Red-light camera firm fires VP, sues him over Chicago scandal
A photo-enforced sign warns drives heading east on West Hollywood towards North Sheridan in Chicago in 2009. (Jose M. Osorio, Chicago Tribune / April 1, 2009)
Reeling from the crippling loss of that contract and the expanding corruption investigation, Arizona-based Redflex filed a lawsuit against the former top executive that lays much of the blame for the company's troubles on his "dishonest and unethical conduct" over a number of years.
The lawsuit marks a turnabout for Redflex officials, who dismissed similar allegations about Aaron Rosenberg after they were brought up more than two years ago in an internal letter to the board of directors for the company's Australian parent company.
Now they are acknowledging what the lawsuit calls a "protracted and covert scheme" to misappropriate company funds over a period of years.
Company officials have said an "exhaustive, deep dive" internal investigation in 2010 found no merit to the whistle-blower allegations that the executive lavished company-paid trips on the Chicago official who oversaw the Redflex contract as part of a broader attempt to improperly court favor.
But the company failed to tell City Hall about the accusations until last year, when the Chicago Tribune obtained the letter and began its own investigation. Even then, the company stood by the results of its internal probe and said the executive vice president had made a one-time mistake for which he was disciplined.
Those early revelations prompted Mayor Rahm Emanuel to ban Redflex from competing for a new speed camera program and refer the matter to city Inspector General Joseph Ferguson.
Amid growing questions about the company's conduct, the Emanuel administration recently announced it would not renew Redflex's red-light contract, which accounts for about 13 percent of the company's worldwide revenue and will expire this summer. The company's stock price in Australia has plummeted since the first stories, and its leaders have promised to regain the trust of its largest North American client.
"This company has pledged to take corrective action regarding unethical employee conduct in Chicago," Robert DeVincenzi, CEO of parent company Redflex Holdings Ltd., said in a written statement to the Tribune late Wednesday explaining the firing.
"Today we terminated the employment of the executive vice president of business development because our internal investigation revealed that he was violating company policies," he said. "Our inquiry is continuing and other corrective actions will be announced in the near future."
DeVincenzi — who took over the company in September — declined to elaborate or respond to questions.
Rosenberg did not return telephone messages.
The scandal now enveloping the company centers on its relationship to former Chicago transportation official John Bills, who retired in 2011 after overseeing the company's contract since it began in 2003.
The internal letter said Bills received lavish vacations directly on the expense report of Rosenberg and raised questions about inappropriate ties between Bills and a Redflex consultant who received more than $570,000 in company commissions.
Bills and the consultant, a longtime friend, have denied any wrongdoing.
The company told the Tribune in October that its investigation in 2010 found only one instance of an inadvertent expenditure for Bills, a two-day hotel stay at the Arizona Biltmore expensed by Rosenberg. Redflex general counsel Andrejs Bunkse told the newspaper that the company responded by sending Rosenberg to "anti-bribery" training and overhauling company expense procedures.
But after additional Tribune reports, the company hired a former Chicago inspector general, David Hoffman, to conduct another investigation. Hoffman made an interim report of his findings to company board members this month. That report prompted the company officials to acknowledge a much deeper involvement with Bills, including thousands of dollars for trips to the Super Bowl and White Sox spring training over many years.
The chairman of the company's Australian board of directors resigned, trading on company stock was temporarily suspended and the company acknowledged that it's sharing information with law enforcement.
The company informed employees of Rosenberg's departure in an internal memo Wednesday that asked them to cease further communication with him on company matters. The company also filed a lawsuit against Rosenberg in Arizona Superior Court in Phoenix seeking damages from the man it once credited for much of its expansion in the U.S.
"Mr. Rosenberg engaged in a protracted and covert scheme to misappropriate funds from Redflex through the submission to the company of false requests for expense reimbursement," the suit alleges. "Mr. Rosenberg's conduct was intentional, outrageous and committed with an evil mind with the intent of causing injury to and/or in deliberate disregard of the unjustifiably substantial risk of significant harm to Redflex."
The suit also alleged Rosenberg's "dishonest and unethical conduct has substantially harmed Redflex's business reputation and goodwill throughout the United States and has and will continue to cause Redflex significant damage."
The lawsuit also seeks relief from defamation claims it said Rosenberg has made privately to the company through his lawyers.