Con Man-Informer Provided Key Information to FBI : Chicago Payoff Scandal Expands to New York

A corruption scandal in Chicago has widened to include New York as federal authorities investigate the alleged payment of bribes to win municipal contracts in both cities.

The key to the unfolding scandals is a portly, silver-tongued con man working under cover for the FBI.

Federal authorities say that information he has provided helped them to expand an investigation originally focused on Chicago. In both cities the revelations have led to suspensions and dismissals of city officials, and in New York may have been behind the suicide attempt of a prominent elected official and close associate of Mayor Edward I. Koch.

The FBI mole, Michael Raymond, reportedly appeared in surreptitiously recorded video tapes discussing bribes in both cities.

Two Mayors Affected

In Chicago, revelations about Raymond’s and the FBI investigation have embarrassed Mayor Harold Washington, who had been elected as a reformer, and in New York, similar disclosures are now bedeviling Koch’s administration.

In both cities, there are allegations that a New York-based collection company made payoffs to public officials for the right to collect delinquent parking ticket revenues or water bills.

When Queens Borough President Donald Manes (pronounced MAN-es) was found in his car Jan. 10 near death with cuts on his wrist and ankle, he told New York detectives he had been kidnaped by two men. After police publicly discounted his story, Manes recanted during a dramatic bedside news conference and admitted that he had tried to commit suicide for unspecified reasons.

Now, the part-owner of another collection agency has told federal prosecutors that, on Manes’ orders, he paid thousands of dollars in kickbacks to the former deputy director of New York’s Parking Violations Bureau, one of Manes’ closest friends. And sources familiar with the investigation told The Times on Thursday that government agents are scrutinizing collection agency contracts in cities other than New York and Chicago.

Private Collection Agencies

In the last 24 months a number of city and county governments have authorized private collection agencies to recover, for a percentage of the take, overdue parking tickets, delinquent water bills and other fees--just as such agencies have long recovered overdue payments for stores and businesses.

In Chicago, Raymond worked for a company, based in New York City, that held a no-bid contract to collect delinquent water bills. After he became a government informer, Raymond wined and dined politicians and entertained them in a luxurious apartment overlooking Lake Michigan while FBI agents recorded the events on videotape from an adjacent apartment.

He tipped lavishly, made generous “political contributions” and allegedly helped to arrange “loans” to both elected and appointed officials in both the Chicago and Cook County governments.

In more than two years of high living, Raymond ingratiated himself with City Council members both loyal and opposed to Mayor Washington, county officials and local businessmen. According to government sources, Raymond also was a key informant in the case against Geoffrey Lindenauer, former deputy director of the New York City Parking Violations Bureau. As a result of Raymond’s involvement, the Chicago Tribune has reported that the FBI has videotapes of boasts of “payoffs” to New York officials.

Records Subpoenaed

A federal grand jury in Chicago has subpoenaed the records of at least two New York-based collection agencies which do business with both cities. Five Chicago public officials have been suspended or fired by Mayor Washington and at least five Chicago City Council members and a ranking Cook County official have confirmed they are under federal scrutiny for unspecified activities.

In New York, Lindenauer, a close friend of Manes, is under indictment for accepting a $5,000 bribe in a case tied to the Chicago investigation. Lindenauer is free on a $100,000 personal recognizance bond. His lawyer is quoted as saying Lindenauer “denies the accusations of the government completely.”

On Thursday, it was revealed that Michael Dowd, a Queens lawyer, and a partner in one of 11 collection agencies used by the New York Parking Violations Bureau to track down scofflaws has alleged to federal prosecutors that Manes extorted $36,000 from him to be paid to Lindenauer.

Upset Mayor Koch

That news was clearly upsetting to New York’s Mayor Koch, who had rushed to Manes’ bedside in sympathy when the public official was first found wounded. Police stopped Manes’ auto near Shea Stadium about 1:50 a.m. on Jan. 10 because it was veering from lane to lane on a highway. Manes, weak from massive blood loss was rushed to a nearby hospital, where he later suffered what his physicians described as a heart attack.

“Donald Manes is a friend of mine,” Koch told a crowded City Hall news conference on Thursday. “The public will forgive anything except corruption and criminality. I hope he can clear his name. I am sorry for him and his family.”

Koch said that Manes, who was reelected by voters last year as one of New York’s five borough presidents, should consider stepping aside if there is a long investigation.

“Public service is the noblest profession,” the mayor said. “I have always held Donald Manes in high regard. It came as an enormous shock these charges should be made.”

Under Mayor’s Control

The Parking Violations Bureau is one of the city’s agencies under the mayor’s control. Earlier this week, after the indictment of Lindenauer and after city officials conferred with federal prosecutors, Koch named John Martin, a former U.S. attorney to investigate New York’s procedures for awarding the more than $1 billion in contracts it gives out annually.

Koch earlier had asked the director of the Parking Enforcement Bureau to resign, two weeks before he was to leave for a position with a law firm.

John J. Goldman reported from New York and Larry Green from Chicago.