Daily Herald
Toll Authority was ready to forgive millions oasis operator owed it
By Joseph Ryan and John Patterson | Daily Herald Staff
Published: 8/15/2009 12:01 AM | Updated: 8/15/2009 9:26 AM

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Gov. Rod Blagojevich's tollway executives were ready to give millions of dollars in breaks to the failing operator of the glass-lined oases until the attorney general squashed the plan, citing a "very troubling" history of insider deals, according to a letter obtained by the Daily Herald.

The revelation of an inside push to give the politically connected Wilton Partners a multimillion-dollar break comes as state lawmakers begin an investigation of their own into the $83 million deal to revamp seven oases across the suburban tollway system. The deal recently has been threatened by a foreclosure against Wilton.

The letter reveals the attorney general stopped tollway officials last summer from forgiving $1.4 million in back rent and unpaid fees Wilton owed the state agency.

The settlement proposal also would have changed the contract with Wilton by limiting the amount of fees from advertising sales and other business due to the tollway under the original contract, according to the letter from the attorney general's office to then-tollway board Chairman John Mitola.

In rejecting the settlement proposal, Attorney General Lisa Madigan's staff cited a long history of questionable deals between Wilton and the tollway and it found the principal partner of the project was "not credible."

"(Jay Wilton) failed to answer many questions about matters affecting the evaluation of the proposed Settlement," reads the June 2008 letter from deputy Attorney General Alan Rosen. "His failure to answer, as well as many of the responses that he did provide, were not credible."

The letter also says Wilton refused to let a business partner out of a confidentiality agreement to talk with the attorney general's staff.

"All of this is particularly disturbing given the manner in which Wilton has conducted Tollway business and selected Oases vendors," Rosen wrote.

Jay Wilton didn't return phone calls seeking comment Friday. But the firm addressed the widespread issues earlier this month in court filings challenging the foreclosure proceedings, saying there was no violation of any lease or loan terms.

In addition to saying the foreclosure is unjustified, Wilton attorneys blast the attorney general's nixing of the settlement as an unenforceable abuse.

The company claims that by waiting 41/2 months after the settlement was reached to notify Wilton of the rejection, the attorney general effectively acquiesced to the tollway's agreement.

"Wilton and the (tollway) agreed to a settlement agreement, which cannot be deemed unenforceable by the Attorney General's unreasonable, arbitrary, capricious and untimely rejection of the agreement," attorneys said in legal documents filed earlier this month in Cook County.

An attorney general's spokeswoman said the rejection is on solid legal ground.

"Illinois law is clear that the attorney general must agree to any legal settlement the tollway authority is considering entering into," said spokeswoman Robyn Ziegler. "The attorney general rejected the settlement with Wilton over a year ago, for all of the reasons outlined in the very detailed letter."

A tollway spokeswoman noted that in the proposed settlement Wilton would have agreed to give up nearly $4.7 million in claims against the tollway in exchange for the tollway giving up $1.6 million in claims against Wilton. Wilton's claims stemmed from oases damages and lost profits blamed on ongoing tollway construction.

The settlement proposal was not made public at the time last year by the tollway because it was killed by the attorney general's office, said tollway spokeswoman Joelle McGinnis.

One state lawmaker investigating the Wilton Partners deal finds it disturbing that tollway officials pushed to provide large breaks to the company.

"Instead of putting the interests of the consumers and drivers first, the toll highway executives put Wilton in the driver's seat and protected their interests at the expense of bringing down the entire oasis system," said state Sen. Susan Garrett, a Lake Forest Democrat holding hearings on the deal next month.

In explaining the rejection, Rosen detailed over seven pages a history of insider deals tied to the oases redevelopment, beginning with a string of contributions made to Blagojevich on the same day from those who stood to profit from the deal.

Rosen told Mitola the history was "very troubling" and that the contracts to Blagojevich insiders and seemingly related campaign donations "raise significant concerns regarding the conduct of business under the Lease."

"Here, the relationships among the Office of Governor Blagojevich, the Governor's political fund, and the parties involved in the Oases project give rise to, at the very least, the appearance of impropriety," the letter reads.

Just before the letter was written, Blagojevich fundraiser Tony Rezko was convicted of influence-peddling and bribery within the Blagojevich administration.

Rezko-linked Panda Express stores landed slots at the oases at a 50-percent-rent discount for their first year. Another oasis vendor tied to Rezko that landed Subway slots was indicted with Rezko.

Six months later Blagojevich was arrested and ousted from office.

Frequent tollway critic Jack Franks, a Democratic state representative from Marengo, said the concerns expressed in the attorney general's letter are unfortunately not surprising.

"It's always been a repository of patronage for whoever's the governor," said Franks, who's pushing to have the tollway system rolled into the Illinois Department of Transportation.

The recent collapse of the Wilton Partners deal is in stark contrast to the beginning championed by Blagojevich in 2003 as a prime example of public-private partnerships at work.

Wilton took control of the prime real estate, demolished old rundown buildings and began erecting new open-air facilities in 2003. The tollway was to get a cut of the sales from vendors and yearly payments of at least $750,000.

But Wilton Partners stopped making those payments in 2007 even as it continued to charge rent to vendors and pay itself management fees, according to the letter. It eventually defaulted on its construction loans and iStar Financial took over the oases this spring.

Timeline

Here is a look a the timeline of the tollway's oases redevelopment:

2002

April: Gov. George Ryan's tollway board signs deal to rehab and run oases with Wilton Partners.

November: Rod Blagojevich elected governor.

2003

June: New tollway board finalizes contract with Wilton, begins work.

July 25: Wilton gives $50,000 to Blagojevich campaign. Others to benefit from deal donate $25,000 each on the same day. One businessman later tells the media he was urged to donate by Wilton to draw the attention of Blagojevich.

December: Wilton makes deal with Panda Express tied to convicted Blagojevich aide Tony Rezko. Panda Express gets a 50% rent break from Wilton.

2004

January: Wilton throws a fundraiser for Blagojevich in California, bringing in at least $150,000 from those associated with Wilton. At the same time, Subway lands oases leases turned over to Rezko's business partner, Al Chaib, who owed the state $350,000 in unpaid taxes. Subway gets a 50% rent break.

2006

October: Rezko indicted on extortion, bribery and money laundering charges for using his influence with Blagojevich to skim kickbacks in pension deals.

2007

January: Wilton stops making required payments to tollway.

July: Financial backer for Wilton folds with national subprime collapse.

December: Blagojevich insider Chris Kelly indicted on charges he evaded taxes in connection to illegal gambling. Chaib indicated for loan fraud tied to Rezko.

2008

January: Wilton debt to tollway totals $1.4 million.

February: Tollway officials issue default on deal, enter into settlement talks.

June: Rezko convicted, later begins cooperating with federal investigators.

July: Illinois Attorney General rejects settlement deal with Wilton.

December: Blagojevich arrested on sweeping corruption charges.

2009

January: Blagojevich impeached and ousted. Lt. Gov. Pat Quinn takes over.

February: Tollway board appoints new CEO, the third in just a few months, without first notifying Quinn.

Spring: Financier of Wilton deal forecloses on oases.

Aug. 1: Lawmakers announce plans to probe tollway oases deal.

Aug. 12: Tollway board Chairman John Mitola, the longest lasting tollway official under Blagojevich, resigns, citing personal reasons.

Aug. 13: Quinn appoints a new chairman and two new board members.

Source: Daily Herald research, 2008 Illinois Attorney General letter to tollway board Chairman John Mitola.