News & Politics » Ben Joravsky on Politics

Will Mayor Rahm use taxpayer money to settle Tony Rezko’s debts?

Apparently, the mayor’s ready to do what it takes to redevelop Rezkoville.


Developer and political fundraiser Antoin "Tony" Rezko leaves federal court in Chicago in October 2006. - AP/NAM Y. HUH
  • AP/Nam Y. Huh
  • Developer and political fundraiser Antoin "Tony" Rezko leaves federal court in Chicago in October 2006.


or the last few days I've been looking for takers on my bet that Mayor Emanuel will eventually spend about $17.4 million of your property tax dollars to pay off some of convicted felon Tony Rezko's obligations.

Not exactly at the top of anyone's priority list of expenditures—except, perhaps, the people who made the mistake of lending Rezko their money.

This has to do with the mayor's mouth-frothing determination to spare no public expense to develop "Rezkoville," the 62 acres of vacant land between Roosevelt and Chinatown that Rezko once owned, into a neighborhood filled with condos and townhomes.

Apparently, Emanuel will do just about anything to avoid spending that money on boring things like our dead-broke schools.

OK, everybody, settle in for a convoluted explanation.

The site is part of the River South tax increment financing district, which Mayor Daley created in 1997.

As you know, TIFs are, in effect, a surcharge added to your property tax. The proceeds are used to pay for pretty much anything the mayor wants.

In this case, Mayor Daley envisioned having someone build town houses, condos, and retail on the vacant South Loop property.

As soon as Daley created the TIF, he made the land more valuable to developers. The TIF signaled the city's readiness not only to approve but to subsidize any subsequent development.

That's where Rezko—a businessman with connections to both Republicans and Democrats—comes in.

In 2002, Rezko purchased the land for about $72.3 million.

His first proposal—which included an Ikea store—fell through.

In 2005, he proposed that the city give him a $140 million TIF handout to help pay for a massive housing and retail development.

But Daley turned down Rezko's TIF request.

By then, Rezko had apparently achieved a status I thought was impossible to reach: too controversial for a TIF.

Specifically, he got entangled in a contracting scandal at O'Hare Airport involving a minority-front company. In addition, the feds were starting to investigate Rezko's involvement in former governor Rod Blagojevich's pay-to-play scandals.

With his legal bills mounting, Rezko turned to Semir Sirazi for a loan. In addition to being Rezko's neighbor in Wilmette, Sirazi is one of the founders of U.S. Robotics' network system division.

The agreement they reached was a complicated one. The bottom line is that Rezko wound up owing Sirazi more than $12 million. Rezko was supposed to repay that obligation with the proceeds from, among other things, the sale of the 62-acre site.

But he didn't.

In 2007, Rezko sold the land to General Mediterranean Holdings, a company owned by Nadhmi Auchi, a controversial Iraqi-British billionaire investor, for about $31.8 million. Rezko and GMH kept Sirazi in the dark about the deal, according to a lawsuit that Sirazi eventually filed.

In 2011, Rezko was sentenced to more than ten years in federal prison for his role in the Blago scandals. And in 2012, Sirazi filed a federal lawsuit demanding that Auchi repay the money that Rezko owed him.

Last year, a jury sided with Sirazi. Auchi appealed the ruling.

On June 20, the Seventh Circuit U.S. Court of Appeals ruled in Sirazi's favor, ordering Auchi to pay him about $17.4 million. The award includes $5 million in punitive damages.

"We're very grateful and gratified that the appellate court did a good job," says Greg Scandaglia, Sirazi's lawyer. "They got to the bottom of it."

According to the appellate court's opinion, written by judge Richard Posner, "Rezko breached" his "agreement by failing to pay Sirazi anything."

And why should Auchi—or GMH, his company—have to repay Sirazi for a loan made by Rezko?

Because "GMH did obtain money from defrauding Sirazi, by deflecting to itself money owed Sirazi," Posner wrote. "It was thus enriched unjustly. Likewise it conspired with Rezko to transfer his property to it without paying anything to Sirazi, thus further deflecting to GMH money owned Sirazi."

But by the time Posner rendered his decision, Emanuel was moving full steam ahead to get that land developed.

On May 12, the mayor issued a press release announcing that a local company, Related Midwest, had "acquired a stake in the site." Auchi would still be involved in the development, but Related Midwest would "serve as its master developer," the mayor said.

"I look forward to working with our private partners to transform this site," the mayor said in his statement. "My administration will continue to use every tool at our disposal to drive private investment into sites like this."

Later that day, Department of Planning commissioner David Reifman filled out the details in a speech at the City Club, where he explained that either he or the mayor had been calling Curt Bailey, Related's chief executive, on a daily basis for weeks, seeking updates on the deal.

Clearly, this project was at the top of the mayor's to-do list.

One problem: Sirazi's lien on the property. Essentially, because Auchi owes him money, he has to be repaid when the site's developed.

And that's where you come in, taxpayers.

There's so much about this project we don't know. We don't know how much total TIF money they'll get. We don't know the terms of the acquisition deal between Auchi and Related Midwest. We don't know how much it will cost to remediate this land. We could go on and on about what we don't know.

But I predict this: My guess is that one way or another, Auchi will drag out this project for so long that Emanuel, desperate to get it done, will use your property tax dollars to pay that $17.4 Rezko owes Sirazi. So paying for Rezko's chicanery will be added to the forever-growing list of dubious TIF expenditures made by our mayors over the years.

Of course, there's always the possibility the mayor will walk away from the deal.

After all, Auchi's a controversial character in his own right, having been "convicted in what was France's biggest postwar corruption scandal," as an article in the Guardian put it.

Also, because of Daley's 1997 TIF, developing the land won't generate property tax dollars for our schools, parks, or police. Instead, the new property taxes created by the development will go to the River South TIF. (By law TIF districts are good for up to 24 years.)

Anyway, here's my bet: Knowing how eager the mayor is to look like a guy who can get things done—especially in the aftermath of George Lucas taking his museum out of town—I say he'll waste your tax dollars on this baby.

And you say—Oh, no, you're wrong. Our mayor is a wise man who will only use our tax dollars for things we really need, like schools.

Any takers? Yeah, well, I didn't think so. v

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