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City Hall Lawyers Claim Park Grill Owes More Than $8 Million To Taxpayers From "Sweetheart Deal"

By Margaret Paulson in News on May 4, 2015 6:20PM

The decade-long Park Grill saga— which began in 2005 and is crowned by three lawsuits pitting City Hall against the popular Millennium Park restaurant— may come to an end when Judge Moshe Jacobius hears closing arguments May 22.

The most recent lawsuit, initiated by Mayor Emanuel, alleges that a 30-year contract, bestowed by Mayor Daley’s Park District to Park Grill in 2003, is a “sweetheart deal” granted through unfair influence that has robbed the city’s taxpayers of more than $8 million in revenue. City Hall lawyers allege that the deal, brokered by the Chicago Park District— which is named as a defendant along with Millennium Park Joint Venture, the operators of Park Grill— is illegal because the city owns the land under the restaurant site and thus Chicago City Council should have been involved in the permissions process from the start.

But in written closing arguments filed Friday, the restaurant’s lawyers argued that if the judge sides with City Hall, both the Park District and the City of Chicago should pay the restaurant $13.6 million, which is how much they planned to make when they attempted to sell the concession agreement four years ago to Levy Restaurants, another restaurant group.

Under the current agreement, Park Grill does not have to pay property taxes, nor does it pay for gas, water or garbage collection. Even though it has a full-service restaurant, bakery, souvenir shop, concession carts and many kiosks inside the park, for all intents and purposes, Park Grill has been treated as if it’s a vendor pushing a hot dog cart. The only terms were it had to pay a fee of $275,000 per year, but that was waived until either the 15th anniversary of the contract or until Park Grill made $3 million or half the cost of construction.

How did this happen? In October 2001 when the Park District selected Matthew O’Malley’s and James Horan’s proposal for a restaurant in the soon-to-be-built Millennium Park and they signed a contract in 2003. There was some media attention, but the deal carried on until the Chicago Sun-Times broke the story in 2005 that O’Malley had an affair (and child) with Laura Foxgrover, who worked for the Chicago Park District at the time. Another shady issue is that O’Malley owned The Chicago Firehouse— one of Mayor Daley’s favorite places to dine. Additionally, the Sun-Times reported that there were actually two competitors who offered lower-priced proposals than O’Malley and Horan.

With increased media attention, the city decided to look into the Park Grill contract, at which point Mayor Daley said he thought the deal was unfair, but naturally passed the buck:

"Lawyers do make mistakes. That's what it was. ... It's embarrassing to them. Yes it is - the corporation counsel and the Park District counsel."

And, as it happens, the Cook County Assessor James Houlihan assessed the restaurant at more than $500,000 in March 2005 and let the restaurant know they’d be sent a bill for their 2004 property taxes, which would likely be around $30,000. But the restaurant sued in August 2005 to avoid paying the taxes, arguing that because they were not lessees and the contract did not use the terms “lease” or “lessor,” they were not liable. The judge sided with Park Grill. Chicago Reader’s Ben Joravsky gave a good overview of the tax situation in an article in 2005.

However, in 2011, Mayor Emanuel took up the issue again, filing a lawsuit against the restaurant for unpaid property taxes. The restaurant counter-sued again. It went all the way to the Illinois Supreme Court before the judge again sided with the restaurant.

It remains to be seen what will happen in this most recent lawsuit, under which both the Chicago Park District and Park Grill are listed as defendants. Under deposition in 2013, former Mayor Daley said he could not recall specifics of the deal. Due to medical reasons, Daley' subpoena to testify was dismissed in July 2014. But Laura (Foxgrover) O’Malley (now married to the defendant) was forced to testify and said she recused herself from economic negotiations in 2002 after becoming pregnant with O’Malley’s child.

The newest development in the case happened in December 2014 when video surfaced of negotiations at the Park District’s selection meeting in October 2001, showing that Foxgrover was not present.

While the restaurant’s lawyers see the video as a boon to their case, City Hall’s attorney doesn’t think it changes things:

"This deal has already cost the city $8 million in past damages ... the city will incur losses up to an additional $25 million if this illegal sweetheart deal is not terminated."

It’s high time the Park Grill pay up. Its gross income is at $96 million but it has only contributed about $2.5 million to the city in the past 10 years.

It’s unclear if the remaining 20 years of the deal will hold or be ruled invalid but the $4.1 million taxpayer-funded legal fees seem worth it in the long run, at least to Mayor Emanuel.