A few weeks ago a small story in the Australian Financial Review piqued my interest. It was about an Australian company CEO who was in court on bribery charges after the Chicago Tribune had uncovered a wide corruption case. Redflex is a global company designing and marketing digital traffic enforcement systems and were founded (and are still headquartered) in Melbourne, Australia.
The story goes back several years when the Tribune uncovered a $900 hotel bill for a city employee paid for by Redflex. What transpired was a classic case of “jobs for the boys”, lucrative contracts and political payments made by consultants that potentially influenced the awarding of the contracts.
When Rahm Emanuel stood for election as the Mayor of Chicago, he campaigned for more red light and speed cameras to be installed to reduce accidents and to improve the city. What he may not have known is that one of his campaign funders was a consultant heavily involved with Redflex – who had been installing the technology. On hearing of the report in the paper, Emanuel cancelled the contract, however the damage was done and the authorities were lurking.
Redflex had hired a Chicago based consultant, Martin O’Malley, to “influence” the city transportation manager, John Bills, into handing them the contract. O’Malley and Bills were long time friends and when the contract was originally awarded to install hundreds of cameras – that would fund the city to the tune of hundreds of millions of dollars in fine collection – it went to Redflex. The uncovering of the hotel bill lead to the downfall of the contract and not only the consultant and the (now retired) manager but also several Redflex executives.
With the case being investigated it appeared that several of the accused squealed quite quickly and details emerged of large cash payments and other inducements to Bills paid via O’Malley from Redflex. $2M was funnelled to Bills this way in cash, property, hotel rooms, meals and other items!
Karen Finlay (now the ex CEO) of Redflex has also been charged with fraud and initially denied all wrongdoing despite evidence quickly mounting against her from her co-accused. Finlay is also accused of conspiring by demanding that staff should not record any contact with O’Malley and to destroy evidence over the 10 year period of the fraud.
The original allegation surfaced in 2012 and with several years of building a case, prosecutors pounced mid 2014 arresting all involved. By September Finlay had admitted to a first round of charges and in December O’Malley admitted guilt in a plea bargain and the following month Bills asked to have his trial moved to a neutral State – Nevada to try and reduce the sentence expected.
Meanwhile the charges against Finlay started to rack up as more details of bribery came to light in several other US cities. It seems that this was their modus operandi: pay off officials to secure contracts. In all, 14 States have found improper conduct. So in August this year she finally admitted guilt to all charges and is set to go down for her involvement.
Redflex has not fared well as you might imagine, after having the contract cancelled by Chicago they also lost contracts in New Jersey and Ohio. They have had a tough year with losses reported of $38M (it was originally estimated to come in at $10M) and to make it worse, Chicago has launched a $300M law suit against them! As I said earlier in the post, Chicago has made hundreds of millions of dollars in fines from motorists during the contract period and now wants to get much more from Redflex. This lawsuit is also intriguing – the salesman who made a mint selling the systems and turned whistleblower after being fired, instigated the suit through a legal play that allows whistleblowers to start proceedings and be backed by the aggrieved parties.
This case has a few more months to play out and it is expected that the accused will receive at least 5 years in jail each.