Four Sentenced for Roles in Chicago HERE Contract Schemes

It may not have been an actual empire over which the Duff family presided in their native Chicago. But it was hardly a Mom-and-Pop operation either.  Family patriarch John Duff, Jr., his wife Patricia, and their sons had grown wealthy over the decades, having cultivated ties both to City Hall and the underworld. But the past few years have seen the Duffs fall upon hard times, after lengthy investigations by the Labor Department’s Office of Labor-Management Standards (OLMS) and Office of Inspector General, plus the FBI and the IRS. The most important chapter may have been closed in U.S. District Court this May 18-20, with the sentencing of four persons for fraud, money laundering and racketeering.


The actions were not the first aimed at reining in the Duffs. Back in 2000 a federally-appointed monitor, Kurt Muellenberg, banned John Duff III from the Hotel Employees and Restaurant Employees for life, having concluded that he’d embezzled more than $172,000 from the union for services not performed, and knowingly associated with organized crime figures. His father in a separate case pleaded guilty almost two decades earlier to embezzling funds from his union, LWSR Local 3; he served 17 months in prison.    


This May’s convictions centered upon a pair of fraudulent schemes. In one case, Duff family associates during 1990-2002 had won at least $100 million in contracts and subcontracts with the City of Chicago by creating sham female- and minority-owned business fronts. In the other case, an insurer with ties to the Duffs had evaded payment of more than $3 million in workers’ compensation insurance premiums.   


Here’s the body count. James Duff, another of the sons, and principal defendant, having pleaded guilty back in January to racketeering, mail fraud and other charges, received a sentence of 9 years and 10 months. Additionally, he was ordered to make restitution to the City of Chicago of nearly $11 million and to the National Council on Compensation Insurance (NCCI) of $1.09 million. John Leahy, president of Leahy & Associates Insurance Brokerage, got a three-year, 10-month sentence, and along with Duff, was declared jointly and severally liable for $1.09 million due NCCI. Edward Wisniewski, an insurance agent and vice president of Leahy’s firm, got a one-year sentence. William Stratton, a former business agent for Local 3, received a five-year, 10-month sentence, and was ordered jointly and severally liable with co-defendant Duff for restitution to the City of Chicago in an amount in excess of $7.3 million. 

It is worth emphasizing a point that very few commentators have made over the course of the affair: the perverse incentives created by affirmative action. The City of Chicago mandates that 25 percent of its contracts be awarded to companies headed by a member of a racial/ethnic minority, and 5 percent of contracts go to firms headed by a woman. It was not the quality of the Duffs’ work that was at issue; it was their misrepresentation of company ownership. But common sense should dictate that had these percentage quotas not been in place, there would have been nothing to misrepresent! The Duffs, to be sure, were crooked, and their $32,000 in contributions to Mayor Richard M. Daley’s election campaigns over the years no doubt played a part in getting City Hall to back away from an investigation. But equally to the point, self-styled “progressives” in city government served as the family’s enablers. If local officials really want to guard against future scandals such as this, they should focus more on scrapping quotas than enforcing them. (OLMS, 6/9).