Charges Filed against Ex-City Hall Manager of Red-Light Camera Program

May 14--The former City Hall manager who ran Chicago's red-light camera program was arrested today on federal charges related to the investigation of an alleged $2 million bribery scheme involving the city's longtime vendor, Redflex Traffic Systems.

A federal complaint filed in U.S. District Court today accused John Bills of taking money and other benefits related to the contract with Redlfex. Mayor Rahm Emanuel fired the company amid the bribery scandal.

Federal prosecutors alleged that Phoenix-based Redflex funneled cash and other benefits, including an Arizona condominium, to Bills since before the contract was signed in 2003.

The Tribune first revealed questions about a questionable relationship between Bills and Redflex in the fall of 2012, triggering a scandal that has shaken the foundation of the company and its Australian parent, Redflex Holdings Ltd., which acknowledged last year that its Chicago program was built on what federal authorities would likely consider a $2 million bribery scheme involving Bills. Six top Redflex officials were jettisoned, and the company has come under scrutiny for its procurement practices across the country.

The criminal complaint alleges that Bills sought a bribe from Redflex during pre-bid discussions over the contract, which grew to be worth more than $100 million to the company and has raked in about $300 million in tickets for the city.

Bills was charged with one count of bribery, which carries a maximum penalty of 10 years in prison and a $250,000 fine. He was escorted in handcuffs into a federal courtroom in Chicago by U.S. marshals shortly before the 3:15 p.m. hearing, dressed in a checkered polo shirt and tan pants.

Bills stood with his hands folded in front of him as the allegations were read in court. When asked if he understood, Bills quietly said, "I do."

Bills was ordered released on a $4,500 unsecured bond, meaning he won't have to post anything.

Bills declined to comment outside the courtroom. His attorney, Nishay Sanan, said after the hearing that Bills is being made a scapegoat by federal authorities who want him to implicate others in the scandal, but Bills won't do it. Sanan said Bills did not have the power to single-handedly control the contract and he was only one vote in a unanimous selection of Redflex.

Federal investigators allege that a personal friend of Bills, identified as Individual A, was paid over $2 million in salary and bonuses as part of the scheme and acted as a conduit between Bills and the company.

A former Redflex employee cooperating with federal investigators said he and his superiors "had explicit conversations about Individual A serving as a conduit to get money to Bills in return for Bills' help in getting Redflex the city of Chicago contract, and for Bills' help in ensuring that Redflex's contract would potentially be expanded and renewed in the future," according to the complaint.

Redflex has previously identified their Chicago consultant as Martin O'Malley, and the Tribune reported previously that he and Bills were longtime friends. O'Malley has denied any wrongdoing.

Redflex Traffic Systems officials declined to answer questions about the case.

"Last year we publicly released the findings of our internal investigation into the conduct of several former employees and announced new leadership, new policies and a line between our past and today's Redflex," the company said in a statement. "As promised, we also fully cooperated with the authorities. We did what a responsible company should do and we are pleased that our internal investigation contributed to the government's legal action."

The complaint also described a February 2003 meeting between Bills and Redflex officials at the John Hancock Center, first disclosed by the Tribune in February, during which Bills discussed specific ways Redflex could be awarded the contract.

The Redflex scandal erupted in October 2012, after the Tribune obtained a 2-year-old internal Redflex whistleblower memo by an ousted vice president that detailed the alleged bribery scheme and lavish company-paid vacations for Bills and suggested "the level of this insider fraud would take down the contract and most likely the company."

At first Redflex disputed much of the memo, saying it thoroughly investigated the allegations internally and found them without merit except for one hotel stay for Bills at the Arizona Biltmore in 2010 that was inadvertently paid by Redflex. Company officials said their failure to notify City Hall at the time was an "oversight and a lapse."

But fallout from the news reports prompted Redflex to commission a second internal investigation, this time by former Chicago Inspector General David Hoffman. Hoffman's probe, completed last March, confirmed the allegations in the 2010 whistleblower memo and expanded upon them, the company said in its summary of Hoffman's investigation filed with the Australian Securities Exchange.

Hoffman identified 17 company-paid trips for Bills -- including airfare, hotels, rental cars, golf outings and meals, according to the filing.

Hoffman also found that Redflex paid its Chicago consultant, who has personal ties to Bills, more than $2 million, the company said . The "highly suspicious" arrangement between Redflex, the consultant and Bills "will likely be considered bribery by the authorities," the company said.

Bills retired in 2011 after a 30-year city career that saw him rise from a streetlight lamp maintenance worker to the deputy managing commissioner of the Transportation Department under former Mayor Richard M. Daley. He was a longtime top precinct captain in the political operation of House Speaker Michael Madigan.

The Redflex contract was awarded and grew to be the largest red-light program in the country during the tenure of Daley. Redflex was hoping to win the potentially more lucrative contract to launch Emanuel's speed camera program when the Tribune stories first broke in 2012.

Emanuel disqualified Redflex, then a leading contender, from the speed-camera competition and subsequently banned them from holding the red-light contract. They were recently replaced by Xerox State & Local Solutions Inc., based in Maryland.

"As you know, Redflex no longer works for Chicago. As soon as we found out they were under investigation, we put the whole contract that we had inherited out to bid, and they're no longer working there," Emanuel said at an unrelated news conference today. "Second, as you know, that when questions were raised, we cooperated with the IG (Chicago inspector general) and gave him information. He worked there when I got there, but Redflex no longer works, services the city of Chicago, and he no longer works for the city of Chicago. And we were in a cooperative effort with the IG."

Many of the allegations in the criminal complaint are attributed to CS1, a cooperating witness in the case, whom the Tribune has identified as former Redflex executive vice president Aaron Rosenberg.

The Tribune reported earlier this year Rosenberg, the company's top national salesman before he was fired, was cooperating in the federal investigation and had alleged in a lawsuit that Redflex doled out bribes and gifts at "dozens of municipalities" in 13 other states.

Rosenberg said in a civil defamation claim against Redflex that he was made a "scapegoat" to cover up a long-standing practice of "providing government officials with lavish gifts and bribes" after the Tribune began asking questions about the Chicago contract.

Redflex fired Rosenberg and sued him for damages in Arizona court in February, largely blaming him for the company's wrongdoing in Chicago. In a counterclaim filed in October, Rosenberg disclosed that he provided information to local and federal investigators as well as to the outside attorney who conducted a damaging private investigation of the company.

In addition to some 22 trips, including to the Super Bowl, hotels, meals, car rentals and other expenses paid to Bills directly by Redflex, the complaint also alleges that proceeds of the bribery scheme were used to purchase a $177,000 condominium in Gilbert, Arizona and a Mercedes convertible.

"John denies ever taking a bribe from anybody. He's a hard-working individual and the one thing that everybody should realize is he didn't have the power in the city of Chicago to direct any contract to anybody," Sanan said.

The complaint alleges that Bills made large cash payments for various expenses including a $10,000 boat, an addition to his Michigan cabin, a $12,500 car purchase, $16,000 in mortgage payments for his girlfriend, $28,280 in rent payments, even $1,200 in cash that went to his divorce attorney.

"He took them to games too. It was reciprocal," Sanan said of Bills. "They weren't bribery gifts. He thought he was a friend. It was a reciprocal gift back and forth.

"There are no bribes in this case. He is the wrong person to bribe. If you're going to bribe somebody in the city of Chicago, he's not the one you go to to get a contract," Sanan said.

Tribune reporters John Chase and Jason Meisner contributed.

dkidwell@tribune.com

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