Orland Should Investigate Pekau Bids, Other Practices: Report

ORLAND PARK, IL —Orland Park officials should investigate contracts awarded to Mayor Keith Pekau’s former landscaping business and the financial interests he holds with two village vendors, as well as fix its own flawed bidding, purchasing and ethics policies, an internal review by a global law firm showed.

Investigators from the Jones Day law firm said they did not gather enough evidence to show whether the village broke state bidding or ethics laws in the cases they reviewed. However, they added, the incidents “raise questions,” leading them to recommend that the village continue its investigation.

“At present, the investigative record is insufficient to conclusively establish that there were any clear violations of existing law or policy in connection with the bidding process involving these contractors,” investigators said in the report. “This is due in part to Jones Day’s incomplete knowledge regarding the events described above, but it also results from gaps in the Village’s own ethics and purchasing policies.”

In some cases the gaps are so big or language so vague, that the policies at times can appear to “sanction” questionable bidding and purchasing practices that were under review, the report said.

For example, investigators added, “with further fact development, it may be determined that there is a clear violation of the policy requiring that ‘fair and equal consideration’ is given to each proposal or quotation received and selection is based on up the lowest total cost complaint bid.”

A second review of the cases, this one opened in response to the Jones Day report, concurred with the findings that no laws were broken. It was conducted by Joseph Mitchell, Orland’s interim assistant village manager. He said he found that Pekau had no conflicts of interest with the village and that he, too, recommended strengthening the village’s ethics and purchasing policies.

The two reports were made public in a news conference Wednesday afternoon with Pekau and acting village manager Tom Dubelbeis, who said they wanted to bring the reports “to light.”

Mayor: Report is a 'purely political attack'

The four-month Jones Day investigation began in January and reviewed allegations of bidding irregularities involving two vendors dating as a far back as 2012, as well as two allegations of questionable financial disclosure practices by the mayor. The Mitchell report, which was conducted in the past three weeks, reviewed those same cases and “finishes” the investigation, Dubelbeis said. The Jones Day report was opened by former village manager Joe La Margo and completed as he was leaving office this spring.

At the conference, Pekau denied the allegations made against him and his former business, calling the Jones Day report “a purely political attack” orchestrated by La Margo.

“This investigation was unethical, potentially illegal and according to the trustees, solely approved by Joe LaMargo, an unelected village employee who does not have such authority,” he said.

Pekau said the investigation was held “in secret” and that no trustees knew about it. He accused La Margo of spending unauthorized money on the review, adding that the $46,000 Jones Day billed is a waste of taxpayer money.

“Anyone with reasonable judgement would have recognized in minutes that these allegations were unfounded but they were investigated because this was political,” Pekau said.

La Margo, reached by phone, said he followed protocol when he opened the investigation.

“This was a situation brought to me by an employee and I had an obligation to look into the situation,” he said. “I brought it to the trustees and they advised me to follow the protocols recommended by village attorneys. It was warranted and it was justified.”

La Margo was pushed out of his position after the April elections, several trustees said, and he had acknowledged publicly that the mayor had asked him to leave. Pekau had stated the decision was mutual.

Records and accounts from seven village officials who were briefed or part of the investigation said that La Margo told all six trustees who were on the board in January that he was opening a review after at least one employee reported bidding irregularities to him. They said he sought advice from law enforcement officials, trustees and other officials who all told him to seek outside counsel.

Generally speaking, they said, under the village manager form of government, the manager has broad powers to hire and fire staff, manage departments, execute contracts and perform other duties the board decides. Most boards and councils do permit managers to spend within limits without prior approval, and in Orland’s case, the manager can spend $20,000 without it. However, Orland regularly permitted its managers to hire attorneys as needed, including when it hired counsel to help with bringing gaming to Orland and in some arbitration cases. Those contracts exceeded the threshold. They added that La Margo also is permitted to authorize money in emergency cases.

Jones Day findings

According to the Jones Day report, La Margo hired the firm after an employee in the public works department told him in 2018 that two regular vendors, Mid-America Tree of Mokena, and GroundsKeeper Landscape Care LLC, which Pekau owned until February 2019, regularly came in as the lowest bidder with a margin of only $25 below competitors.

This tipped off a larger review that focused on that allegation and four others:

• A 2012 project known as the Emerald Ash Borer tree removal contract, or EAB;
• Pekau’s introduction of his company’s new owner to village officials;
• Pekau’s financial interests with Horton Insurance Group, the village’s health insurance provider; and
• Reviews of irregularities in Mid-Tree America and Groundskeeper contracts.

With EAB, Jones Day found that on Oct. 5, 2012, three days after bids were unsealed for the project, Pekau’s company, GroundsKeeper, was permitted to submit lower prices in an amendment to its bid. Investigators said they could not explain why, but said the action indicated GroundsKeeper may have communicated with a village employee after bids were received. GroundsKeeper was awarded a three-year contract. However, an employee in the finance department mistakenly included GroundsKeeper’s original prices in the contract that all parties signed. The company was paid those prices, which as times were higher than its competitors. Investigators said there is no indication that Pekau, who is known as “Official A” in the report, spoke with village employees about the contract’s prices. They added that it did not appear that anyone in the public works department saw or corrected the error.

Investigators also found that the public works department often chose vendors from a pool of candidates for projects worth less than $10,000 so that contracts would not have to go out to bid. After Pekau sold his GroundsKeeper business in the winter of 2019, he introduced the new owners to public works employees who are responsible for hiring these vendors. He added that although he sold the business to someone else, he still owned the land where the company sits. Pekau, investigators found, did not ask the employees to steer work to the new owner and he told the company it would have to be the lowest bidder to be awarded contracts. He also said he would recuse himself from votes if the company’s contracts came before the board.

Investigators also learned that Pekau had a relationship with Horton, the village’s long-time insurance provider. As officials discussed in 2018 whether to put the contract out to bid, Pekau said in conversations and in email that seeking competitors was not necessary. During these debates, La Margo learned that Pekau held a consulting contract with Horton. He called Horton to confirm the news, and Horton reported that Pekau’s consulting firm, Fahrenheit, had completed one-third of its contract, but that Pekau’s partner handled most of the work. Horton had paid the company $25,000 at that time. Horton won the contract; Pekau abstained from the vote.

Finally, the report showed that Mid-American Tree, a longtime landscaping company for the village, consistently came in as the lowest bidder with razor-thin margins. Investigators did not find evidence of communications between the company and village employees. But fluctuating pricing patterns from the company warranted follow-up by Orland officials, Jones Day said.

In all, investigators added, no violations of policy or law in connection with contracts awarded to or work performed by Mid-American Tree were found.

However, although no clear evidence pointed to bid-rigging, fraud, official misconduct or conflicts of interest at the time they submitted the report, Jones Day investigators said they recommended that Orland officials take a deeper look into the issues relating to GroundsKeeper and to Horton.

“Further investigation needs to be conducted into whether the level of financial interest held by Official A is sufficient to trigger certain statutes,” they wrote.

In his report, Mitchell said he reviewed those allegations and found no wrongdoing.

Both Jones Day and Mitchell recommended that village officials shore up their practices.

Jones Day recommended that they strengthen or develop policies that address influence in bidding, personal financial interest and personal self-dealing. Mitchell suggested revamping its current ethics policy using Hoffman Estates’ ordinance as a guide.

The village’s next steps are not clear. Pekau said the board will address this at Monday’s meeting. However, several trustees have said they have not had enough time to review the documents and could not yet comment on them.