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County collects cigarette taxes

Wednesday, December 20, 2006
Pioneer Press
by JOHN HUSTON Staff Writer

A year ago, Cook County did something it had never done before: Hire a private company to collect a portion of its taxes.
Officials say it is money the county is owed and doesn't have the resources to collect.
Critics say collecting taxes is a government responsibility.
And at least one Cook County commissioner supports an investigation into the company hired last year after learning of allegations the firm tried to bribe public officials in Texas and Florida to win municipal contracts.
The firm has been hired to collect the taxes on cigarettes Cook County residents purchase over the Internet or telephone from out-of-state vendors.
Cook County cigarette taxes are among the highest in the country, and many smokers have turned to their computers for respite.
But smokers buying from Internet sites advertising cheaper cigarettes leave a trail, thanks to the Jenkins Act, a federal law passed in 1949.
That law requires companies that sell tobacco products across state lines to provide a list of the purchases and customers to states.
"We go through and manually bill the customers for the state portion," said Mike Klemens, of the Illinois Department of Revenue. "When we're done, we send the list to Cook County."
In January, Cook County turned over tax collections for cigarettes purchased from out of state to Linebarger, Goggan, Blair and Sampson, a private firm based in Austin, Texas.
Keeps 25 percent
The Linebarger firm keeps 25 percent of the taxes it collects for Cook County.
Cook County's Revenue Department gave Linebarger the list of everyone in the county who had purchased cigarettes from outside Illinois dating back to early 1999.
As of Sept. 1, Linebarger collected $689,305 of the $1.1 million in cigarette taxes.
"It's darn good," said Barbara Bruno, director of Cook County's Revenue Department. "I'm very happy with their collections."
Bruno said she intends to turn more taxation over to private firms.
"We will be attempting to get all of our uncollectables through a collection agency," she said.
The only other area in which the county employs private collection is the health bureau.
County commissioners, who voted unanimously in September 2005 to hire the Linebarger firm, say the previously untapped revenue stream is a positive.
"I think we should use every means necessary to collect these taxes," said Larry Suffredin, D-13th, of Evanston. "In a short-handed revenue department like we have, the use of outside services is a reasonable approach to solving what is a cash-flow problem."
Peter N. Silvestri, R-9th, of Elmwood Park, said he opposed increasing the county's cigarette tax earlier this year, which raised it from $1 to $2 per pack, but supports collecting the tax from people who buy out-of-state.
"I think of that as something that is due," Silvestri said.
Linebarger's take of the $689,000 it collected this year for the county is $172,250. Silvestri pondered whether that money could have been used another way.
"It's very possible we could do it in house," he said of the collections.
But one piece of the Linebarger contract troubled Suffredin, Silvestri and other commissioners - allegations that the firm has used bribery and illegal gifts to win public contracts.
A former Linebarger partner was indicted and later convicted for a 2002 bribery scheme for making payments to two San Antonio city councilmen who voted to approve a collection contract with the law firm.
In 2004, a lawsuit was settled in which Linebarger was accused by a competitor of offering illegal gifts and bribes as well as rigging bids to win collection contracts from several local governments in Texas and Florida.
Linebarger responded to questions from the Pioneer Press with a written response. The company said its former partner acted "outside the business practices and policies of the firm" and that the man, Juan Pena, was terminated after his indictment.
"The firm took immediate and significant steps to ensure that nothing like this ever occurs again," the response said.
On the 2004 lawsuit, Linebarger would only say it was "settled to the mutual satisfaction of the parties involved."
No bidding
Linebarger's contract with Cook County, which was considered a "service contract" and therefore was not subject to a bidding process, was brought forth by former Board President John Stroger.
Before the contract was discussed, Linebarger donated two payments worth $2,700 to the campaign fund of then-Commissioner Bobbie L. Steele, D-2nd, of Chicago. After the contract was approved, Linebarger donated another $1,000 to Steele, as well as $1,500 to Stroger and $2,500 to Deborah Sims, D-5th, of Chicago, who was also the chair of the County's Tax Delinquency Committee.
In early November, Linebarger contributed another $1,000 to the campaign of Todd Stroger, who was in the midst of a successful race to replace his father as board president.
Linebarger defended its political donations, saying it "is committed to being active in the civic life of this community" by "making charitable contributions to worthy causes as well as contributing to elected officials and candidates who we believe are best qualified to serve the people of this area."
But the donations, combined with Linebarger's legal history of bribery allegations, were enough for Commissioner Forrest Claypool, D-12th, of Chicago, who said the matter should be investigated.
"Too many contracts have been awarded based on campaign donations and outside deals," Claypool said. "If they have a pattern of bribery and malfeasance elsewhere that certainly supports that this contract should be reviewed."



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