Metra: Pagano cashed in on unchecked power - Probe reveals executive director was able to take $475,000 because 'no one was willing to tell him no'

Metra: Pagano cashed in on unchecked power - Probe reveals executive director was able to take $475,000 because 'no one was willing to tell him no'
By Richard Wronski and Erika Slife
Copyright © 2010, Chicago Tribune
8:07 p.m. CDT, May 14, 2010
http://www.chicagotribune.com/news/local/ct-met-metra-pagano-0515-20100514,0,879475.story


Metra's longtime executive director, Phil Pagano, amassed so much unchallenged power that he felt confident enough to forge the signature of the agency's chairwoman as part of a scheme to improperly give himself nearly half a million dollars in vacation pay, an investigation disclosed Friday.

The allegations were contained in the executive summary of a report released one week after Pagano — the subject of a rapidly expanding inquiry into financial irregularities — stepped in front of a Metra train near his home in Crystal Lake.

Besides outlining the "blatantly illegal" advances Pagano took on vacation pay, the investigation also showed Pagano faced serious financial concerns, borrowing $839,000 against the value of a deferred compensation account and an insurance policy. Those concerns were not spelled out in the report.

"This investigation revealed substantial evidence of financial irregularities and abuses carried out by a person at the highest level of Metra who, as a result of that position, was in the best position to perpetrate these acts," special counsel James Sotos concluded in his report to Metra's directors.

Pagano, 60, improperly took $475,000 — $225,000 for cashing out vacation pay from 2007 to 2010, and $250,000 between 1999 and 2006, Sotos' report found.

The report paints a picture of Pagano as someone who over 20 years at the agency consolidated control to such an extent that his authority was unchallenged. It also portrays someone who developed a growing need for cash atop his generous Metra salary, most recently $269,625 a year, and who would go to any lengths to get it.

"In the end, it seems no one was willing to tell Pagano no," Sotos wrote in the report.

Sotos said he planned to ask the Metra board to fire Pagano on the day Pagano took his life.

The report will be turned over to the Illinois attorney general's office for a possible criminal investigation and to any other agency that requests it, Sotos said, adding that Pagano violated Metra's rules of conduct and "likely various state and federal criminal laws."

U.S. Attorney Patrick Fitzgerald's office said Friday it has asked Sotos for the report, some portions of which were not disclosed publicly at Fitzgerald's request.

It wasn't until Jan. 11 that Pagano's abuse of power began to unravel. When his authority to pay himself for 2010 and 2011 vacation time was questioned, he submitted memos authorizing the payments and bearing the signature of Metra Chairwoman Carole Doris. The signatures were forgeries, discovered by Doris last month, Sotos said in the 14-page executive summary.

Pagano "had the trust and confidence of the staff at Metra, this board and previous boards," Doris said. "Our error was in trusting too completely, too deeply."

Sotos' report didn't delve into the reasons for Pagano's continued desire for cash. In closed meetings with Metra directors and Sotos, an emotional and remorseful Pagano admitted he had erred but offered no explanation for his actions, other than that it was a "family matter," the officials said.

"There was a great deal of trust that was placed in Mr. Pagano by a lot of people in this organization," Sotos said Friday. "As a result of that trust, the usual accountability (was) not in place."

In his report, Sotos referred to a document which he called the "Ladd certificate," referring to Metra's former longtime Chairman Jeffrey Ladd.

Pagano claimed this document, allegedly signed by Ladd in 2005 or 2006, authorized the executive director to be awarded additional vacation time and to be paid for any unused time, in lieu of carrying it over into the next year.

But several significant factors undermined Pagano's attempt to justify his cash payouts on that basis, Sotos said. No original version or even a signed copy of the Ladd document could be found, the report noted.

The investigative report also alleged the circumstances surrounding the Ladd document "smack of transparent efforts to create a paper trail to justify practices that were clearly inappropriate."

Ladd, an attorney, did not respond to calls for comment Friday. Neither did Pagano's attorney, George Jackson III.

Ladd surfaced in the 2008 trial of Antoin "Tony" Rezko, who was a key fundraiser and adviser for former Gov. Rod Blagojevich. Ladd testified under a grant of immunity from prosecution about his dealings in 2004 with the Illinois Health Facilities Planning Board, which Rezko and political insider Stuart Levine controlled.

Ladd, a veteran lobbyist, told the Rezko jury he had been hired by hospital groups to represent them before the board, and testified that his clients paid $80,000 to a Rezko associate to keep Rezko from secretly working against them.

Sotos said in his report that from January 1999 to 2006, Pagano cashed out roughly 80 percent of his yearly vacation allotment at the beginning of the year whether he took the time off or not, and all of his vacation time since 2007.

The investigation, Sotos said, did not turn up any wrongdoing on the part of any other Metra employee. But he did determine Metra had "a troubling lack of oversight and accountability which needs to be remedied."

At Doris' recommendation, Metra's directors on Friday approved several measures to tighten oversight at the agency. The actions include appointment of Metra's chief internal auditor, Eric Fernandez, as acting inspector general to serve as an internal watchdog.

Tribune reporter Jeff Coen contributed to this story.

rwronski@tribune.com

eslife@tribune.com