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Gov. Pat Quinn’s administration has cut off funding to the state’s largest charter-school operator, the politically influential United Neighborhood Organization, over insider deals it says violated terms of a $98 million state grant, according to a letter obtained by the Chicago Sun-Times.
The deals involved millions of dollars in state funds that went to companies owned by two brothers of a high-ranking UNO executive, Miguel d’Escoto, that were hired as contractors on state-funded school construction projects in Chicago, according to the letter, which was sent to the organization Thursday from the Illinois Department of Commerce and Economic Opportunity.
The state agency began investigating UNO in response to reports in the Sun-Times that revealed that d’Escoto Inc. and Reflection Window Co. have been paid a total of $8.5 million out of the state grant. D’Escoto Inc. is owned by Federico “Fred” d’Escoto. Reflection Window is owned by Rodrigo d’Escoto.
The two men are brothers of Miguel d’Escoto, a city transportation commissioner in former Mayor Richard M. Daley’s administration who resigned Feb. 12 from his $200,000-a-year position as UNO’s No. 2 executive following the Sun-Times reports.
State officials said UNO should have notified them it was using the companies owned by the d’Escoto family members.
“We believe that UNO’s failure to notify the Department of Commerce and Economic Opportunity of an appearance of a conflict of interest arising from the familial relationship between a senior UNO official and two contractors hired to perform work with grant funds constituted a violation of ... the grant agreements,” Charles M. Biggam III, general counsel for the state agency, said in the letter to Juan Rangel, UNO’s chief executive officer, who is a key political supporter of Mayor Rahm Emanuel.
Biggam said UNO violated a requirement in each of three grant agreements that it must notify the state “in writing of any actual or potential conflicts of interest.”
Biggam told Rangel, who was co-chairman of Emanuel’s 2011 mayoral campaign, the state is “withholding any further payment of grant funds and prohibiting UNO from incurring additional obligations of grant funds until further notice.”
Asked about the state action, Rangel said,“UNO is working ... to address the relevant issues.”
UNO so far has received $54.7 million of the $98 million grant, which the group won with the support of Quinn and House Speaker Michael Madigan (D-Chicago).
It used the state taxpayer funding to finish one new school and build two others but was relying on much of what was left to complete a $25 million charter high school it’s building at 5050 S. Homan Ave.— to be called the UNO Soccer Academy High School.
Quinn and Madigan attended a groundbreaking last summer for the high school, which UNO planned to open next fall. The impact on those plans isn’t clear.
But Rangel noted,“We should not lose sight that there are hundreds of children already enrolled for the new UNO Soccer High School looking to start this fall in their school, currently under construction.”
The move to suspend the state funding came after the Quinn administration asked Rangel to respond to a Feb. 4 report in the Sun-Times revealing UNO’s hiring of the companies owned by d’Escoto’s brothers.