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Showdown at Clout Corner

UNDER INVESTIGATION | Rezko, partners made millions on Northwest Side deal that pitted mayor against Ald. Mell

November 2, 2008

It was a quick $4.6 million profit for Tony Rezko and his partners.
And it happened because Mayor Daley told them no.

Tony Rezko and others wanted to build houses on this site at 3500 N. Kimball. Mayor Daley opposed the plan to build houses, so Rezko and his partners sold the land to Home Depot.

(Al Podgorski/Sun-Times) THE PLAYERS
Mayor Daley's friend Michael Marchese wanted it for a Home Depot. But Tony Rezko and his friends bought it to build houses. When City Hall nixed Rezko's plans, they sold it at a 40 percent profit to Home Depot. These are the clout-heavy players involved in the development of an industrial property at Addison and Kimball that's now the focus of a federal investigation:

Ali Ata, 56, of Lemont
  • Developer who bought an option on the land in late 1999. Took on partners Tony Rezko and Dan Mahru.
  • Longtime political supporter of Ald. Richard Mell and his son-in-law, Gov. Blagojevich.
  • Pleaded guilty in April to avoiding paying taxes when the property was sold.
  • Testified at Rezko's trial that he gave Blagojevich a $25,000 campaign contribution in Rezko's office, and was rewarded with a $127,000-a-year state job.
Tony Rezko, 53, of Wilmette
  • Convicted influence-peddler now talking with federal investigators.
  • Longtime campaign fund-raiser for Gov. Blagojevich, Sen. Barack Obama and others.
  • Developer who got millions from government to rehab low-income apartments that he left in shambles, moving on to build upscale homes, often on former industrial sites.
Dan Mahru, 64, of Glencoe
  • Rezko's ex-development partner. Also owns an ice-machine company.
Michael Marchese, 61, of Chicago
  • Friend of Mayor Daley's.
  • President of Harlem Irving Companies, retail developer whose clients include Home Depot.
William F. Cellini, 73, of Springfield
  • Republican power broker since his days as the state's first secretary of transportation under Gov. Richard B. Ogilvie.
  • Indicted last week on charges he tried to shake down a Hollywood movie producer for campaign contributions to Gov. Blagojevich.
  • Developer whose partners include Marchese. They bought property from Home Depot at Addison and Kimball, now lease it to CVS.
Mayor Richard M. Daley, 66
  • Opposed Rezko's plans for housing at Addison and Kimball, clashing with Ald. Richard Mell.
  • Wanted property kept for manufacturing, which under the city's ordinance includes home-supply stores.
Ald. Richard Mell, 70
  • Ward included the Addison-Kimball site. Opposed Home Depot, backing Rezko's plan for homes.
  • As his son-in-law, Rod Blagojevich, ran for governor, Mell dropped his opposition to Home Depot. Had his ward boundaries redrawn so the property was no longer in his ward.
Former Ald. Vilma Colom, 55
  • Former Mell protege who lost re-election in 2003 after the City Council redrew ward boundaries, putting the Home Depot property in her ward along with the neighbors who opposed the project.
Jack George, 68, of Western Springs
  • Law partner in Daley & George firm with Mayor Daley's younger brother, Michael Daley.
  • One of the city's top zoning lawyers. Represented Marchese and Home Depot, then Rezko and his partners, then went back to Home Depot when it bought the land.
The mayor wouldn't let Rezko, Dan Mahru and Ali Ata build townhomes at Addison and Kimball on Chicago's Northwest Side.

Rather than fight City Hall, Rezko and his partners sold the 10-acre site to Home Depot represented by developer Michael Marchese, a friend of the mayor's.

Rezko and his partners paid $7.9 million for the vacant land in September 2001. Eleven months later, they sold it to Home Depot for $12.5 million a 40 percent profit.

The sale infuriated neighbors who didn't want a busy store on the corner where an envelope factory had operated for decades.

Now, the deal is under federal investigation, a source familiar with the probe said. "There's a further case against Tony Rezko. It involves this property,'' the source said.

The sale came up earlier this year at the corruption trial of Rezko, a high-flying businessman and political fund-raiser who was found guilty of fraud charges and is now talking with federal prosecutors. The Addison-Kimball development involved several Rezko associates including William F. Cellini, who was indicted last week on corruption charges.

For years, Daley and Ald. Richard Mell had fought over the corner while it was in Mell's 33rd Ward.

Daley wanted the property to remain zoned for manufacturing, which also allows home-supply stores. Mell didn't want stores and later backed Rezko's plan for homes.

Their feud ended as Mell's son-in-law, Rod Blagojevich, was making his first run for Illinois governor.

In 2001, Mell abruptly dropped his opposition to Home Depot on the same day his ward boundaries were redrawn so the controversial corner was no longer in his ward. Four months later, Daley agreed to serve as chairman of Blagojevich's campaign an unprecedented move for the mayor. He had never done that for any other candidate for governor.

Mell said he didn't make any deal with the mayor. "There was never any discussion of any political thing," the alderman said.

And the Home Depot, along with a CVS pharmacy, rose on the property.

How Daley, Home Depot won

For 75 years, a factory had churned out envelopes at the southwest corner of Addison and Kimball. But in 1994, International Paper Company decided to close the crumbling factory and sell most of the property to Builders Square, a home-improvement chain. The City Council rezoned the land for a home-improvement store, but Builders Square went bankrupt. The land would sit vacant for years.

Here's what happened over the next eight years, based on city records and interviews:
  • 1997. Home Depot a client of the mayor's friend Marchese is "in the final stages of negotiating the purchase of the property,'' according to a Jan. 14, 1997, letter that Home Depot attorney Jack George sent to city planning officials. George is a partner in the law firm of Daley & George, with the mayor's brother Michael Daley. Neighbors balk. They don't want any stores, fearing more traffic.
  • 1998. Their alderman, Dick Mell, takes their side. He asks city officials to rezone the property to block construction of any "home supply stores,'' but his request is never acted upon by the City Council Zoning Committee. Several plans are floated for the site, including making it the new home of the St. Vincent DePaul Society.
  • 1999. Mell's friend Ata puts down a $100,000 deposit to buy the land, according to court records. He plans to erect multi-level buildings for small manufacturers.
  • 2000. With Ata's plans going nowhere, he joins with two residential developers Rezko and Mahru. Ata and Rezko are campaign contributors to Mell and Blagojevich, who was then a congressman preparing to run for governor. Blagojevich is among several Democrats, including Daley's brother Bill, eyeing the state's top job then held by Gov. George Ryan, a Republican who ultimately would go to prison for corruption.
  • 2001. Rezko and his partners hire Jack George the lawyer who had represented Home Depot. George asks the city to rezone the property so they can build 164 townhomes, a project that has the support of Mell and the community. But city officials reject the development, suggesting instead that Rezko and his partners consider a home-supply store on the property, according to sources. "Neither the mayor nor any of the people who worked on the project have any recollection of a meeting in which the mayor specifically requested a Home Depot, or anything specific," Daley spokeswoman Jacquelyn Heard said Friday. According to a former Rezko employee: "Sometime before we bought the land, we learned that it couldn't be residential, but they went ahead and bought it anyway."
  • Sept. 12, 2001. Rezko and his partners pay International Paper $7.9 million for the land, closing the deal the day after terrorists attack the United States.
  • Dec. 19, 2001. Mell abruptly drops his opposition to a home-supply store, withdrawing his 3-year-old petition to rezone the property on the same day the City Council approves a new ward map that Mell had helped draw. The new map shifts Addison-Kimball out of his 33rd Ward and into the 35th Ward represented by Ald. Vilma Colom. Colom picks up hundreds of new constituents including the neighbors opposing Home Depot. "He called me up, asked me for my address, and then mapped me out of his ward," recalled Michael Graff, who led protests against Home Depot. "All of a sudden, we're in Vilma Colom's ward."
  • March 20, 2002. Rezko and Mahru buy 62 acres of riverfront land in the South Loop for a massive residential-commercial development. They plan to build homes and enlist Marchese to build stores. Around the same time, Marchese's client, Home Depot, is negotiating to buy the Addison-Kimball corner from Rezko and his partners.
  • April 1, 2002. Home Depot again turns to George as its zoning attorney for Addison-Kimball, even as George still represents Rezko, Ata and Mahru on the site.
  • April 30, 2002. Daley makes an unprecedented show of support for Mell son-in-law Blagojevich, who has just won the Democratic nomination for governor. Daley agrees to become chairman of the Blagojevich campaign and even do commercials. "I'll do anything Rod wants me to do," the mayor says.
  • Aug. 23, 2002. Home Depot buys the Addison-Kimball property, paying Rezko, Mahru and Ata $12.5 million.
  • Dec. 23, 2003. Home Depot sells 1.19 acres of the property for $1.5 million to Marchese and Cellini. They later sign a 22-year lease with CVS.
A spokeswoman for Home Depot said the company was unaware of the federal investigation into the Addison-Kimball property." The site was priced fairly and appropriately for our needs," she said. "It was a competitive site and a prime location."

To this day, neighbors are upset about what happened.

"Mell redistricted us out of his ward so he wouldn't have to take the heat," said Harold Turrentine, one of those who fought the plans. "I know the neighbors got the shaft."

Said Mell: "I can understand. They just didn't want that there at all. But it made no sense just to leave this vacant forever. After I brought two or three possibilities to the site and they were shot down, I just figured something on the vacant site is better than nothing."

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