an internally prepared roadmap of initiatives that Covert and several members of his staff had prepared and which was not publicly disseminated," the proffer said.
During his initial meetings with Warner, Covert simply agreed with Ryan's friend, assuming that Warner spoke with Ryan's voice, the document alleged.
When Warner brought Covert to ADM's facility on West Fullerton in July 1991, he allegedly announced to ADM's O'Brien that Covert was "on the team."
Yet apparently, Warner's team was his own.
In September 1991, he told Covert to be "evasive" in discussing new contracts with O'Brien "so that Warner could try to get more money out of ADM regarding any potential new business with the SOS," the federal document alleged.
By early 1993, Covert had become uncomfortable with what Warner was doing and stopped returning Warner's phone calls, according to the filing.
Crossing Warner allegedly led to a series of calls from the secretary of state in 1992 and 1993, beginning with a call from Ryan to Covert with four words of advice: "Warner is your friend."
One of the last calls from Ryan came when Covert opened the license sticker contract to competitive bids, the filing said. Though an internal review in April 1993 determined the move would save Illinois money, Ryan allegedly "indicated he was unhappy with the change."
Change in ownership
In late 1992 when ADM was sold, the first of many times the company changed hands, the government alleged Warner saw opportunities to ask for more money.
When John Koepke was named interim president of the company, Warner allegedly appeared in March 1993, mentioned his friendship with Ryan, his non-negotiable $3,000 monthly fee, and the precariousness of ADM's decal contract.
In February 1994, after another sale of ADM, Warner threatened to scuttle ADM's license decal contract unless he was paid $5,000 a month, the filing said. The company's new executives balked.
When Jim Motter became president two months later, Warner allegedly called within weeks. He repeated the $5,000-a-month demand, retroactive to the beginning of 1994, the filing said. "Motter decided to capitulate," the proffer alleged.
In April 1998, recognizing ADM's cash flow problem along with his own, Warner asked for $8,000 a month, the filing said. He offered the company new help with a state contract to print temporary registration permits, the filing said.
According to the filing, Aristotelis Mpougas, who bought the company in September 1998, also soon got an $8,000 monthly demand from Warner as ADM faltered on producing registration stickers--its biggest contract.
On Oct. 8, 1998, Warner quit over ADM's inability to pay his monthly fees, the filing said.
Within a year, Ryan left the secretary of state's office for the governor's mansion, ADM lost the validation stickers contract, and the company was split up and sold.
The decal contract was picked up by a Detroit-based company--run by former ADM executives who hired Warner.