Further Reading City of Chicago sues red light camera maker Redflex for more than $300 million

Redflex Holdings Limited (RHL), the embattled Australian red light camera company, has now been brought into an ongoing massive corruption-related lawsuit involving the city of Chicago.

Earlier this year, the city of Chicago had previously sued Redflex Traffic Systems Inc. (RTSI), RHL’s Arizona-based subsidiary, for $300 million. RTSI recently had the case transferred out of Illinois state court and into federal court.

Earlier this week, the city of Chicago filed an amended complaint outlining expanded allegations against both firms. The new allegations include the previous accusations of violations of the city’s False Claims Ordinance “as well as claims for breach of contract, civil conspiracy, unjust enrichment, and payment of kickbacks in connection with City contracts.”

The original suit alleged that RHL bribed a former Chicago Department of Transportation manager, John Bills, with $2 million in kickbacks to secure contracts with the city.

The debacle has already resulted in related federal criminal corruption convictions, and the company's CEO, Karen Finley, pleaded guilty to bribery earlier this year in federal cases in both Illinois and Ohio. Martin O’Malley, a friend of Bills, has also pleaded guilty to one count of conspiracy: according to his own plea agreement, he acted as a vehicle to get money to Bills.

The former transportation official, meanwhile, is set to go to trial in Chicago in January 2016.

Your tax dollars at work

The city had hired Redflex to provide automated enforcement cameras, known formally as its Digital Automated Red Light Enforcement Program (DARLEP), from October 2003 until February 2013. That was when Mayor Rahm Emanuel dropped Redflex and its 384 cameras after Bills was shown to have accepted a hotel room that Redflex paid for—but city officials believe that the corruption ran far deeper. In October 2013, Chicago selected Xerox ACS to replace Redflex as its new red light camera operator.

A May 2014 affidavit written by an FBI special agent suggests that Bills likely used some of this money to purchase and store a boat, buy a car, pay for an addition to his Michigan cabin, pay for his girlfriend’s mortgage, pay his own mortgage, pay for his kids’ schools, and hire a divorce attorney over the course of several years.

In a Tuesday statement to investors, RHL wrote, “Both the Company and RTSI will, in defending this legal action, make use of all available legal defences.” RHL did not immediately respond to Ars’ request for comment.

With the loss of the Chicago contract, as well as similar contracts in Ohio and New Jersey, Redflex has been in dire financial straits recently. Its most recent annual report shows that the company lost nearly A$32 million (US$22.7 million) in the fiscal year that ended in June 2015—roughly 30 times greater than the same period one year earlier.

For his part, John Muldoon, an attorney representing the city of Chicago, told Ars that he's still waiting for a formal response to the amended complaint from Redflex.

“Here we have the CEO and a board member admitting to making false filings and admitting to bribing city officials—I’ll be very curious to see how they're going to react to that,” he said.

When asked if this case was unique, Muldoon alluded to Chicago’s longstanding history of political corruption.

“Certainly this is an elaborate scheme; they hired this guy O’Malley to be a go-between and bagman—just that term bagman, I learned that living here in Chicago.”