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Feel Safe Yet?: A Dangerous Game

A union unleashes its new clout in the City Council, slamming an inexpensive but potentially risky airport security contract.



Alderman Ike Carothers is a burly west-sider who wears nice suits but often looks ready to head butt anyone he catches looking at him sideways. As the chair of the City Council's Committee on Police and Fire, his job is to ward off questions about Mayor Daley's record on police abuse or civil rights, and he usually does it well.

But last week Carothers emerged as one of the harshest critics of a new $32 million contract for airport security. In the past the city has rejected low bidders for not meeting requirements to the letter. This time a contract's been awarded to a firm that didn't even meet the staffing requirements of the bid. Universal Security, headed by a former Chicago police officer, stands to increase its last year revenues of $1.45 million many times, while cutting its employees' salary and benefits.

"In its best light, it's hard to find anything good about this contract," said Carothers during a packed meeting of the council's finance and aviation committees. "This company has come in here and literally pulled the wool over two departments' eyes, and nearly pulled the wool over the whole city of Chicago's eyes."

By the time Carothers was done, he'd joined a growing group of aldermen calling for the security deal to be voided. And the Service Employees International Union, which has managed to turn the contract into a political controversy, has used more of the clout it showed in this winter's elections.

The saga really started in 1996, when McCoy Security, a black-owned Chicago firm, won a contract to provide about 180 unarmed security guards to monitor airport terminals and parking lots. In the event of an emergency, the guards were also supposed to support city police officers and federal security officials. McCoy's workers were represented by SEIU, and the firm had some experience at airport work, having been a minority subcontractor for the company that had previously held the contract.

McCoy won a renewal of the contract in 1999. By 2002 it had been paid about $27 million for airport security. But when McCoy's second contract ran out in late 2002, the city put the airport security work out for bid again, this time as part of its Target Market program, meaning that only minority- or woman-owned firms could compete for it. Six companies bid. At $5.2 million a year, McCoy's was nearly half a million dollars more than the low bidder. But McCoy won the contract after highlighting its experience providing security for the Hines VA Hospital, Argonne National Laboratory, and federal General Services Administration facilities in Minneapolis and Indianapolis as well as at Chicago airports.

The 2002 contract was scheduled to end in November 2005, and this time the city requested bids for security at other city facilities along with the work at the airports. Eight were submitted in March and 11 more in May, but each time the city rejected the airport security portion of the proposals based on "inconsistencies" and "issues related to paperwork and other documentation," according to Karen Bates, a spokeswoman for the city's Department of Procurement Services. So McCoy's 2002 contract was extended through early 2007. By this spring the city had paid McCoy a total of more than $52 million for airport security.

This January, as SEIU was pouring resources into aldermanic campaigns, challenging Daley's grip on the City Council, the city issued a new request for airport security bids. Though it had some requirements for minority subcontracting, the contract was no longer part of the Target Market program. "The City determined that there was an insufficient number of interested and/or qualified [minority- or woman-owned firms] with the capacity needed to perform these services," Bates said.

This time ten companies offered five-year bids ranging from $35 million to $63 million; McCoy's was the second-highest offer, at $61 million. Renard Mayfield, McCoy's director of finance, said his company knew it wouldn't be able to offer the low bid. "Since we've been involved in this for an extended period of time, we have people with some seniority and some benefits," he said. "When other companies came in and did not have to offer the same benefits we did, they were able to offer a bid price substantially lower than our bid price."

Again, though, the city rejected all of the bids. Bates said this was because several of the lowest bidders didn't meet all of the city's requirements.

So in March the city once again requested more bids, and this time it received 16. The lowest, $31 million, came from first-time bidder Universal Security, run by former police officer Mark Lundgren. McCoy's $49 million offer was the second-highest.

Just a month earlier, Lundgren, a leader of the Old Town Merchants and Residents Association (once known as the Old Town Chamber of Commerce), had donated $1,000 to 43rd Ward alderman Vi Daley, a mayoral loyalist who was then in a tight race against several challengers, including union-endorsed Michele Smith. Lundgren didn't return numerous calls for comment, but Alderman Daley said she was unaware that Lundgren had been bidding for the airport deal. "I know him because he lives in the ward and he's been supportive of me," she said. "But I know nothing about this at all."

Meanwhile, 22nd Ward alderman Ricardo Munoz, a frequent critic of the mayor, heard from several McCoy employees that their firm was likely to lose the contract. Given SEIU's campaign work against Daley-supported aldermen, Munoz was suspicious about the timing and got in touch with the union's leaders. He said they told him they'd notified Ed Burke, the powerful chairman of the council's finance committee. Burke typically supports mayoral initiatives but has long received backing from organized labor.

Universal Security was awarded the contract on April 18, the day after City Council runoff elections, most of them pitting SEIU-backed candidates against mayoral allies.

Because the city dropped its Target Market requirements, Lundgren, who's white, was able to satisfy the city's remaining affirmative action requirements by promising to subcontract $7.3 million to Steiner Security, a black- and woman-owned business that had previously worked at the airports under McCoy, and another $1.6 million to Moore Security Services, which is owned by a woman.

These figures caught the attention of Jon Clark of Securitas Security Services, one of the losing bidders. In a letter to city officials Clark noted that the numbers were about half a million dollars short of the mark promised, and that there were a couple of other inconsistencies in the subcontracting proposals. In the final version of the contract, posted on the city's Web site, the figures were changed.

Records also raise questions about how much the city weighed Universal's experience before awarding the contract. On its Web site Universal says that it specializes in security training, human resources services like background checks, and shoplifting prevention. In one memo to city officials, company executives asked if they needed to submit a statement of their experience along with their bid. The city responded no--that was only necessary "if requested by the Chief Procurement Officer."

But Wendy Abrams, a spokeswoman for the city's Department of Aviation, said that before finalizing the contract city officials held a meeting with Universal leaders to review the firm's qualifications. The city first confirmed that Universal had $1.5 million in revenue last year, a line of credit with Chase bank worth nearly half a million dollars, and $185,000 in credit for leasing equipment, she said. "Based on that, the city decided they could handle the payroll," Abrams said.

The city was also satisfied by Universal's security experience and size. Its background included shoplifting prevention at Target, K-Mart, Macy's, and Home Depot and patrols of airport buildings for Signature Flight Support, a company that has worked on business flights. Universal had only 130 employees, 44 short of the 174 required under the contract, and planned to cut the pay and benefits of its airport security guards.

Shortly after the deal was inked, SEIU began looking into Universal and Lundgren--and spreading the message to aldermen and reporters that McCoy had been dumped as political retaliation for the union's electioneering, potentially leaving the airports at risk.

Burke was convinced, and he persuaded 45th Ward alderman Pat Levar, a loyal Daley ally who chairs the council's Committee on Aviation, to join him in calling for a hearing to reexamine Universal's contract. Burke announced plans for the hearing at the May 23 City Council meeting--the first to include the seven rookie aldermen elected with SEIU support. In a written statement explaining the need for the hearing, Burke questioned Universal's security qualifications but didn't mention SEIU or the possibility of political motivations for the award.

"The city of Chicago deserves only the best security companies we can find to guard our airports," Burke said. "I would like to find out more about how this company was picked for the job." He noted that state regulators cited Universal Security in 2001 for employing two people who weren't properly registered to work as security guards. The company got a year's probation and paid a $400 fine for the violations, according to state records.

The following week, SEIU state president Thomas Balanoff wrote a letter to Mayor Daley expressing concerns that Universal's planned wage and benefit cuts would increase staffing turnover and erode the quality of airport security. He also raised the question of politics.

"I have been trying for several weeks to get this situation resolved," Balanoff wrote. "This security contract was awarded within days after the Aldermanic elections, and I contacted both [Daley campaign chairman] Terry Peterson and [Daley aide] John Dunn and asked them if this happened as retaliation for SEIU's involvement in the aldermanic elections. They both told me that the two were not connected."

However, Balanoff continued, Dunn had stopped returning his calls, so he was hoping the mayor would agree to meet with him. "If we could not reach a resolution, in the very least I wanted you to understand why [SEIU] would have to engage in a public campaign to protect our standards and security at O'Hare and Midway airports."

Balanoff didn't receive a reply for more than a month. In the meantime, the union kept up its lobbying. "Before this, his biggest job was patrolling Target parking lots in golf carts," Jerry Morrison, SEIU's state executive director, said of Lundgren in an interview in early July. "It seems ridiculous to us that the mayor would jeopardize security at the airports for political retribution."

Most aldermen who knew anything about the controversy had received all of their information from SEIU. "I did meet with members of SEIU about this, and I know they have some concern about the new firm's lack of experience, some concern about process and the impact on employees, and some concerns about violations the company might have," Third Ward alderman Pat Dowell said at that time. "That's one side of the story. I'm hoping the hearings will shed light on a lot of these questions."

Alderman Michael Zalewski, whose 23rd Ward includes Midway Airport, said that he didn't know much about the contract, either, though he's one of the aviation committee's leaders. "I'm vice chairman of the aviation committee, which doesn't really mean a lot," he said. He promised to find out more.

On July 6, the Tribune ran a story outlining Universal's contract and experience. It noted that SEIU and its allies suspected that politics had played a role in awarding the contract, quoting Munoz as saying, "It obviously looks like political payback."

That week Balanoff received a letter, dated July 3, from chief procurement officer Barbara Lumpkin in response to what he'd written to the mayor. Lumpkin noted that Universal was the lowest bidder and said it would be offering fair wages and health insurance to its employees, many of whom had been hired away from McCoy when the contract changed hands. But she didn't directly address Balanoff's concerns about politics, writing, "I have looked into the matter and have not discovered any issues with either the bid process or the responsiveness [qualifications] of the winning bidder."

The next week SEIU staffers prowled the halls behind City Council chambers, handing copies of the Trib story to aldermen as they hurried into committee meetings.

By the morning of July 17, the day of the hearing, SEIU had dropped the political retribution angle. Instead, at a rally outside council chambers, Balanoff and Munoz gave speeches asserting that the city's decision to skimp on security services was a raw deal for the workers and a risk to travelers.

Balanoff pointed to a poster of a security guard's blown-up pay stub from Universal. The guard was being paid $7.50 an hour plus $3 an hour for uniform and transportation costs--"benefits" that workers would have to pay income taxes on at the end of the year. Balanoff charged that it was a violation of the city's living wage ordinance, which mandates that security guards be paid at least $10.33 an hour in straight wages. "Really what this means is that we'll have a workforce that will experience high turnover and will not provide the security we need," he said.

Burke called the hearing to order in the council chambers a few minutes later. It was immediately clear that it was the union's show. Most members of the City Council were present, and they listened to Balanoff read a ten-minute statement detailing his grievances against the contract and Universal. The new contractor, he said, did not offer health insurance to its employees. It was also violating the city's own wage laws and "cheating" workers out of 30 percent of their social security benefits in order to save itself nearly $100,000 a year. "City contractors should not be leading the race to the bottom," Balanoff said.

After heavy applause from the SEIU members who'd packed the gallery, Burke noted that Universal's contract didn't include a performance bond, a provision that would penalize the company if it didn't reach certain performance goals.

"There is no performance bond--it's been waived. I'll note that there is one required for the firm that provides the airport with toilet seats," Balanoff said.

"So there's a performance bond for toilet seats and not for the security bonds," Burke said. "OK, any questions for Mr. Balanoff?"

Sandi Jackson, who received thousands of dollars in union support during her recent campaign, had one. "Is it your understanding that this contractor has zero experience in doing security at airports?"

"They may have had some before with private companies--"

"But major security?" Jackson said.

"They have not done this type of security."

"And Alderman Jackson, it is undisputed that Universal Security had $1.45 million in revenue--that's the most that it ever had," Burke said. "This contract is now 20 times more than the highest amount of revenue this company has ever demonstrated it can handle."

"So for an airport the size of O'Hare Airport, which is the second-biggest airport in the country, which pretty much determines the traffic from coast to coast, is now being secured by a company that has zero experience securing an airport of this magnitude?" Jackson asked. "Is that your understanding?"

"That is my level of understanding," Balanoff said.

Copies of the pay stub shown on the poster were distributed to the aldermen, and several said they were upset that Universal appeared to be skirting city law. "Mr. Balanoff, you and I have often disagreed, but there's one thing that's clear, and it's as clear as the nose on my face, and that's that when I voted for a living wage, I voted for a living wage," growled 50th Ward alderman Berny Stone, another union target this past winter. "I voted for a wage, not a transportation allowance." He and alderman Carrie Austin, chair of the council's budget committee, said the contract should be rebid.

But the best part of the show was still unfolding. Burke called two security guards who had worked at the airports under McCoy and now were employed by Universal. He took a jocular tone with one, Zbigneiw "Ziggy" Matelski.

Under McCoy, Matelski had received full health benefits and a pension plan. Now he had to pay his own insurance, which meant he'd been going to the county hospital to get treatment for a broken arm.

"Any questions for Ziggy?" Burke asked. "Your alderman is here, Zig, the alderman of the 13th Ward. You got any questions for your constituent, alderman?"

Alderman Frank Olivo, who hasn't said a word on the council floor in years, sat up straight. "Ziggy, I see you give 100 percent," Olivo said. He asked where Matelski was "located." Matelski didn't understand.

"Where do you live, Zig?" Burke said. Matelski told him. "And he votes for you early and often, alderman," Burke said to Olivo.

"If he does a good job, I'll vote for him," Matelski said. "If not, I won't."

The place erupted in applause and laughter. When it quieted down, Burke spoke up for his new ally. "They're doing the best they can under tough circumstances--salt of the earth, that's what Chicago is all about. And it's especially compelling when you hear that Zig had health insurance and a pension, and he's got no choice--they come in and say, 'Work for less money or you don't have a job.'"

The aldermen heard withering testimony from a security expert from the City University of New York who'd been recruited by SEIU. Then Lumpkin and aviation commissioner Nuria Fernandez stepped up for more than an hour of questioning.

The shots fired by alderman Ray Suarez, another close Daley ally who sounded increasingly disgusted as the hearing went on, were typical. "So, commissioner, is this a very important job at the airports?" he asked Fernandez.

"This security contract is one component of a multitiered security--"

"They play an important role," Suarez said.

"They supplement our aviation security."

"So you think that a company that has no track record at major security should qualify to be given this kind of responsibility?"

"It is my understanding based on the due diligence that was performed during the evaluation of the company's responsiveness that they have in fact provided security services to Fortune 500 companies and that they have experience at both O'Hare and Midway airports working for Signature Flight company, which provides private company support."

"They might have one or two security guards there, and the rest of them are our own people and federal people, correct?"


"So they don't have any major experience at major security," Suarez said. "You know, people fill out applications to work for your department, you're not going to hire someone who operates heavy equipment to do accounting. Am I right or am I wrong?"

"You make a very important statement, Alderman Suarez," Fernandez said.

As Suarez pressed on, Fernandez added that she'd just learned that Universal wasn't paying the full $10.50 in wages it had promised, but Lundgren had sent her a letter the day before vowing to change his practices.

A few minutes later, Carothers grilled the commissioners before summing things up. "I don't think there's anyone in this room who believes this is a good contract," he said. "And I'm telling you, because of this, you have single-handedly resurrected the whole issue of why City Council should have oversight of these contracts."

The committee meeting ended with a promise from Lumpkin to continue to investigate the contract and a vow from several aldermen to press for it to be terminated immediately.

At the full City Council meeting two days later, the SEIU's Morrison worked the lounge behind council chambers as aldermen Munoz, Toni Preckwinkle, Freddrenna Lyle, and Joe Moore were drafting a nonbinding resolution calling for the contract to be voided. He approached alderman Tom Allen and offered a handshake.

"Alderman Lyle is going to be introducing a resolution on the airport contract," Morrison said. "Can we have your support?"

"Of course," Allen said. "It's a no-brainer for me."

As Jackson walked by, Morrison said hello, and she veered over to give him a hug and a kiss. "It's good to have friends here," Morrison said as she left.

The resolution passed as part of a package at the end of the meeting, and its sponsors say they'll keep pushing the administration until the contract is dead.

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