Cook County Record

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Apartment building real estate investors allege construction manager, contractors profited from rigged bids

By Jonathan Bilyk | Apr 21, 2016

Law money 13

A group of related Chicago companies specializing in renovating and flipping apartment buildings – all of which are managed by two of the leaders at a prominent Chicago real estate brokerage – has launched a $5 million fraud action against a construction company and other contractors with whom they partnered on a number of projects, accusing the lead contractor and others of conspiring to rig bids and drive up the price in favor of friends and associates.

On April 18, the corporate entities, identified in the court documents as the “MRR LLCs,” filed suit in Cook County Circuit Court against a group of defendants, including Adam Walz, a construction manager affiliated with Chicago-based CAF Construction, and Daniel Capota, owner of DC Heating & Cooling, of Glenview.

All of the “MRR LLCs” are managed by Gerald Nudo and Laurence Weiner, according to information listed by the Illinois Secretary of State’s Office. Nudo and Weiner are each principals at Marc Realty Capital in Chicago.

According to the lawsuit, the MRR LLCs were each formed to manage the purchase, renovation and subsequent sale or leasing of various residential apartment buildings in various locations in Chicago. Once the property was purchased, the lawsuit said the MRR LLCs would entrust Walz and CAF with overseeing the renovation and construction work needed to prepare the building to either be flipped or leased, the complaint said.

However, the lawsuit arose after the MRR managers became aware of what they alleged to be a pattern of bid rigging, overcharging and unnecessary property damage at their properties.

The complaint particularly referenced events surrounding the renovation of the MRR’s property in the 5400 block of South Woodlawn in Chicago’s Hyde Park neighborhood. In their lawsuit, the MRR managers accused Walz of leaning on a general contractor to drive up the bid for the work from about $2.67 million to more than $3 million, to benefit Capota and DC Heating.

The MRR group managers accused the defendants of conspiring to similarly provide “bids at an artificially inflated price on other projects and the three would pocket the excess monies from the construction draws.”

The complaint also alleged Walz and others extorted money from other contractors in exchange for work.

The complaint alleged other contractors went along with the alleged scheme to maintain a working relationship with CAF Construction, fearing otherwise “Walz would blacklist him from future work.”

And the complaint further alleged the defendants would, on various projects, use “substandard materials in order to pocket the difference between the amount that had been budgeted for the materials and the lower price paid.” This, the complaint alleged, resulted in “numerous instances of property damage

At the Woodlawn property, for instance, the complaint alleged the MRR group was required to replace flooring; repair “tilting and improper curing;” repair damage from mold, water leaks and moisture “due to failure to plan drainage and to address below grade walls, floors and drainage causing necessary dismantling of apartments; repair leaky roofs and masonry problems; and repair warped doorways, among a number of other maintenance issues. The plaintiffs alleged the damage required at least $600,000 in repairs.

In all, the plaintiffs alleged the purported scheme had cost them more than $5 million.

The complaint included 10 counts, including allegations of fraud, concealment, conspiracy, negligence, conversion and unjust enrichment, among other allegations against the various defendants.

The MRR LLCs are represented in the action by attorney Edward F. Ruberry, of the firm of Ruberry, Stalmack & Garvey, of Chicago.

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Organizations in this Story

Ruberry, Stalmack And Garvey, LLC