Suspension, Firing Follow Disclosure of Undercover Probe Aided by Con Man ‘Mole’ : FBI’s ‘Sting’ Investigation of Civic Corruption Jolts Chicago Politicians

A jolly, generous, bespectacled, overweight man with a hearty laugh brought Chicago politicians a big surprise for Christmas--yet another federal investigation into corruption.

The big man in this case was Michael Raymond, a master swindler and con man who has been involved in major scams and crimes from Los Angeles to Miami. For more than a year now, Raymond has worked as an FBI “mole,” testing the honesty of Chicago’s City Council and Mayor Harold Washington’s Administration.

It appears that many flunked the test.

Since the Christmas Eve disclosure of the investigation, published reports indicate that at least seven City Council members and a number of other public employees and businessmen are under federal grand jury and Internal Revenue Service examination. Alleged crimes include bribery, extortion and mail fraud.

Although indictments are believed to be weeks away, three city officials left their jobs last week after their names appeared in news accounts of the investigation.

And last Friday, Mayor Washington abruptly canceled all city business with a New York firm that had a no-bid contract to collect tens of millions of dollars in unpaid municipal water bills in exchange for up to 30% of the amount collected. Con man Raymond worked for the company both before and after he became an FBI informant in Chicago.

“Any public contract obtained by fraud is voidable,” explained the mayor’s press aide, Alton Miller.

Last Thursday, aides to Washington announced that the city’s deputy revenue director had been fired, the revenue director was taking a paid administrative leave and the superintendent of water collections had been suspended without pay.

At least one of the three, according to aides to the mayor, allegedly accepted up to $10,000 in “loans” from Raymond, and a second allegedly accepted “campaign contributions” on behalf of a city councilman. The third was suspended for refusing to cooperate with an internal city investigation.

Focus on Contracts

Sources familiar with the government probe said it has focused on how city contracts are awarded and on influence peddling.

Raymond apparently was deeply involved in the seamy side of Chicago politics before the government investigation began. It was only after his arrest in another state that he agreed to become an FBI “mole.”

Raymond, the FBI said in its only public comment on the case, “was brought here by corrupt former and present political figures for corrupt purposes in violation of existing state of Illinois, city of Chicago and federal laws.”

Thousands of dollars changed hands during the investigation, including a $1,500 “campaign contri- bution” to a councilman and a total of $10,000 to a city official, according to reports here.

Operating from a luxurious high-rise apartment overlooking Lake Michigan, Raymond wined and dined Chicago politicians and power brokers. He has been portrayed as a silk-tongued, free-spending wheeler-dealer with an appetite for gourmet food. He stayed in the most expensive hotel rooms before he rented his own apartment, drove a flashy luxury car and tipped lavishly.

Concealed Microphone

And, once he became a government informer, he wore a concealed microphone and transmitter seven days a week.

As a result, many of the transactions being investigated were electronically monitored by federal agents in an operation resembling the government’s controversial Abscam investigation of public officials. In that probe, a convicted swindler working for the FBI offered bribes of up to $100,000 in exchange for political favors. Nineteen persons, including seven members of Congress, were convicted as a result.

Although many of its details are still secret, the Chicago investigation has already proved controversial too because of what appears to be an effort to focus the investigation on the mayor’s political allies and because of the FBI’s collabora- tion with Raymond. One federal official, who declined to be quoted by name, has described Raymond as “a sinister swindler with a checkered career.”

Although federal sources have told The Times that politicians both loyal and opposed to Washington--Chicago’s first black mayor--are under investigation, the only ones to be named publicly so far are those allied with him.

When asked if he thought the probe might be racially motivated, Washington said, “I have no problem (with) that at all. . . . Obviously, it was deliberate. The leak was deliberate. The finger pointing was deliberate. It was not an accident by any stretch of the imagination.

“And if perchance these people have been ‘set up,” ’ the mayor added, “that also was deliberate in terms of choice of people to set up. I look at it (the investigation) through the jaundiced eye of history.”

Longtime Swindler

Raymond, 56, has an extensive criminal record dating back to the 1950s. He has been involved in multimillion-dollar international swindles and, as recently as 1984, was arrested in Nashville while allegedly en route to commit a burglary. At the time, police and federal authorities found a machine gun in his van.

In 1974, Raymond was a key witness in the prosecution of two men convicted of trying to bilk the Los Angeles municipal treasury out of $3.5 million. He was paid a $45,000 reward for tipping off authorities in that case.

In 1971, using the name George White, he told congressional investigators about his life as a con man. At least twice, federal authorities have helped Raymond establish new identities in exchange for his cooperation in investigations.

In 1979, he pleaded guilty to charges that he sold $1.5 million in stolen securities and that he defrauded European investors.

Raymond’s participation in the Chicago investigation was uncovered last March by reporter Gaeton Fonzi. Fonzi was investigating the relationship between a man called Michael Burnett and the mysterious disappearances of three Florida residents for an article that appeared last week in South Florida Magazine. Burnett turned out to be Raymond, and, when the FBI learned of the article, they dispatched top officials to Florida to delay its publication.

“They told us if we printed the story, we would end a million-dollar, save-the-public investigation,” said Erica M. Rauzin, South Florida editor. “They felt that people would be in danger of their lives if we broke the story in the spring as we intended.”

Bill Collector

Raymond originally came to Chicago as a representative of Systematic Recovery Systems Inc., a company that collects delinquent accounts for government agencies, including the Chicago Department of Water. It was that contract that Washington terminated on Friday, alleging that it had been “apparently obtained by bribery.”

A secretary for Bernard Sandow, president of Systematic Recovery Systems, said that Sandow was on vacation and that no one else in the company could discuss the Chicago matter. Sandow has also declined to comment to other publications.

Sources said that after the arrest in Nashville, Raymond agreed to become a government informer, boasting to federal authorities that he could provide valuable information on corruption in Chicago.

Despite pleading guilty to the weapons charge in Nashville on Oct. 22, 1984, Raymond still has not been sentenced. Sentencing is now scheduled for Feb. 28--more than 16 months after his guilty plea.

While Washington insists that he does not support government “harboring miscreants--be they elected or appointed officials,” he has been one of the investigation’s harshest critics.

‘Peeking and Sneaking’

“Let’s don’t all say ‘hosanna’ because some reprehensible character has been turned loose willy-nilly with a microphone ostensibly in his shirt, peeking and sneaking and listening to a lot of people,” the Chicago mayor said.

But the Chicago Tribune disagreed with Washington on both points.

“The people who bribe crooked officials tend to be crooks,” the Tribune said editorially last week. “So it is not surprising that the person who began telling tales about Chicago corruption in order to get out of a jam was somebody of Mr. Raymond’s reputation.”

And, the Tribune said: “When it comes to making a fast buck illegally, Chicagoans are all brothers under the skin.”