Top Kane County officials under investigation over law firm hiring

Three top Kane County officials are under investigation by the state's attorney, who says they may have violated county and state law by hiring an outside law firm without seeking bids or getting permission from the proper authorities.

The investigation is mentioned in a Sept. 9 letter obtained by the Daily Herald and confirmed by county board Chairman Chris Lauzen. The letter details how Lauzen, Kane County Treasurer David Rickert and Auditor Terry Hunt hired the firm at a cost of up to $95,000 without the direct consent or knowledge of the county board or state's attorney.

Lauzen confirmed he did hire the law firm as described in the letter, but he said he believes all his actions were both within the law and in the best interests of county taxpayers.

“I scrupulously follow state statute and local ordinances, policies and procedures to the best of my ability,” he said. “I want to color within the lines. That's been my life for 63 years. And it has been at the forefront of my career in public office.”

State's Attorney Joe McMahon declined to comment on the investigation. But his letter contains a different interpretation of Lauzen's actions.

The controversy dates back to November. That's when Lauzen contracted with Schain, Banks, Kenny & Schwartz Ltd. Three agreements with the law firm put taxpayers on the hook for up to $95,000, according to McMahon's letter. As of June 30, the county had paid out at least $40,000.

Rather than send the contracts and bills through the county board approval process, Lauzen sent a memo to Rickert and Hunt to release the funds.

All those actions appear to be in violation of either state law or the county's purchasing ordinance, McMahon's letter said. For one, McMahon's office didn't review or approve any of it. Lauzen also split the $40,000 in three smaller contracts.

The letter says that action appears to be “the stringing of contracts to evade the financial controls established by the state, and local ordinances, for contracts over a certain dollar amount,” noting all such contracts exceeding $30,000 must go through a request for proposals and competitive bidding.

After McMahon's office started asking about those contracts, Lauzen contacted the firm, and it refunded enough money to bring the total payout for this year below that $30,000 threshold. But there was still “an unauthorized expenditure of county funds” totaling at least $25,375, the letter states.

Finally, the state's attorney's office is the only body authorized to provide legal services to the county, unless McMahon agrees otherwise, the letter said.

Lauzen doesn't dispute any of those actions. Yes, he hired the firm. Yes, the total amount paid out this year was $40,000. There was no request for proposals or competitive bid. He didn't send any of the bills or contracts through the county board or state's attorney's office.

Lauzen said he hired the firm on a consulting basis, not as county attorneys, to help with his three plans to create new non-property tax income: Using county infrastructure for cellphone amplification, selling use of the county's fiber optic network and creating a waste-to-fuel facility, all measures that would help keep property taxes frozen. So far, legal opinions from the state's attorney's office say they are not projects the county can pursue.

“If (the state's attorney's office) can help me, that's all I'm looking for,” Lauzen said. “But at each turn of these projects, rather than help, they've hurt the process. I don't feel like I have legal representation.”

So, he says, he hired the firm to consult him on other avenues to make the projects a reality. The three projects created three separate agreements. Two agreements came at a cost of $15,000 each this year. The third came at a cost of $10,000 — all below the $30,000 threshold requiring bids and county board approval, Lauzen explained.

He never thought even combined they would surpass the $30,000 mark this year. All three projects, he said, are ones the county board has agreed to on several occasions. So Lauzen saw no reason to ask for permission to hire consultants to move the projects along.

Board members contacted declined to comment.

Political dispute?

Lauzen said Schain, Banks, Kenny & Schwartz Ltd. was needed because McMahon's team has given “bad” and “inaccurate” legal advice to the county board on everything from his income-generation projects to the pending union contract with coroner's office employees and another pending personnel issue.

“I want to follow all the rules, but I do want to get some things done,” Lauzen said. “And the timing of this controversy is interesting to me. I didn't have these public problems with the state's attorney's office three to six months ago.”

Six months ago, the county began its 2017 budget process in earnest. McMahon has asked for $800,000 in new spending — money Lauzen says the county doesn't have, especially without raising property taxes. And Lauzen has chastised McMahon for giving his employees bonuses with money Lauzen wants returned to the county's general coffers.

“I have asked a lot of questions,” Lauzen said. “I have made it clear that paying bonuses is not a county policy. We shouldn't be doing it, but he is doing it. So I pray that this investigation isn't a matter of retaliation for areas of dissatisfaction that the state's attorney may have with my conduct.”

Auditor Hunt, who campaigned with Lauzen when they first ran for county office, said he approved the payouts because he determined there were three contracts for three distinct projects. Taken individually, the contracts fell well below the $30,000 threshold where he would have remanded them back to the county board for consideration. Hunt said he was unaware until recently that McMahon had any concerns.

“I had not given any consideration to the fact that the state's attorney was supposed to weigh in on those contracts or not,” Hunt said. “We only saw the executed contracts. I am now aware that the state's attorney is probably the only official that has the authority to appoint outside counsel.”

Hunt said he's “absolutely confident that we did nothing wrong in our office.”

Treasurer Rickert did not respond to an interview request.

The county's budget process, including McMahon's request for more money, will conclude within the next four to six weeks. There is no timetable stated in McMahon's letter for when the investigation will end. The letter says McMahon will inform the board of any findings regarding legal violations and any breakdowns in the county's financial oversight controls.

Who is Schain, Banks, Kenny & Schwartz?

Three Kane County officials are under investigation for their hiring of the Chicago law firm of Shain, Banks, Kenny & Schwartz.

What: Specializes in real estate, business and government law and civil litigation

Who:

• Jerry Schain, former Cook County assistant state's attorney

• William Banks, former alderman for Chicago's 36th Ward; former counsel for the City of Chicago; former treasurer for the Cook County Democratic Party

• Robert Kenny, village attorney for Palatine and Vernon Hills

• Marty Schwartz, business and commercial litigation expert

• Peter N. Silvestri, Cook County commissioner for the 9th District; former mayor of Elmwood Park

Source: schainbanks.com