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April 7, 2009

ATTORNEY GENERAL MADIGAN: CASTLE CONSTRUCTION, OWNER INDICTED FOR CONCEALING MINORITY-OWNED BUSINESS FRAUD

Chicago — Attorney General Lisa Madigan today announced the indictment of a Chicago-area businessman and his construction company for fraudulently obtaining public funds reserved for minority businesses in construction contracts with City of Chicago agencies.

A Cook County grand jury returned the indictment today against Robert Blum, 56, of New Lenox, Ill., and Castle Construction Co., based in Markham, Ill., on 10 counts of fraudulently obtaining public moneys reserved for disadvantaged business enterprises, one count of wire fraud and one count of mail fraud. Blum is the owner and CEO of Castle Construction.

"Castle Construction never would have received these public contracts without employing deceptive practices, and because of that, this company prevented other legitimate businesses from securing contracts intended to help provide business growth opportunities for minority-owned businesses," Madigan said.

The indictment alleges that Blum and Castle Construction fraudulently obtained two construction contracts worth more than $18 million and allegedly devised a scheme to misrepresent and conceal how much of the public funds actually went to minority-owned businesses, a condition required by both contracts.

In January 2006, Castle Construction allegedly obtained a $9.8 million construction contract from the Chicago Transit Authority (CTA) to upgrade bus and train washing facilities at three CTA locations. As a condition of the contract, Castle Construction agreed to employ a minority business as a subcontractor. To fulfill this condition, Castle Construction represented to the CTA that it had entered into a $2.96 million subcontract with a minority business, Mid-City. According to the indictment, the Mid-City contract was actually $550,000. Also according to the indictment, from May 2006 to May 2007, Castle Construction and Blum presented the CTA with sworn statements in which they misrepresented the amount of work that Mid-City had performed on the project. On reliance on those sworn statements and other documentation, the CTA issued checks to Castle Construction, which included payment for work supposedly done by Mid-City.

In March 2007, Castle Construction signed a $9 million contract with the City of Chicago Public Building Commission to construct a fire station on North Clark Street and allegedly represented that minority-owned businesses would perform 26 percent of the work on the project. According to the indictment, Castle Construction falsely stated that it had signed a $1.5 million subcontract with GAG Masonry, Inc., a minority-owned firm. In fact, Castle Construction had entered into a contract with a different, non-minority-owned business to do masonry work on the North Clark Street project. According to the indictment, during the fall of 2007, Castle Construction and Blum presented the Public Building Commission with sworn statements in which they misrepresented the amount of work that GAG Masonry had performed on the project. In reliance on those sworn statements and other documentation, the Public Building Commission issued checks to Castle Construction, which included payment for work supposedly done by GAG Masonry.

The Inspector General's Office of the CTA discovered the defendants' scheme in October 2007 and referred the case to the Attorney General's office, which later uncovered the Public Building Commission contract in the course of its investigation. The CTA and the Public Building Commission both cooperated with the Attorney General's Office in this investigation. The Cook County State's Attorney's Office also participated in the investigation.

The 10 counts of fraudulently obtaining public moneys are Class 2 felonies, punishable by a sentence of three to seven years in the Illinois Department of Corrections (IDOC). The wire and mail fraud counts are each Class 3 felonies, punishable by a sentence of two to five years in IDOC.

Public Integrity Bureau Deputy Chief Mary Bucaro and Special Assistant Attorney General Jonathan Bunge are handling the case for Madigan's office.

The public is reminded that these are merely charges and that the defendants are presumed innocent until proven guilty in court.

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