Aide's conflict of interest revealed

SPRINGFIELD -- A top agency official under Gov. Rod Blagojevich co-owns a company that has gotten more than $1 million in state work over the past five years even though a law restricts such business activities, The Associated Press has learned.

Mark Kolaz, chief of staff for Blagojevich's procurement agency, owns part of Modern Mailing & Printing Services. The bulk-mail company has done work for more than a dozen state agencies and the General Assembly since 2004.

It's illegal for highly paid state employees "to have or acquire any contract" with the government, according to state conflict-of-interest law. No company may have a contract if a state employee owns more than a small part of the business.

The law allows such a deal if the governor writes a waiver declaring it in the public interest. Neither the secretary of state's nor the comptroller's offices, which collect and maintain them, has any on file about Kolaz.

The director of one agency said he didn't find out that Kolaz was a co-owner until months after signing a deal with Modern Mailing in 2004. He said an agency staff member talked to Kolaz about the potential conflict but Kolaz did not seek a waiver.

The law applies only to contracts that require agencies to seek bids from vendors and doesn't affect deals that took effect before an owner takes a state job, said Matt Brown, director of the board that oversees state procurement.

Kolaz, who makes $121,116 for the Department of Central Management Services, did not return a phone call seeking comment.

Another Modern Mailing co-owner said the company's state pacts were signed before Kolaz went on the government payroll in 2003.

"To the best of our ability, we've tried to comply," Larry Sweat said.

But state records show Modern Mailing has bid on and received three contracts totaling $157,000 since Kolaz got his state job. The other money the company received was from business that did not require a bidding process, so the law didn't apply.

Sweat and four others, including Kolaz, bought Modern Mailing in 1999, when Kolaz worked for a private lobbying firm. Kolaz owns 20 percent and has disclosed his association each year on the economic interest statement he's required to file.

Kolaz volunteered for Blagojevich's 2002 campaign and was hired by the administration in January 2003. Sweat said Kolaz has had no influence in getting the firm state money.

"He's rarely ever been at the building," said Sweat, who's known Kolaz for more than 25 years. "He's not involved in any of the day-to-day activities."

Teachers Retirement System Executive Director Jon Bauman thought differently. A few months after the pension system signed a deal in July 2004, Bauman heard a Modern Mailing radio commercial that identified Kolaz as the company's contact.

Bauman said Kolaz's involvement should have been disclosed when the company bid on the contract. After Bauman contacted Modern Mailing, he said Kolaz called a TRS staff member and was "defensive and upset."

TRS decided to find another vendor when the contract expired this year because Kolaz hadn't done anything to remedy concerns from 2004, Bauman said. TRS declined an offer by Central Management Services to review the potential conflict after Modern Mailing submitted its 2007 bid.

The law bars employees who make more than 60 percent of the governor's salary from getting state contracts without a waiver. It also prohibits companies from getting contracts if a state employee gets more than 7.5 percent of the business' income.

When Kolaz started in state government, he made just under the 60 percent threshold but had topped it by September 2004.

Kolaz's initial share of Modern Mailing was 15 percent; now it's 20 percent.

Last week, The Associated Press reported a federal grand jury is investigating alleged embezzlement by Kolaz's former wife. Among the $1.3 million Christine Egizii Kolaz is accused of taking from a family business is $385,000 that went to another enterprise she co-owned with Mark Kolaz.

The incident predated Kolaz's work in government. Neither has been charged with a crime.