IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT LAW DIVISION CITY OF CHICAGO ex rel. AARON ROSENBERG TO BE FILED UNDER SEAL V. REDFLEX TRAFFIC SYSTEMS, INC. . a Delaware corporation {353' COMPLAINT ?cticm Now Comes the City of Chicago ex rel. Aaron Rosenberg through Muldoon Muldoon, LLC and sues under the Municipal False Claims Ordinance 1-22-010 et seq. of the City of Chicago Municipal Code, against Red?ex Traf?c Systems, Inc. seeking relief against Red?ex on behalf of the City of Chicago for false claims submitted to the City of Chicago and in support states: NATURE OF CASE 1. The City of Chicago (?City?) expressly requires, as a condition of public contracts, that those contracting with it af?rmatively state that they have not engaged in bribery or attempted to bribe any employee of the City. 2. Defendant Red?ex Traf?c Systems, Inc. (?Red?ex?) engaged in systematic bribery of John Bills the Deputy Commissioner of the Chicago Department of Transportation from 2003 through 2012 in connection with its contracts for the City of Chicago?s Red Light Enforcement program. 10. 11. 12. From 2003 through 2013, Red?ex ?led numerous statements it was not engaged in bribery of a City employee. These statements were false. Red?ex knew these statements were false. Red?ex made these false statements to be paid by the City on fraudulent claims. The City?s False Claims Ordinance 1-22-010 et seq. of the City of Chicago Municipal Code prohibits anyone from making a false statement to get a fraudulent claim paid by the City. Red?ex violated the FCO by ?ling false statements for the purpose of being paid on fraudulent claims. The FCO also authorizes a private person to sue on behalf of the City and himself against any person who has violated the FCO. Relator, Aaron Rosenberg Rosenberg?), was intimately involved in and has exclusive knowledge of Red?ex?s systematic bribery of Mr. Bills. Mr. Rosenberg, having direct, independent knowledge of the information on which the following allegations are based, sues on behalf of himself and the City against Red?ex for violations of the FCO. JURISDICTION AND VENUE Jurisdiction is proper in Illinois under 735 ILCS 5/2-209 because during the relevant time Redflex did business in Illinois. 13. 14. 15. 16. 17. 18. 19. 20. 21. Venue is proper in Cook County, Illinois under 735 ILCS 5/2-201 because the transactions from which the cause of action arises occurred in Cook County, Illinois. PARTIES Relator Mr. Rosenberg is a resident of California and former employee of Red?ex, who represented Red?ex in negotiations and other business dealings with the City of Chicago from 2002 through 2012. Red?ex is a Delaware corporation that, during the relevant period, was doing business in the City of Chicago, County of Cook, State of Illinois. Red?ex is a wholly owned subsidiary of Red?ex Holdings LTD. (?Red?ex Holdings?), an Australian public company. FACTUAL BACKGROUND Red?ex is in the business of producing and implementing traf?c safety systems for municipal, county, and state entities in the United States and elsewhere. Mr. Rosenberg was hired by Red?ex in March 2002 as Vice President of Sales and Marketing for North America. Prior to hiring Mr. Rosenberg, Red?ex hired Bruce Higgins as its Chief Executive Of?cer. Prior to hiring Mr. Rosenberg, Red?ex promoted Karen Finley as its Vice President of Operations. Red?ex produces and maintains Digital Automated Red Light Enforcement systems that it sells to municipal entities, such as the City of Chicago. 23. 25. 26. 27. At the time it hired Mr. Rosenberg, Red?ex held a #4 US-market position with only eleven contracts in the entire United States. Chairman of the Board of Red?ex Holdings, Mr. Christopher Cooper, as well as Mr. Higgins and Ms. Finley, instructed Mr. Rosenberg to improve Red?ex?s market position to #1 through the execution of new contracts and with a major US. city, such as Chicago, as an anchor client and marquee reference. JOHN ASSISTANCE IN NEGOTIATON OF CITY CONTRACT Unlawful Pre?Bid Assistance In order to procure a contract with the City of Chicago to sell Red?ex?s Digital Automated Red Light Enforcement systems, Mr. Rosenberg began preliminary discussions with John Bills of the City?s Department of Transportation Mr. Rosenberg learned the City was planning on issuing a Request for Proposal for Digital Automated Red Light Enforcement systems. An RFP is a soli01tation made by the City, often through a bidding process, by an entity interested in procurement of a commodity, service, or valuable asset, to potential suppliers to submit business proposals to the City. Mr. Bills asked Mr. Rosenberg to provide assistance in developing the scope of services for the City?s RFP. 80. 31. 32. 33. 34. 35. Mr. Rosenberg, Mr. Higgins, and Ms. Finley would meet face-to?face with Mr. Bills to ensure the scope of the RF was advantageous to Red?ex. These discussions also concentrated on the types of financial arrangements (6. g. contract terms) that would be most advantageous for Red?ex given its limited ?nancial means. During the winter of 2002/2003 the City held a pre-bid meeting for interested vendors to discuss the up?coming RFP for Digital Automated Red Light Enforcement systems. Due to a medical condition, attending this meeting was dif?cult for Mr. Rosenberg. However, Mr. Bills told Mr. Rosenberg to attend. Additionally, Mr. Bills informed Mr. Rosenberg that it was important for Mr. Rosenberg to further strengthen his relationship with Mr. Bills? boss Donald Grabowski before the RFP responses were submitted by vendors. Mr. Bills informed Mr. Rosenberg that Red?ex? main competitor, Affiliated Computer Systems, Inc. had deep ties and existing contracts with the City and that in order for Red?ex to be selected; Red?ex had to distinguish itself from ACS. It was improper and a Violation of the City's Code of Government Ethics (Section 2-156 et al of the City's Municipal Code) for Mr. Bills to give this information to Mr. Rosenberg. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. Mr. Bills gave this information to Mr. Rosenberg to gain favor with Red?ex and to be in a position to later ask to Red?ex to compensate him after it had procured a contract with the City. Mr. Rosenberg attended the pre-bid meeting with City of?cials in Winter 2002/2003. Mr. Rosenberg attended the pre-bid meeting at the direction of Mr. Bills and Mr. Higgins for the purpose of Red?ex gaining an illegal advantage in the RFP process. After the RFP was issued, Red?ex submitted a proposal to the City. In its submission to the RFP, Red?ex included an Economic Disclosure Statement wherein Red?ex stated that it was in compliance with the City's Code of Government Ethics. This statement was false. Red?ex knew it was false. Red?ex made this false statement for the purpose of procuring the contract for the City?s Red-Light Enforcement Program. Unlawful Assistance with Field Tests After the deadline for submissions, the City conducted ?eld tests for various vendors, including Red?ex. The ?eld test consisted of a 30-day live system trial. Such a ?eld test involved considerable costs for Red?ex. At the direction of Mr. Higgins, Mr. Rosenberg informed Mr. Bills that Red?ex was concerned about the considerable costs of the ?eld tests, especially if its bid would fail. 48. 49. 50. 51. 53. 54. 55. Mr. Bills assured Mr. Rosenberg that he wanted to help Red?ex. However, Mr. Bills told Mr. Rosenberg that Red?ex needed to ?step-up its game? because ACS was making a strong push to get the City?s business. Mr. Bills related that ACS had a good relationship with people at the City and had gone of?ce in Chlcago. Mr. Bills also said that representative had offered to pay Mr. Bills, possibly $100,000, if Mr. Bills helped ACS. Mr. Bills gave the information regarding ACS and instructed Red?ex to ?step-up its game? in order to let Red?ex know that his assistance was necessary to get the City contract. Mr. Bills also gave the information regarding ACS and instructed Red?ex to ?step-up its game? so that he would to be in a position to ask to Red?ex to compensate him after it had procured a contract with the City. It was improper and in violation of the City?s Code of Government Ethics for Mr. Bills to give the information regarding ACS and to instruct Red?ex to ?step up its game? in order for Red?ex to procure the City contract because he was the chairman of the Evaluation Committee. Unlawful Assistance with Evaluation Process In May 2003, upon completion of the ?eld tests, the City initiated an evaluation procedure for the bids and the results of the ?eld tests. 56. 57. 58. 59. 60. 61. 63. The evaluation process included a formal meeting with the City Of?cials who were members of the Evaluation Committee to discuss the results of the ?eld tests. On or about May 12th, 2008, Mr. Higgins, Ms. Finley, and Mr. Rosenberg joined Mr. Bills at a hotel in Chicago to discuss the evaluation process and to develop evaluation standards that would be advantageous to Red?ex. Mr. Higgins and Ms. Finley pledged that Mr. Rosenberg would be Supporting Mr. Bills in his continued e?orts to steer this contract award to Red?ex. In the days leading up to the ?nal Evaluation Committee meeting, Mr. Rosenberg was in Chicago working with Mr. Bills preparing Red?ex?s presentation. On the night before ?nal Evaluation Committee meeting, Mr. Bills met with Mr. Rosenberg. Mr. Bills invited Mr. Rosenberg to the DOT of?ces after hours. At this meeting, Mr. Bills reviewed ?eld test data of Red?ex? and its competitor, ACS, with Mr. Rosenberg In particular, Mr. Bills and Mr. Rosenberg reviewed photos taken by each company during the pilot phase, and each company had instances where the equipment produced good quality photographs and instances where the equipment did not produce good photos. 64. 66. 6?7. 68. 69. 70. 71. 72. Mr. Bills said he would use good photos for Red?ex and poor ones for ACS during the evaluation committee meeting, and would do so in a way that made them seem randomly selected. Mr. Bills also informed Mr. Rosenberg that he was not sure of all of the votes on the committee but that he would make name cards and place the ?unknown votes? at the end of the voting order. This effort would make it dif?cult to vote against Red?ex, as the majority of the committee would have already selected Red?ex. Mr. Bills insisted he wanted to achieve a unanimous vote from the Evaluation Committee in favor of Red?ex. On or about May 27 2003, Mr. Bills delivered the unanimous selection of Red?ex by the Evaluation Committee. The after-hours pre-Evaluation Committee meeting and the tender of information by Mr. Bills to Mr. Rosenberg were improper and in violation of the City?s Code of Government Ethics. Mr. Bills gave this information to Mr. Rosenberg for the purpose of I gaining favor with Red?ex and with the intention to be compensated by Red?ex after it had procured an agreement with the City. In approximately June 2003, the City accepted Red?ex? proposal and initiated negotiations for a formal contract with Red?ex. PURCHASE VS. LEASE OF CAMERAS During initial contract negotiations, Mr. Bills asked Mr. Rosenberg for guidance on whether the City should lease or buy the cameras used for the project. 73. 74. 75. 76. 77. 78. ?79. 80. Mr. Rosenberg consulted with Mr. Higgins on whether the City should lease or buy the cameras used for the project. Although leasing the cameras was a better option for the City, Mr. Higgins directed Rosenberg to convince Bills to have the City purchase the cameras. The City?s purchase of the cameras would help Red?ex with cash- capitalization issues and make it harder for the City later change vendors from Red?ex since the City would already own Red?ex cameras. ENTERTAINMENT OF CITY OFFICIALS During these negotiations and throughout the contractual relationship, Mr. Bills entertained Red?ex of?cials including Red?ex Holdings Chairman Mr. Cooper, Ms. Finley, and Mr. Higgins. Mr. Bills? entertainment of these of?cials included, but was not limited to, escorting them to Chicago White Sox baseball games, where he provided front row seats, personal messages on the Jumbo-Tron, food, beer, and other beverages. During the RFP process, Mr. Bills ?ew to Phoenix Arizona to meet with various members of the Red?ex team, including Ms. Finley and Mr. Rosenberg. Red?ex paid the cost of this trip and also provided Mr. Bills with rounds of golf and other entertainment. It was improper and a violation of City?s Code of Government Ethics regulations for Mr. Bills to entertain the Red?ex of?cials. 81. 82. 83. 84. 85. 86. 87. 88. 89. PAYOFF TO JOHN BILLS In most projects Red?ex would seek guidance with the local municipality regarding the hiring of sub-contractors. In June 2003, after the initial contract had been ?nalized, Mr. Bills travelled to California with Mr. Johnson to meet with Red?ex of?cials, including Mr. Rosenberg and CEO Higgins. One of the purposes of this meeting was to discuss the hiring of sub- contractors. Mr. Bills informed Red?ex that it must include Network Electric, Inc. as a subcontractor. Red?ex later learned that Mr. Bills had a relationship with Network Electric?s owner, Jimmy Johnson. Mr. Higgins and Ms. Finley, who were directly in-charge of Red?ex?s subcontractors, agreed to hire Network Electric, Inc. in order to accommodate Mr. Bills and in?uence his performance as deputy Commissioner of the City?s DOT. At a meeting in Los Angeles that was celebrating Red?ex?s award of the Chicago contract, Mr. Bills told Mr. Rosenberg words to the effect that ?it?s time to make good.? Mr. Bills indicated the amount he wanted, in the range of $100,000 to $200,000, writing notes on a napkin as he spoke. Mr. Bills suggested that Red?ex could make payments to him either by overpaying Mr. Johnson, who would get the money to Bills, or by hiring someone close to Bills in a customer liaison position. 90. 91. 93. 94. 95. Mr. Rosenberg told Mr. Bills he would speak with Red?ex CEO Bruce Higgins and that Mr. Higgins would determine the appropriate course of action. In July 2003, Red?ex under the direction of Mr. Higgins and Ms. Finley; and Mr. Bills agreed that: a. Red?ex would hire Martin O?Malley, a friend of Mr. Bills, as a consultant; b. Mr. O?Malley would then pay Mr. Bills from funds he received from Red?ex and c. Mr. Bills was being paid this money for his having procured Chicago?s contract with Red?ex and for him to continue to use his in?uence to assist Red?ex procuring additional contracts to sell its systems to the City and contracts to maintain those systems. In August 2003, Ms. Finley and Mr. Higgins negotiated and Ms. Finley executed the contract with Mr. O?Malley. Mr. O?Malley was to report directly to Karen Finley. Red?ex paid Mr. O?Malley a salary and bonus, plus a one-time payment that ranged from for each new system the City bought from Red?ex, plus commission that ranged from of revenue for ?out of scope? changes that achieved additional revenue for Red?ex. Because Mr. O?Malley, and therefore Mr. Bills, was paid whenever ?out of scope? work occurred, Mr. Bills was always looking for out of scope work to be added to the project. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. Indeed, Mr. Bills would say that his favorite words were ?out of scope.? Based upon this arrangement, Red?ex paid in excess of $2,000,000 to Mr. O?Malley for purported consulting work. The funds paid to Mr. O?Malley were paid out of the funds paid to Red?ex by the City. Mr. O?Malley?s invoices were approved by multiple Red?ex employees including Mr. Higgins and Ms. Finley. Mr. Higgins provided direction to Red?ex executives, including Mr. Rosenberg and Ms. Finley on these calculations of Mr. O?Malley?s invoices and subsequent invoices were paid out of both Operations and Sales Department budgets. If the City was delayed in making payments to Red?ex, Red?ex would delay payments of commissions to O?Malley. When this would happen, Mr. Bills would sometimes complain to Mr. Rosenberg about the lack of payment to O?Malley. In addition to these payments to Mr. Bills through Mr. O?Malley, Red?ex reutinely paid other expenses for Mr. Bills, including but not limited to travel expenses, hotel bills, rental cars and golf fees. Red?ex also provided Mr. Bills with two personal computers. Red?ex agreed to hire Mr. O?Malley to in?uence the performance of Mr. Bills? as deputy Commissioner of the City?s DOT. During the time Mr. Bills was receiving funds from Mr. O?Malley and in exchange for receiving these funds, Mr. Bills protected Red?ex from any liability for performance issues under its contract with the City. 107. 108. 109. 110. 111. 112. 113- 114. 115. Bribery is de?ned in part by the Illinois Complied Statures as ?[w]ith intent to in?uence the performance of any act related to the employment or function of any public of?cer, public employee, juror or witness, he or she promises or tenders to that person any property or personal advantage which he or she is not authorized by law to accept.? 720 ILCS 33-1(a) The hiring of Network Electric, Inc., Mr. Johnson and Mr. O?Malley also constituted bribery of Mr. Bills. The hiring of Network Electric, Inc., Mr. Johnson and Mr. O?Malley violated the City?s Code of Government Ethics. EXPANSION OF ORIGINAL CONTRACT The initial contract with Red?ex comprised 20 systems. Each system provided cameras for red-light violations in one direction, e.g. a typical Chicago intersection would require 2 systems to enforce the red-light violations coming from two of four possible directions. Therefore, the initial contract would cover only 10 intersections and 20 systems. The contract also included provisions for Red?ex to maintain the systems for the City. For the initial 20 systems the City paid Red?ex a one-time fee of $85,000 per each system. Red?ex was also paid by the City $3,250 per each system per each month for program support and maintenance. 1 16. 117. 118. 119. 120. 121. 122. 128. 124. In 2006, the scope of the program changed and the Red?ex contract was amended so that Red?ex would receive a one-time fee of $100000 per system and $5,000 per month per system for maintenance. In 2008, Red?ex was awarded a sole source agreement with the City to maintain the 136 operational systems for a fee of $4,395 per month per system. This contract term was for 5 years plus two 1 year extensions. Using Mr. O?Malley as a conduit, Mr. Bills provided Ms. Finley and Mr. Rosenberg a draft speci?cation for the City?s upcoming RFP for program expansion. Mr. Bills sought speci?cations and/or requirements that would be highly advantageous to Red?ex. Ms. Finley and Mr. Rosenberg reviewed the draft RFP, provided feedback to Mr. Bills, and the ?nal RFP speci?cation was designed to advantageous to Red?ex. Mr. Bills also provided Red?ex with RF scoring tables that would demonstrate and justify a high scoring and ranking for Red?ex when compared to the competition. PAYOFF FOR EXTENSION OF CONTRACT In early 2008, Mr. O?Malley was being paid commissions in excess of $100,000. Shortly after these commission payments to Mr. O?Malley, Red?ex was awarded a contract for program expansion for an additional 248 new 125. 126. 128. 129. 130. 131. 133. systems, which included a one-time fee of $24,500 per system and a fee of $3,900 per system per month. This contract term was also for 5 years plus two 1 year extensions. The revenues from this and the other red light enforcement contracts between Red?ex and the City of Chicago achieved in excess of $100,000,000 to Red?ex. As part of each of these contracts, Red?ex certi?ed it had not been engaged in bribery or attempted bribery of a public of?cer or employee of the City of Chicago. These statements were false as Red?ex had been engaged in the bribery of Mr. Bills. As part of each of these contracts, Red?ex ?led an EDS which required Red?ex to certify it had not been engaged in bribery or attempted bribery of a public of?cer or employee of the City of Chicago. In the EDS, Red?ex also certi?ed that it was in compliance with the City's Code of Government Ethics. The EDS submitted by Redflex was false as Red?ex had been engaged in the bribery of Mr. Bills and was not in compliance with the City?s Code of Government Ethics. It was contemplated by the City and Red?ex that if these 20 systems succeeded, the City would implement 100?s of systems throughout the city, which Red?ex would continue to sell and maintain. Mr. Bills ensured that any of Red?ex? performance issues were handled solely by him. 134. 135. 136. 137. 138. 139. 140. 141. Mr. Bills ensured that any performance issues did not trigger any liquidated damage provisions called for in Red?ex? contract with the City. This agreement to pay Mr. Bills through Mr. O?Malley continued until 2011, when Mr. Bills retired from the City. POST-EMPOLYMENT ASSISTANCE When he retired from the City, Mr. Bills asked Red?ex executives, including Ms. Finley and Mr. Andy Bunske (General Counsel), to secure him employment with Resolute Consulting, a public relations ?rm with which Red?ex worked extensively. Resolute Consulting either hired Mr. Bills directly or through a Red?eX-funded public outreach group called the Traf?c Safety Coalition at Red?ex? request. By this arrangement, Red?ex was able to hire Mr. Bills indirectly and circumvent the City?s prohibition of vendors from hiring its former employees. The expectation was for Red?ex to subsidize Mr. Bills? employment and receive continued support with the City of Chicago. This support included securing additional contract extensions and new contracts for additional solutions. Once Resolute Consulting ?hired? Mr. Bills, Ms. Finley and Red?ex CFO Sean Nolen informed Mr. Rosenberg that Red?ex would no longer pay O?Malley his commissions because Red?ex was not going to "double pay? Mr. Bills. 142. From the initial contract through 2012, Red?ex entered into numerous contracts with the City. 143. In each of those contracts, Red?ex certi?ed it was not engaged in bribery of a public of?cial. 144. Each of these certi?cations was false. 145. From the initial contract through 2012, Red?ex also submitted numerous to the City. 146. In each of those Red?ex certi?ed it was not engaged in bribery of a public of?cial and in compliance with the City's Code of Government Ethics. 147. Each of these was false. 148. Red?ex ?led these false statements with the intent to induce the City to pay Red?ex for its products and services. 149. The City relied upon Red?ex? false statements and paid Red?ex pursuant to the fraudulent contracts. VIOLATIONS OF THE MUNICIPAL FALSE CLAIMS ORDINANCE (VIOLATIONS OF 1?22-010 et seq.) 150. Red?ex entered into numerous contracts with the City for the purchase and maintenance of its Digital Automated Red Light Enforcement systems. 151. In each of these contracts, Red?ex stated that it had not engaged in bribery or attempted to bribery any employee of the City. 152. . Each of these statements in each of these contracts was false. 153. Red?ex had systematically bribed Mr. Bills through its agreeme . with Mr. O?Malley. 154. 155. 156. 157. 158. 159. 160. 161. 162. Red?ex also submitted numerous to the City as part of its contractual obligations. Cn each of these Red?ex certified that that it had not engaged in bribery or attempted to bribery any employee of the City. Each of these statements in each of these was false. Red?ex knew that each of these statements in both the contracts and in the were false. Red?ex made these knowingly false statements in both the contracts and in the to induce the City to pay them on these fraudulent contracts. Each of these false statements in both the contracts and in the constitutes a separate violation of the FCC. The City paid Red?ex on each contract in reliance that Red?ex had not engaged in bribery or attempted to bribery any employee of the City. Had the City known that these statements were false, the City would have cancelled the contracts with Red?ex. The City suffered damages in reliance of Red?ex? false statements that it had not engaged in bribery or attempted to bribery any employee of the City. PRAYER FOR RELIEF WHEREFORE, for all the foregoing reasons, the City of Chicago, ex rel. Aaron Rosenberg, prays that this Honorable Court award the following relief: A. Enter a judgment against Red?ex and in favor of the City of Chicago for treble the amount paid to Red?ex by the City of Chicago under the contracts relating to the purchase and maintenance of Red?ex? Digital emu?. op a 39.3959/333- Automated Red Light Enforcement systems and; B. Enter a judgment against Red?ex and in favor of the City of Chicago for a civil penalty of not less than $5,000.00 and not more than $10,000.00 for each individual false statement made by Red?ex; and C. Enter a judgment against Red?ex and in favor of the City of Chicago for its attorneys? fees and costs of this action and D. Enter a judgment against Red?ex and in favor of the Relator, Aaron Rosenberg, for a percentage of the total the judgment against Red?ex and E. Enter a judgment against Red?ex and in favor of the Relator, Aaron Rosenberg, for reasonable expenses which this court ?nds to have been necessarily incurred, plus reasonable attorneys' fees and costs and F. Any and all additional relief which ourt deems fair and just. JAi?i?idoon, ITI doon Muldoon, LLC Attorneys for Relator Muldoon Muldoon LLC 30 N. LaSalle St., Suite 2950 Chicago, IL 60602 (312) 739-3550 Cook Co. Atty. No. 38728 Service Via email will be accepted at: jjm@muldoonlaw.com