Chicago pension fiasco: $54M lost on deal with Daley nephew, ex-Obama boss

The Chicago Sun-Times reports:

A dozen years ago, five financially strapped city of Chicago pension funds invested $68 million in a shaky real estate deal put together by a former boss of President Barack Obama and a nephew of Mayor Richard M. Daley.

It was a high-risk investment. Allison S. Davis — who once headed a small Chicago law firm that gave Obama his first job out of Harvard Law School — and Daley nephew Robert G. Vanecko even warned in the prospectus that the pension funds could lose their entire investments.

But, with Daley in office and three top officials in his administration in on the decisions, the city pension funds agreed to give Davis and Vanecko’s DV Urban Realty Partners the money, which they said they would use to buy and develop properties in struggling Chicago neighborhoods.

Eleven years ago, the Chicago Sun-Times exposed the deal, which quickly turned sour. The mayor publicly distanced himself from his nephew, whose pension deals created friction in the Daley family.

Vanecko pulled out of the partnership with Davis and his family in June 2009 — 12 days after a federal grand jury issued subpoenas for DV Urban’s records.

Three years later, the pension funds dumped Davis and seized control of the real estate portfolio DV Urban had put together, with lawsuits filed in Illinois and in Delaware.

The pension funds are now out of all of the real estate deals that Davis and Vanecko put together, which included the failed redevelopment of the former Chicago Defender headquarters and the redevelopment of a burned-out Dominick’s supermarket in Lake View that’s now occupied by a Mariano’s.

And not only did the pension funds not make a profit, records show they will end up losing a combined $54.2 million for the retirement plans, which cover Chicago teachers, police officers, municipal workers, garbage collectors and bus drivers.

The ethical world that Barack Obama came from......