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TRIBUNE WATCHDOG

FBI operation helped re-elect Harvey mayor

State, feds leave troubling practices largely unchecked Tuesday, February 11, 2014

By Joseph Ryan, Joe Mahr and Matthew Walberg

The glossy campaign fliers arrived in time to help Harvey’s besieged mayor.Eric Kellogg’s police department was mired in scandal, reports of violent crime

were rising and challengers were calling him corrupt.But the fliers showed a different picture: Kellogg smiling with officers and shov-

eling dirt at groundbreaking ceremonies, as well as skewed statistics declaring that Harvey was on the mend.

The rescue came from an odd backer, the Tribune has learned: an undercover FBI agent.

The agent had been placed in a local strip club to investigate corruption. And for reasons federal officials won’t discuss, records show the agent formed a special po-litical committee and primed it with about $140,000. The committee then flooded the crucial 2007 mayoral race with money that helped Kellogg to victory, even as federal agents were probing the mayor’s police department.

The FBI’s involvement — uncovered in this Tribune investigation — set the stage for a series of actions by state and federal agencies that preserved the status quo and masked problems in Harvey.

The Tribune documented earlier this week how Harvey has the stark combina-tion of high violent crime and few arrests — with police officers facing a smorgas-bord of allegations that often go unchecked.

The latest investigation has found that outside agencies ignored and enabled Harvey’s leaders in ways that may have made things worse. The revelations are based on a review of numerous civil and criminal court cases as well as local, state and federal records.

After the undercover federal agent aided Kellogg’s campaign, another powerful federal agency came in to document systemic problems in his police department — only to leave without forcing reforms.

And all along, state officials have neglected to take key steps to stop the city and Kellogg from repeatedly breaking disclosure laws, helping the mayor maintain power with money from secret backers while also obscuring the city’s dire financial state.

Residents have been left with a town where the violent crime rate is higher than it was during Kellogg’s first full year in office a decade ago. And, based on the records that the Tribune has seen, the suburb appears hard-pressed to improve crime-fight-ing. It is nearly insolvent, owing millions of dollars that it has no clear way to pay back after insider deals helped drain city accounts.

‘New Harvey Rising’Kellogg gained a following in Harvey as a football coach who spoke of beating the

odds in the hardscrabble town, coming from a poor, large family to attend college and go into public office.

Starting at the Harvey Park District, he rose through the ranks before running for mayor, making impassioned speeches denouncing his hometown’s crime, cor-

ruption and racism. By 2003 he had unseated the incumbent, riding a groundswell of calls for reform.

But by the end of his first term, opponents said he was becoming part of the problem.

Kellogg, who came to office promising “A New Harvey Rising,” surrounded him-self with relatives. He put his brother, a full-time plumber, in charge of a new police initiative. He named his sister as his main assistant, and for city attorney he chose his newly licensed niece. He said the hires saved the town money.

Kellogg also brought back police officers who supported his campaign after be-ing cast out by the previous administration over allegations of wrongdoing. He said the officers had been wrongly maligned.

Some of those police hires eventually came under fire again, this time in lawsuits that accused them of having gang ties, brutalizing citizens and fumbling cases.

As his first term was coming to a close, Kellogg was hit with headlines that said his police didn’t solve any homicides in 2005, and the numbers hadn’t improved much in 2006. City Council members revolted, asking in vain for state police to audit the local force.

Soon state and county investiga-tors marched into police headquar-ters and seized records and evidence related to dozens of unsolved crimes. By then, Harvey’s violent crime rate had jumped 30 percent over Kellogg’s first full year in office.

Amid all that, Kellogg asked voters for a second term.Five challengers vied to defeat him at the polls, but their efforts were countered

by a new man in town.

Campaign secretsAs Election Day approached in spring 2007, a new political committee came to

life: The Harvey Good Government Group 2007.State records show the committee was created by a man named Carlos Vargas,

using an address that traced to a fifth-floor condo overlooking the relatively safe suburb of Oak Lawn. Vargas’ occupation is listed on state records as “construction consultant,” and he is reported as the source for $141,300 lent to the committee.

Court records would later reveal that Vargas was an undercover FBI agent with about a dozen assignments under his belt, working national security, public corrup-tion and organized crime cases — though few knew that at the time. Vargas isn’t the agent’s real name.

His cover: the new manager helping remodel the Skybox strip club on Halsted Street. The club was owned by Michael Wellek, who became an FBI informant at some point after IRS agents seized $12 million in cash from a warehouse he con-trolled in 2003, according to court records.

The Vargas-tied committee reported about $130,000 in spending on election-related activities like printing, newspaper ads, cable TV time, get-out-the-vote ef-forts and polling. Of the total, the committee reported spending $17,000 on postage and mailing.

Federal authorities declined to tell the Tribune where the money came from,

although they said it wasn’t government money.The Tribune found three fliers from the mayoral campaign that supported Kel-

logg and bear the name of the Vargas-tied committee: “Paid for by Harvey Good Government Group 2007.”

The fliers contain material that appears to mirror Kellogg’s campaign, including a roster of his good deeds and photographs from city events. One touted Kellogg’s economic development initiatives, though his signature achievement — redevelop-ing the long-shut Dixie Square Mall — was floundering. Another said the mayor bal-anced the budget, though the records would later show multimillion-dollar deficits.

And another flier said the mayor helped reduce crime, though statistics showed violent crime at its highest level since he first took office.

The committee’s spending amounted to far more than what Kellogg’s challeng-ers reported spending, combined, and twice as much as Kellogg’s campaign report-ed spending.

“If I had that kind of money, I would have had a shot,” said challenger Thomas Dantzler, a former alderman.

Kellogg emerged from the six-person race with a winning 43 percent of the vote.The Tribune asked the FBI and the U.S. attorney’s office to explain their actions

in the 2007 race. Both instead issued a joint statement saying, in part, that “under-cover operations are a critical tool in rooting out public corruption.”

Vargas’ undercover work at the club was one part of a multiphase, multiyear in-vestigation of politicians and police officers, according to FBI testimony in a later drug trial.

It is not unusual for undercover federal agents to make campaign contributions or to set up fake businesses that do real business as part of sting operations. The FBI and the U.S. attorney’s office, in their statement, said they followed all protocols.

But the FBI has so far refused to release records in the case that could illuminate who approved the campaign efforts and why.

Vargas’ role as an undercover agent at the Skybox became public the year after Kellogg was re-elected, after the agent concluded his work luring local officers to act as security on fake drug deals. Fifteen officers were charged, including Harvey cops, among them Archie Stallworth.

Stallworth was caught telling Vargas that Harvey was a great place for large drug transactions because “if anything goin’ down, we gonna know about it.” Stallworth, since convicted, maintains he was only hoping to take down Vargas the drug dealer.

Stallworth was close to Kellogg. At Stallworth’s 2009 trial, an FBI agent said in-vestigators asked Stallworth to cooperate against Kellogg. He later told the Tribune he declined.

Trial evidence also showed that a year after the election, Vargas boasted to Stall-worth about working with city officials to land a coveted casino license for the sub-urb.

“The mayor knows, the aldermen are in,” Vargas said, according to a transcript of a recorded conversation. “It’s gonna be huge.”

Harvey didn’t get the license from the state — Des Plaines did.Kellogg declined to be interviewed or answer questions about the 2007 election

and Vargas’ role in it.

Feds walk awayAfter Kellogg’s re-election, the headlines on Harvey’s problem Police Depart-

ment prompted a visit from the FBI’s sister agency: the Civil Rights Division of the Justice Department.

The division has immense power through the federal courts to demand that

problem departments shape up, which it has done across the country, including forcing departments in Highland Park and Mount Prospect in 2000 to ensure that they weren’t unfairly targeting minorities for traffic tickets. More recently, the di-vision forced police in Missoula, Mont., to ensure that they properly handled rape investigations.

But the division didn’t look at Harvey’s notoriously shoddy rape investigations, instead focusing on police brutality. It spent three years — from December 2008 to January 2012 — reviewing Harvey’s haphazardly kept records and noted “serious concerns” that officers routinely roughed up residents. It declared the department “devoid of supervisory oversight and accountability.”

But Justice officials did nothing to force Harvey to change.Instead, the town was given “recommendations,” such as rewriting its policies

and procedures. Harvey officials said at the time that they would make the changes.Justice Department officials declined to explain their decision to the Tribune.

Nebraska criminologist Sam Walker, a national expert on police accountability who once served as a consultant to the civil rights division, said he was surprised by the decision. He said federal officials had plenty of evidence of widespread problems in Harvey to push for the appointment of an outside monitor.

“It’s a little surprising given how utterly dysfunctional the department appears,” Walker said.

Flouting the lawAt the same time that Justice officials did not force reform, state officials were

failing to enforce a key law that would have exposed how the city’s finances had started to spiral out of control.

Illinois law requires cities and villages to hire licensed auditors to go through their books and release an annual report that sheds light on their financial state.

It’s meant to ensure public finances are readily known and aboveboard.Harvey stopped producing the audits in Kellogg’s second term, saying they were

too expensive.During the information blackout, the Tribune has found through records, the

city borrowed millions while failing to set aside millions more for legally required

ZBIGNIEW BZDAK/TRIBUNE PHOTO

Though Eric Kellogg’s campaign has failed to file about a dozen reports over three years, the State Board of Elections has fined him only once, for $5,000.

binationofhighviolentcrimeand fewarrests—withpoliceofficers facing a smorgasbordof allegations that often gounchecked.

The latest investigationhas found that outside agen-cies ignored and enabledHarvey’s leaders inways thatmayhavemade thingsworse.The revelations are based ona review of numerous civiland criminal court cases aswell as local, state and federalrecords.

After the undercover fed-eral agent aided Kellogg’scampaign, another powerfulfederal agency came in todocumentsystemicproblemsin his police department —only to leave without forcingreforms.

And all along, state offi-cials have neglected to takekey steps to stop the city andKellogg from repeatedlybreaking disclosure laws,helping the mayor maintainpower with money from se-cret backers while also ob-scuring the city’s dire fi-nancial state.

Residents have been leftwith a town where the vio-lent crime rate is higher thanit was during Kellogg’s firstfull year in office a decadeago. And, based on the re-cords that the Tribune hasseen, the suburb appearshard-pressed to improvecrime-fighting. It is nearlyinsolvent, owing millions ofdollars that it has no clearway to pay back after insiderdeals helped drain city ac-counts.

‘NewHarveyRising’Kellogg gained a following

in Harvey as a football coachwho spoke of beating theodds in the hardscrabbletown, coming from a poor,large family to attend collegeand go into public office.

Startingat theHarveyParkDistrict, he rose through theranks before running formayor, making impassionedspeeches denouncing hishometown’s crime, corrup-tion and racism. By 2003 hehad unseated the incumbent,riding a groundswell of callsfor reform.

But by the end of his firstterm, opponents said he wasbecoming part of the prob-lem.

Kellogg, who came to of-fice promising “A New Har-veyRising,” surroundedhim-self with relatives. He put hisbrother, a full-time plumber,in charge of a new policeinitiative.Henamedhis sisteras his main assistant, and forcity attorney he chose hisnewly licensedniece.He saidthe hires saved the townmoney.

Kellogg also brought backpolice officers who sup-ported his campaign afterbeingcast outby thepreviousadministration over allega-tions of wrongdoing. He saidthe officers had been wrong-lymaligned.

Some of those police hireseventually came under fireagain, this time in lawsuitsthat accused them of havinggang ties, brutalizing citizensand fumbling cases.

As his first term was com-ing to a close, Kelloggwas hitwith headlines that said hispolice didn’t solve any homi-cides in 2005, and the num-bers hadn’t improved muchin 2006. City Council mem-bers revolted, asking in vainfor state police to audit thelocal force.

Soon state and county in-vestigators marched into po-lice headquarters and seizedrecords and evidence relatedtodozensofunsolvedcrimes.By then, Harvey’s violentcrime rate had jumped 30percent over Kellogg’s firstfull year in office.

Amid all that, Kelloggasked voters for a secondterm.

Five challengers vied todefeat him at the polls, buttheir efforts were counteredby a newman in town.

Campaign secretsAs Election Day ap-

proached in spring 2007, anew political committeecame to life: The HarveyGood Government Group2007.

State records show thecommittee was created by a

man named Carlos Vargas,using an address that tracedto a fifth-floor condo over-looking the relatively safesuburb of Oak Lawn. Vargas’occupation is listed on staterecords as “construction con-sultant,” andhe is reported asthe source for $141,300 lentto the committee.

Court records would laterreveal that Vargas was anundercover FBI agent withabout a dozen assignmentsunder his belt, working na-tional security, public cor-ruption and organized crimecases — though few knewthat at the time. Vargas isn’tthe agent’s real name.

His cover: the new man-ager helping remodel theSkybox strip club on HalstedStreet. The club was ownedby Michael Wellek, who be-came an FBI informant atsome point after IRS agentsseized $12 million in cashfrom a warehouse he con-trolled in 2003, according tocourt records.

The Vargas-tied commit-tee reported about $130,000in spending on election-re-lated activities like printing,newspaper ads, cable TVtime, get-out-the-vote effortsand polling. Of the total, thecommittee reported spend-ing $17,000 on postage andmailing.

Federal authorities de-clined to tell the Tribunewhere themoney came from,although they said it wasn’tgovernmentmoney.

The Tribune found threefliers from the mayoral cam-paign that supported Kelloggand bear the name of theVargas-tied committee: “Paidfor by Harvey Good Govern-mentGroup 2007.”

The fliers containmaterialthat appears to mirror Kel-logg’s campaign, including aroster of his good deeds andphotographs from cityevents. One touted Kellogg’seconomic development ini-tiatives, though his signatureachievement — redevelopingthe long-shut Dixie SquareMall — was floundering. An-other said the mayor bal-anced the budget, though therecords would later showmultimillion-dollar deficits.

And another flier said themayor helped reduce crime,though statistics showed vio-lent crime at its highest levelsince he first took office.

The committee’s spendingamounted to far more thanwhat Kellogg’s challengersreported spending, com-bined, and twice as much asKellogg’s campaign reportedspending.

“If I had that kind ofmoney, I would have had ashot,” said challenger Thom-as Dantzler, a former alder-man.

Kellogg emerged from thesix-person race with a win-ning 43 percent of the vote.

TheTribuneasked theFBIand the U.S. attorney’s officeto explain their actions in the2007 race. Both instead is-sued a joint statement saying,in part, that “undercover op-erations are a critical tool inrooting out public corrup-tion.”

Vargas’ undercover workat the club was one part of amultiphase, multiyear inves-tigation of politicians andpolice officers, according toFBI testimony in a later drugtrial.

It is not unusual for under-cover federal agents to makecampaign contributions or toset up fake businesses that doreal business as part of stingoperations. The FBI and theU.S. attorney’s office, in theirstatement, said they followedall protocols.

But the FBI has so farrefused to release records inthecase that could illuminatewho approved the campaignefforts andwhy.

Vargas’ role as an under-cover agent at the Skyboxbecame public the year afterKellogg was re-elected, aftertheagent concludedhisworkluring local officers to act assecurity on fake drug deals.Fifteen officers werecharged, including Harveycops, among them ArchieStallworth.

Stallworthwas caught tell-ing Vargas that Harvey was agreat place for large drugtransactions because “if any-thing goin’ down, we gonnaknow about it.” Stallworth,

mer.In a boardroom at Har-

vey’s aging City Hall, Kelloggsat under an enlarged, gold-hued city seal, against awood-paneledwall.

He spoke optimisticallyabout the city’s financial fu-ture,pointing toabudget thatcalled for increased policespending, partly based onshaky new taxes and fees.

The meeting didn’t di-rectly address how the citywill deal with the millionsowed to Chicago for water,the pension funds or debtpayments on the botchedhotel development.

Residents were left tojudge the city’s financial stateon the word from officials,with Kellogg assuring them:“I think we are in a greatposition.”

[email protected]@[email protected]

were covered.■ There is little to no moneyin savings, while long-termdebt has ballooned to about$50million,mostof itcominginKellogg’s second term.■ The state says Harveystopped paying into its policeand fire pension funds, pay-ing just $140 toward $7.3million owed over a three-year period. The back pay-ments owed have reachedabout $10million.■ The running tab that Chi-cago says Harvey owes forwater has reached $18 mil-lion, about the same amountas the suburb takes in fromtaxes and fees over an entireyear.

The city typically spendsabout $5.5 million a year onpolice, a figure that has notkept pace with inflation inrecent years.

Still, the range of the city’sfinancial troubles wasglossed over during an annu-al budget hearing this sum-

mitting four years worth ofbroad financial reports thatwere not vetted by auditors,and one 5-year-old reportthatwas.

The city is still short audi-ted reports for the last fourfiscal years.

Experts say it remains im-possible to know the truedepth of the city’s financialproblems.

From reviewing what isavailable, one public financeexpert at the University ofIllinois at Chicago, RebeccaHendrick, said: “I wonderhow they are paying theirbills.”

Coupled with other issuesthe Tribune discovered, thedocuments underscore howyears of challenges havegathered into a financial ava-lanche:■ The city spent at least $12million more than it took infrom taxes and fees over fouryears, with no clear explana-tion for how the shortfalls

state disclosure laws, andstate agencies continued todecline to use their full au-thority.

On the campaign end, theState Board of Elections lev-ied a $5,000 fine againstKellogg’s committee, thoughthe board could have leviedmany more fines for about adozen missing reports. Thefine has not been paid.

The board has the powerto force a committee to per-form an audit and hand overthe records to the state insome cases.

It hasn’t done that inKellogg’s case.

Kellogg has sought to dis-tance himself from the issue,saying through a spokesmanthat he only recently becameaware that Citizens to ElectEric J. Kellogg— ofwhich heis chairman — did not revealits fundraising over the lastthree years.

The committee’s treasureris a Kellogg relative. Thespokesman said the mayorhas “directed the committee”to contact the state.

Election board DirectorRupert Borgsmiller said theagency is hamstrung by astatute that requires monthsof notices and hearings be-fore fines are levied.

It is a process easily de-railed when certified lettersfrom the board go unac-cepted, which has happenedwithKellogg’s committee.

Borgsmiller conceded thatthe agency had not tried tohand-deliver the notices tothe mayor to speed up theprocess but said the agencyplanned to do so in the nearfuture.

“We can’t do everything ina timely fashion — we try,”Borgsmiller said.

Unpaid fines could theo-retically keep Kellogg offnext year’s ballot, but underthe law, he may be able tocounter such a move bysimply appealing the fines.

As for city finances, yearsticked by without a licensedfirm scrubbing Harvey’sbooks.

In that time, the city took amajor development gamble,spending at least $10 millionto fix up a privately ownedhotel next to a strip club atthe town’s edge.

The Tribune previouslyreported how the city comp-troller was also working forthe developer at the time andhow the city failed to keepclose tabs on how taxpayermoneywas spent.

The hotel is now half-gutted, languishing in fore-closure and leaving city tax-payers with little to show forthe investment.

That revelation hasn’tproddedthecomptroller’sof-fice to use its power toforcibly audit Harvey’sbooks.

The state comptroller didstart tallying fines against thecity last year, which so fartotalmore than $20,000.

Harvey officials are ap-pealing the fines, saying theyare a “financial burden.”

A spokesman for Comp-troller Judy Baar Topinkadeclined to discuss Harvey’scase, other than to say thedepartment has “forwardeddocuments to legal author-ities for review.”

In recent months, the citymoved to play catch-up withits filing requirements, sub-

city borrowed millions whilefailing to set aside millionsmore for legally requiredpublic safety pension pay-ments.

Harvey also obtained wa-ter from the city of Chicagoon credit, sold it to residentsand other suburbs, thenstiffed Chicago on multimil-lion-dollar bills, according tocourt records.

The suburb, meanwhile,was underfunding police, tothepoint thatdetectiveswereforced for years to jugglethree-digit caseloadswithoutregular Internet access.

Yet all the while, officialslet loose on developmentgambles, including an insiderdeal thatwent bust.

The depths of the down-ward spiral shouldn’t havebeen secret.

By law, the state comptrol-ler is supposed to force townsto file the audits Harvey wasrefusing to compile. Thecomptroller can even hire anauditing firm to go to a town,scour the books and thencharge the townfor thework.

But the state comptrollerdidn’t do that in Harvey,instead routinely asking thecity, to no avail, to complywith the law.

So when voters turned toanother heated mayoral racein2011, theyhad little basis tojudge Kellogg’s assurancesthat city financeswereOK.

Kicking off that re-elec-tion bid, the two-termmayorgathered his supporters in astorefront campaign officeand boasted that new busi-ness was moving in andpolicing had improved.

He portrayed himself asthe city’s defender againstoutside forces.

“Iwill fight, andIneedyouto fight with me,” Kelloggsaid to cheers, amid a back-drop of campaign signs thaturged: “Keep The New Har-veyRising.”

But the mayor was deny-ing residents even more in-formation: who was fundinghis campaign.

In previous years, Kel-logg’s campaign committeefiled disclosure reports thatshowed his money comingfrom strip club interests, li-quor stores, city contractorsand employees, among oth-ers.

In typical races, critics canpoint to a candidate’s list ofcontributors to questionwhom the politician is reallyfighting for.

But in this race, the may-or’s committee simplystopped filing the reports —obscuring where his cam-paign money was comingfrom or going toward, aswellas how much he was spend-ing.

The scope of the violationis rare for a sittingmayor, saythose familiarwith the law.

“This destroys people’sfaith in the political system,”said Kent Redfield, a profes-soremeritusat theUniversityof Illinois at Springfield whohelped craft the state’s cam-paign finance laws.

Yet the State Board ofElectionsdidnothing to forceKellogg to comply before theelection. He faced four chal-lengers and won with 40percent of the vote.

NoactionMore than two years later,

Kellogg continued to flout

reform, state officials werefailing to enforce a key lawthat would have exposedhow the city’s finances hadstarted to spiral out of con-trol.

Illinois law requires citiesand villages to hire licensedauditors to go through theirbooks and release an annualreport that sheds light ontheir financial state.

It’s meant to ensure publicfinances are readily knownand aboveboard.

Harvey stoppedproducingtheaudits inKellogg’s secondterm, saying they were tooexpensive.

During the informationblackout, the Tribune hasfound through records, the

cials declined to explain theirdecision to the Tribune. Ne-braska criminologist SamWalker, a national expert onpolice accountability whoonceservedasaconsultant tothe civil rights division, saidhe was surprised by thedecision.He said federal offi-cials had plenty of evidenceof widespread problems inHarvey to push for the ap-pointment of an outsidemonitor.

“It’s a little surprising giv-en how utterly dysfunctionalthe department appears,”Walker said.

Flouting the lawAt the same time that

Justice officials did not force

since convicted,maintainshewasonlyhoping to takedownVargas the drug dealer.

Stallworth was close toKellogg. At Stallworth’s 2009trial, an FBI agent said in-vestigators asked Stallworthto cooperate against Kellogg.He later told the Tribune hedeclined.

Trialevidencealsoshowedthat a year after the election,Vargas boasted to Stallworthabout working with city offi-cials to land a coveted casinolicense for the suburb.

“The mayor knows, thealdermen are in,” Vargas said,according to a transcript of arecorded conversation. “It’sgonna be huge.”

Harvey didn’t get the li-cense from the state — DesPlaines did.

Kellogg declined to be in-terviewed or answer ques-tions about the 2007 electionandVargas’ role in it.

Fedswalk awayAfterKellogg’s re-election,

the headlines on Harvey’sproblem Police Departmentprompted a visit from theFBI’s sister agency: the CivilRights Division of the JusticeDepartment.

The division has immensepower through the federalcourts to demand that prob-lem departments shape up,which it has done across thecountry, including forcingdepartments in HighlandPark and Mount Prospect in2000 to ensure that theyweren’tunfairly targetingmi-norities for traffic tickets.More recently, the divisionforced police in Missoula,Mont., to ensure that theyproperly handled rape in-vestigations.

But thedivisiondidn’t lookat Harvey’s notoriouslyshoddy rape investigations,instead focusing on policebrutality. It spent three years— from December 2008 toJanuary 2012 — reviewingHarvey’s haphazardly keptrecords and noted “seriousconcerns” that officers rou-tinely roughed up residents.It declared the department“devoid of supervisory over-sight and accountability.”

But Justice officials didnothing to force Harvey tochange.

Instead, the town was giv-en “recommendations,” suchas rewriting its policies andprocedures. Harvey officialssaid at the time that theywouldmake the changes.

Justice Department offi-

Harvey issueslow on list ofthe feds, stateHarvey, from Page 1



HowtheFBIhelpedre-elect aonetime targetof corruptionprobeTheFBI planted an undercover agent in aHarvey club in 2007. Records showhe quicklystarted a political action committee that paid for campaignmaterial gushing about thesuburb’s controversialmayor,whowon re-election.

4 Weeks before the local election, Vargas forms apolitical committee, listing its headquarters as hisOakLawn condominium.

5 Vargas is listed in staterecords as lending thecommittee a combined$141,300 over threeweeks.

6 Agent’s committee is listed as paying for fliers toutingmayor’swork during first term.

7 Results:

SOURCE: Tribune reporting TRIBUNE

TIMELINE OF FBI INVOLVEMENT

1 In 2003, federal agents seize$12million found inwarehouse tiedto strip club ownerMichaelWellek.At some point, he begins cooperatingwith FBI.

2 In early 2007, FBI places undercoveragent in anOakLawn condominium.Agent is given the alias Carlos Vargas.

3 Vargas starts a job asmanager/remodeling consultant at Skyboxstrip club inHarvey, also owned byWellek. The agent starts networkingto find corruption.

1

2

3

9490

55

57 94

80

90

290

294

355

Chicago

Oak Lawn

ILLINOIS

IND

IAN

AHarvey

Elk GroveVillage

5Miles

■Kelloggwinssix-wayrace.

■Agent arrestsHarveypolice officer forcorruption, asks him tocooperate in probe ofKellogg, but cop refuses.

■Authoritiesprosecutethat cop. FBIpulls agentout ofHarvey.

■Five years later, federalofficials say governmentmoneywasn’t used, buttheywon’t saywhoprovided the cash.

The city took a major development gamble in spending at least $10 million to fix up a privatelyowned hotel next to a strip club at the town’s edge that is now half-gutted and in foreclosure.

ZBIGNIEW BZDAK/TRIBUNE PHOTO 2013

8 Chicago Tribune | Section 1 | Tuesday, February 11, 2014 S

TRIBUNE WATCHDOG

9S Chicago Tribune | Section 1 | Tuesday, February 11, 2014

State policewon’t auditIn the struggling steel town of Gary, just across the

Indiana border, a new set of town officials last year askedtheir state’s leaders for help. The state police studied thelocal department and helped craft a plan to boost patrols,equipment and training — and promised to continue the“partnership ofmanpower and ideas.”

Compare thatwithwhat happened inHarvey.Harvey’s City Council — against the mayor’s wishes —

called on state police as early as 2006 to audit theHarveydepartment and advise the suburb on how to police itsstreets better. The request for state intervention wasechoed by then-U.S. Rep. Jesse Jackson Jr., who hadcalledHarvey’s situation a “dire public safety debacle.”

But state police didn’t do an audit. SpokeswomanMoniqueBond told theTribune that the agency, then andnow, simply isn’t geared to evaluate the competence oflocal departments.

Attorney general does not investigateCivil rights laws have been commonly used by the U.S.

Justice Department to force reforms on agencies. Butwhen federal officials pass on pushing reforms, as theydid inHarvey, states can step in and sue on their own.

InNewYork, the state attorney general sued in federalcourt to force reforms on a department with a history ofpoor leadership, abuse of power and shoddy policework.

Illinois hasn’t sued. State Attorney General LisaMadigan did not respond to a question on whether heroffice has considered suing any Illinois police depart-ments over abuses of civil rights.

State’s attorneywon’t intercedeNearly 280miles fromHarvey, St. Clair County State’s

Attorney Brendan Kelly spearheaded the passage of aspecial statute that allowed him to impose betteroversight and improvements on departments in East St.Louis and surrounding towns thathad seen similar cyclesof violence, corruption and incompetence.

“Whether it’s corruption or incompetence, it’s a threatto justice,” Kelly said before citing a paraphrased quotefrom Martin Luther King Jr. “And a threat to justiceanywhere is a threat to justice everywhere.”

InCookCounty, State’s AttorneyAnitaAlvarez has notpushed for similar legislation granting her any authorityinHarvey or other long-troubleddepartments.Her officedid not respond to questionswhy.

—JoeMahr

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www.800Florals.comTen Chicagoland Locations

public safety pension payments.Harvey also obtained water from the city of Chicago on credit, sold it to residents

and other suburbs, then stiffed Chicago on multimillion-dollar bills, according to court records.

The suburb, meanwhile, was underfunding police, to the point that detectives were forced for years to juggle three-digit caseloads without regular Internet ac-cess.

Yet all the while, officials let loose on development gambles, including an insider deal that went bust.

The depths of the downward spiral shouldn’t have been secret.By law, the state comptroller is supposed to force towns to file the audits Harvey

was refusing to compile. The comptroller can even hire an auditing firm to go to a town, scour the books and then charge the town for the work.

But the state comptroller didn’t do that in Harvey, instead routinely asking the city, to no avail, to comply with the law.

So when voters turned to another heated mayoral race in 2011, they had little basis to judge Kellogg’s assurances that city finances were OK.

Kicking off that re-election bid, the two-term mayor gathered his supporters in a storefront campaign office and boasted that new business was moving in and polic-

ing had improved.He portrayed himself as the

city’s defender against outside forces.

“I will fight, and I need you to fight with me,” Kellogg said to cheers, amid a backdrop of cam-paign signs that urged: “Keep The New Harvey Rising.”

But the mayor was denying residents even more information: who was funding his campaign.

In previous years, Kellogg’s campaign committee filed disclo-sure reports that showed his mon-

ey coming from strip club interests, liquor stores, city contractors and employees, among others.

In typical races, critics can point to a candidate’s list of contributors to question whom the politician is really fighting for.

But in this race, the mayor’s committee simply stopped filing the reports — ob-scuring where his campaign money was coming from or going toward, as well as how much he was spending.

The scope of the violation is rare for a sitting mayor, say those familiar with the law.

“This destroys people’s faith in the political system,” said Kent Redfield, a profes-sor emeritus at the University of Illinois at Springfield who helped craft the state’s campaign finance laws.

Yet the State Board of Elections did nothing to force Kellogg to comply before the election. He faced four challengers and won with 40 percent of the vote.

No actionMore than two years later, Kellogg continued to flout state disclosure laws, and

state agencies continued to decline to use their full authority.On the campaign end, the State Board of Elections levied a $5,000 fine against


The city took a major development gamble in spending at least $10 million to fix up a privately owned hotel next to a strip club at the town’s edge that is now half-gutted and in foreclosure.
























































































































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THEARTOFMEANING.






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Kellogg’s committee, though the board could have levied many more fines for about a dozen missing reports. The fine has not been paid.

The board has the power to force a committee to perform an audit and hand over the records to the state in some cases.

It hasn’t done that in Kellogg’s case.Kellogg has sought to distance himself from the issue, saying through a spokes-

man that he only recently became aware that Citizens to Elect Eric J. Kellogg — of which he is chairman — did not reveal its fundraising over the last three years.

The committee’s treasurer is a Kellogg relative. The spokesman said the mayor has “directed the committee” to contact the state.

Election board Director Rupert Borgsmiller said the agency is hamstrung by a statute that requires months of notices and hearings before fines are levied.

It is a process easily derailed when certified letters from the board go unaccept-ed, which has happened with Kellogg’s committee.

Borgsmiller conceded that the agency had not tried to hand-deliver the notices to the mayor to speed up the process but said the agency planned to do so in the near future.

“We can’t do everything in a timely fashion — we try,” Borgsmiller said.Unpaid fines could theoretically keep Kellogg off next year’s ballot, but under the
























































































































7 Results:






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9490

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Chicago

Oak Lawn

ILLINOIS

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Elk GroveVillage

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TRIBUNE WATCHDOG















—JoeMahr






THEARTOFMEANING.






312-503-1177

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7 Results:






1

2

3

9490

55

57 94

80

90

290

294

355

Chicago

Oak Lawn

ILLINOIS

IND

IAN

AHarvey

Elk GroveVillage

5Miles








TRIBUNE WATCHDOG















—JoeMahr






THEARTOFMEANING.






312-503-1177

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law, he may be able to counter such a move by simply appealing the fines.As for city finances, years ticked by without a licensed firm scrubbing Harvey’s

books.In that time, the city took a major development gamble, spending at least $10

million to fix up a privately owned hotel next to a strip club at the town’s edge.The Tribune previously reported how the city comptroller was also working for

the developer at the time and how the city failed to keep close tabs on how taxpayer money was spent.

The hotel is now half-gutted, languishing in foreclosure and leaving city taxpay-ers with little to show for the investment.

That revelation hasn’t prodded the comptroller’s office to use its power to forc-

ibly audit Harvey’s books.The state comptroller did start tallying fines against the city last year, which so

far total more than $20,000.Harvey officials are appealing the fines, saying they are a “financial burden.”A spokesman for Comptroller Judy Baar Topinka declined to discuss Harvey’s

case, other than to say the department has “forwarded documents to legal authori-ties for review.”

In recent months, the city moved to play catch-up with its filing requirements, submitting four years worth of broad financial reports that were not vetted by audi-tors, and one 5-year-old report that was.

The city is still short audited reports for the last four fiscal years.Experts say it remains impossible to know the true depth of the city’s financial

problems.From reviewing what is available, one public finance expert at the University of

Illinois at Chicago, Rebecca Hendrick, said: “I wonder how they are paying their bills.”

Coupled with other issues the Tribune discovered, the documents underscore how years of challenges have gathered into a financial avalanche:■ The city spent at least $12 million more than it took in from taxes and fees over four years, with no clear explanation for how the shortfalls were covered.■ There is little to no money in savings, while long-term debt has ballooned to about $50 million, most of it coming in Kellogg’s second term.■ The state says Harvey stopped paying into its police and fire pension funds, pay-ing just $140 toward $7.3 million owed over a three-year period. The back payments owed have reached about $10 million.■ The running tab that Chicago says Harvey owes for water has reached $18 mil-lion, about the same amount as the suburb takes in from taxes and fees over an entire year.

The city typically spends about $5.5 million a year on police, a figure that has not kept pace with inflation in recent years.

Still, the range of the city’s financial troubles was glossed over during an annual budget hearing this summer.

In a boardroom at Harvey’s aging City Hall, Kellogg sat under an enlarged, gold-hued city seal, against a wood-paneled wall.

He spoke optimistically about the city’s financial future, pointing to a budget that called for increased police spending, partly based on shaky new taxes and fees.

The meeting didn’t directly address how the city will deal with the millions owed to Chicago for water, the pension funds or debt payments on the botched hotel development.

Residents were left to judge the city’s financial state on the word from officials, with Kellogg assuring them: “I think we are in a great position.”

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