AX FOR PENSION ADVISER
Judge rules city funds can fire firm founded by Daley nephew, friend of Obama
Five Chicago government pension funds have won a six-month court battle to fire the money-management firm founded by a friend of President Barack Obama and a nephew of then-Mayor Richard M. Daley.
Chancery Court Judge John Noble ruled last week in Delaware that the pension funds had sufficient cause to fire DV Urban Realty Advisors, which was formed by Obama’s friend and onetime employer Allison S. Davis and Daley nephew Robert G. Vanecko.
For the past six years, DV Urban has managed $68 million for pension funds representing Chicago teachers, police officers, other city employees and transit workers, investing government workers’ and retirees’ pension money in risky real estate deals that haven’t done well.
That was one of the reasons the pension funds cited in voting to fire DV Urban last February, when they also filed suit against DV Urban in Delaware, where the company was created.
DV Urban argued that the pension funds had no good reason to dump the firm and were bowing to pressure from members upset over “unwanted media attention” after a series of stories in the Chicago Sun-Times between 2007 and 2009 that exposed The Sun-Times reported on DV Urban in September 2007. the deals involving the mayor’s nephew and reported how the investments were doing.
Three years ago, a federal grand jury began investigating DV Urban, looking into why the five city pension f u n d s put money in the hands of a new firm with no experience in the field that had been unable to find any other investors. Daley’s top financial advisers were members of four of the five pension funds that invested with his nephew’s firm. The grand jury issued subpoenas to the pension funds three years ago. The status of that investigation is unclear.
Two weeks after the subpoenas were issued, the Sun-Times reported that Vanecko and Davis had used city pension money to buy an industrial warehouse that City Hall had been leasing for water department trucks. Vanecko announced he was leaving DV Urban after coming under public fire from his uncle, the then-mayor, who said his nephew had ignored his advice to get out of the pension deals.
Vanecko has said he resigned from DV Urban in late 2009. The financial terms of his resignation haven’t been made public. Davis and his son, Jared Davis, have continued running the company and handling the real estate deals originally made by Vanecko.
Over six years, the pension funds have paid DV Urban a total of $7.2 million — $4.7 million to manage the pension funds’ investments and $2.5 million more for a sister company that operates three buildings bought with pension money.
Before Vanecko got into the pension fund deal, he and Daley’s son, Patrick Daley, had secretly invested in a sewer inspection company that landed millions of dollars in nobid contract extensions from City Hall. The company’s former president has pleaded guilty to criminal charges involving his role in a minority-contracting scam and is awaiting sentencing. Vanecko and Patrick Daley haven’t been charged with any wrongdoing.
Vanecko’s youngest
brother, Richard J. “R.J.” Vanecko, has been identified by Chicago police as the man who punched David Koschman, who later died from brain injuries. No one was ever charged, and the case is now under investigation by a special prosecutor Dan K. Webb and a grand jury.
Chicago pension officials plan to hire Lincoln Advisory Group Ltd. to manage the real estate investments made by Vanecko and Davis. Those deals include $1 million in pension money lent to the owners of the boarded-up building at 2400 S. Michigan, which formerly housed the Chicago Defender, the city’s largest black-owned newspaper. The historic building is in foreclosure, placing the pension fund investment in jeopardy.