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U.S. targets city on set-aside firm
County first probed on medical supplier

Monday, April 11, 2005
Chicago Tribune
by Ray Gibson

A federal probe of irregularities with a Cook County minority contract expanded when a grand jury questioned how a medical supply company won business with the City of Chicago, according to a subpoena obtained by the Tribune.

The city was subpoenaed to detail how it certified Faustech Industries as a minority-owned firm and was asked for copies of bid submissions, contracts and communications with the company.

The chief focus of the probe has been Faustech's involvement with Cook County government. Two Cook County Board members have acknowledged that they were subpoenaed to appear before the grand jury.

The subpoena of the city is the first indication that the firm's dealings with the city are under investigation.

Faustech owner Faust Villazan and his attorney could not be reached for comment. A spokesman for the U.S. attorney's office declined to comment.

In February, Mayor Richard Daley named Mary Dempsey the head of the city's agency that regulates the set-aside program after a series of scandals involving companies that falsely claimed to be minority- or women-owned.

City records show Faustech has eight contracts with the city and has been paid at least $2.3 million for medical equipment and supplies.

A spokeswoman for the city's Procurement Services Department declined to comment because the records have been subpoenaed.

City officials have proposed decertifying the company as a minority-owned business and considered banning it from city business for possible certification irregularities.

In recent days, Cook County Commissioner Mike Quigley has called for an audit of the county's set-aside program because of the investigation of Faustech and questions raised by the certification of a firm run by an African-American woman who had been dead for more than a year.

Quigley has asked the County Board's contract compliance committee to discuss the county's program at a meeting Wednesday.

"Scandals aside, it is a mess," Quigley said last week of the county's program. He wants an outside company brought in to run the program.

One of the issues that Quigley and other county commissioners are seeking clarity on is whether the county does an independent investigation of companies seeking certification. Like most Chicago-area governments, the county relies on the city to investigate the background of firms and determine whether they are truly run by minorities or women, according to the county ordinance.

But county officials insist that despite the ordinance, its practice has been to complete an independent investigation of all firms seeking minority- or woman-owned status and such an investigation was completed on Faustech.

The Faustech federal probe of the county business is focusing on a $49 million hospital equipment contract to a joint venture of Siemens Medical Equipment and Faustech. After the county awarded the joint venture the contract, a judge voided it.

U.S. Magistrate Judge Geraldine Soat Brown said there was no evidence to show that Faustech performed any "commercially useful" function to merit its $14.8 million share of the contract.

County guidelines mandate that contractors must perform a "commercially useful function" and provide "real or actual services" in the contract.

In his testimony in the civil lawsuit brought by a competitor, Villazan testified that $13.9 million of the $14.8 million his firm was to receive would go to Siemens to buy radiology equipment he was supposed to be supplying to the county.

Villazan has been a political donor to Stroger and three County Board members. Two of the commissioners, Joseph M. Moreno and Roberto Maldonado, have said they have appeared before the grand jury, but Moreno and Maldonado said they are not targets of the probe.



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