Appeals panel: Ex-Redflex executive can't claim share of $20M paid to city to settle red-light camera bribes claims

By Jonathan Bilyk | Mar 13, 2018

Saying to find otherwise would give “fraudsters” the chance to profit from bribery, a federal appeals panel has upheld a lower court’s decision to bar a figure at the center of Chicago’s red light camera bribery scheme from claiming a cut of the settlement paid to City Hall by the city’s former red light camera vendor.

On March 12, a three-judge panel of the U.S. Seventh Circuit Court of Appeals in Chicago slapped down the appeal raised by Aaron Rosenberg, a former executive at red light camera vendor Redflex who both helped to facilitate the payment of bribes to key Chicago city officials, yet also provided key information to aid the city’s investigation of the scheme.

Rosenberg had appealed the decision of U.S. District Judge John Tharp, who ruled in 2016 Rosenberg’s contributions to the investigation did not meet the standard under which the law would allow him to stake a claim under the city’s False Claims Ordinance (FCO) to a share of the $20 million Redflex would ultimately pay to the city to resolve the lawsuit Rosenberg had initially filed, ostensibly on the city’s behalf, over the bribes.

The appellate judges agreed with Tharp, saying Rosenberg never proved, most importantly, he had provided the key information voluntarily. Rather, they noted, while Rosenberg spilled everything he knew about the bribery scheme to the city’s Inspector General’s Office, and he was never subpoenaed, he did so only after receiving a guarantee of immunity from legal action himself.

John J. Muldoon III   Muldoon & Muldoon LLC

“Rosenberg did not voluntarily initiate contact with the OIG and only provided information once he was contacted as part of the City’s investigation,” the judges wrote. “To hold that Rosenberg’s disclosure was voluntary simply because no formal legal process required his cooperation in the investigation would frustrate the FCO’s essential goal of motivating true volunteers and transform the ordinance into a vehicle for fraudsters to evade responsibility while at the same time profiting further from their crimes.”

The opinion was authored by U.S. District Judge William Griesbach, of the U.S. District Court for the Eastern District of Wisconsin, sitting on the panel with Seventh Circuit Judges Diane Sykes and Amy Barrett. Sykes and Barrett concurred in the decision.

The case had landed in court in April 2014, when Rosenberg first filed suit against Redflex in Cook County Circuit Court, bringing his complaint as a qui tam action – meaning, on behalf of a government, the city of Chicago, in this case. As the relator in the case, Rosenberg sought to claim a share of whatever amount Redflex would ultimately pay the city.

According to court documents, Rosenberg estimated Redflex owed the city nearly $300 million for allegedly bribing key city officials to secure the city’s red-light camera vendor contract.

Rosenberg’s suit was then kept under seal until August 2014, when the city agreed to intervene in the case, and essentially become the lead plaintiff in the action. Redflex then removed the case to federal court in 2015.

In the lawsuit, Rosenberg alleged Redflex should pay for using millions in bribes, allegedly targeted at former Chicago Department of Transportation manager John Bills, who allegedly offered his assistance in steering the red-light camera contract award process to Redflex.

According to the complaint, the scheme went to the highest levels at Redflex, as bogus invoices in which the bribes were concealed were approved by former Redflex top executives.

The scheme was exposed in reports published by The Chicago Tribune.

Bills and others were indicted, and Bills was sentenced to 10 years in prison.

Rosenberg also played a role in the scheme, submitting at least one expense report under which Redflex paid for “one of Bills’ stays at a luxury hotel in Phoenix … in 2010,” according to the panel’s opinion. While Rosenberg was referred to “anti-bribery training,” Redflex did not report the alleged incident to Chicago’s Board of Ethics, as required, costing Redflex the bid and prompting the Inspector General’s investigation.

A few months, later Rosenberg had his turn before the Inspector General, but only after much of the scheme had been reported by the Chicago Tribune, and after the Inspector General had met with others with information about the bribes.

Redflex fired Rosenberg about a week later, when the Tribune reported further on the case.

More than a year later, Rosenberg filed his qui tam action, seeking 15-20 percent of whatever the city would be paid.

Redflex and the city agreed to settle the case for $20 million in early 2017, which amounts to only about 6-7 percent of what Rosenberg believed the city should have received under his lawsuit.

However, first Judge Tharp, and now the Seventh Circuit judges, said they believed Rosenberg shouldn’t be able to claim even a portion of that amount, agreeing with Redflex – which objected to Rosenberg’s involvement in the action – that Rosenberg should not qualify as a whistleblower under the language of the city’s FCO.

The appellate judges noted Rosenberg’s contributions to the case were not substantially more than what was obtained from other sources, including the Tribune’s articles, nor could he claim to be an original source of information, surrendered voluntarily, with no coercion from investigators.

Rosenberg was represented in the action by attorney John J. Muldoon III, of the firm of Muldoon & Muldoon LLC, of Chicago.


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