Former Chicago Treasurer Santos Hit with SEC Civil Suit

November 15, 2002 ( - Federal regulators have sued the former city of Chicago treasurer and two investment brokers accused of trying to gain city business by making campaign contributions to her during the 1990s.

Named in the US Securities and Exchange Commission (SEC) lawsuit, according to a Reuters news report, was Miriam Santos, who served as treasurer from 1989 to 2000. Santos oversaw the investment of about $2.5 billion in city funds through buying and selling securities. Reuters said the suit also names brokers Peter Burns and Michael Hollendoner whose firms were not identified.

The SEC alleged in the lawsuit that in order to obtain a share of the city’s lucrative securities investments, Burns and Hollendoner made secret payments to Santos from 1995 through 1999, according to Reuters.

The SEC said it was seeking civil penalties from the three defendants as well as demanding the three return any ill-gotten gains, Reuters said.

Campaign Contributions

Santos allegedly cut off dozens of brokers, who refused to make campaign contributions she solicited, skirting the competitive bidding process designed to prevent favoritism and seek the best investment bids, according to the SEC.

“As a result of Santos’ cutoff order, on at least twenty occasions, the city was unable to make investments at the best rate provided by approved brokerage firms,” the SEC said in the suit, Reuters reported. That led to losses of $16,000 in interest income for the city, the SEC said.

The government lawsuit comes two years after Santos, 45, pleaded guilty to mail fraud and to accepting $7,500 worth of furniture for her “Santos for Attorney General” campaign in 1998, Reuters said. The SEC said she was later sentenced to four months in prison and ordered to pay $21,000 in fine and restitution and later accepted a two-year suspension of her Illinois law license.

In connection with the criminal charges filed against Santos, federal prosecutors alleged that Santos solicited $10,000 Democratic Party contributions from several brokerage firms with city contracts with the goal of raising $60,000 for the state Democratic organization, However, prosecutors said, a Citibank executive approached for a contribution called the FBI.