IDOT review of younger Palumbo generation's road-building firms just latest government interest in family

Veteran Chicago-area road builder Sebastian “Sam” Palumbo once portrayed his family’s longevity in construction this way:

“The Palumbo family’s primary focus has been to embed their family values into their business policies and practices. This has been the cornerstone of our multi-generational success.”

That explanation was showcased until last year on a since-disabled web site for Orange Crush LLC, one of the companies Palumbo long ran that’s part of his family’s century-old legacy in the construction industry in the region.

But the biography page omits a key fact: That four generations of the Palumbo family that have been involved in road construction have at some point faced government scrutiny for their business practices, dating from the 1960s until today.

The Illinois Department of Transportation is in the midst of a “review” over state government contractor Builders Paving LLC — whose executives include Palumbo daughter Kaitlyn Palumbo Gandy and her husband Ryan Gandy — and affiliated contracting companies.

At issue: if and how Palumbo is tied to any of the businesses, despite facing a lifetime ban on participating in road projects funded by state and federal tax dollars.

More than 60 years ago, Palumbo’s late father Peter and grandfather Samuel, running what was then called Palumbo Excavating Co., were called to testify at the trial of an Illinois State Police captain who authorities believe had taken gifts that were “tantamount to bribes in return for having his men overlook overweight truck violations.”

That’s according to a 1963 article in the Chicago Daily News that says Palumbo’s father and grandfather each asserted their 5th Amendment right against self incrimination.

In the 1970s, Palumbo’s dad was granted immunity to testify against others in the industry in a bid-rigging prosecution, news accounts show.

He and Palumbo Excavating were later part of a legal settlement in which several contractors paid more than $1 million to the government for their involvement — described by the Chicago Sun-Times in 1981 as “an illegal scheme to rig bids on the $45.7 million Stevenson Expy. resurfacing project in 1975.”

The company — which was once based in Chicago but later moved to west suburban Hillside where the family’s construction firms are still hubbed — was temporarily barred from government contracts as a result of the case.

More recently, Palumbo, his brother Joseph and their father pleaded guilty in 1999 in a federal fraud case involving some of their construction firms in which the men admitted to a scheme shortchanging their union employees’ benefit plans. They each were sentenced to prison and permanently banned from future IDOT work.

Two of their companies, Palumbo Brothers, Inc., and Monarch Asphalt Company, admitted to overbilling taxpayers on numerous road projects, improperly pocketing millions of dollars. Those two companies were also permanently banned from state and federal projects, as were “all existing or later created affiliates and successors,” records show.

That prohibition appears to be at the heart of the ongoing review by IDOT, which has “paused” awarding new contracts to Builders. The company has in turn sued and, in response to the lawsuit, the state agency disclosed in court records that it’s found Palumbo owned an affiliated firm until mid-2022, which wasn’t disclosed to IDOT.

The agency, which builds and maintains state highways and is overseen by Gov. JB Pritzker, “is concerned about the possibility of material omissions or inaccuracies in the prequalification application and is therefore in the process of determining whether” Builders Paving “is a proper bidder, which is a prerequisite to awarding any contract” to the firm, IDOT said in a court filing.

Officials from the Illinois State Toll Highway Authority, another government agency overseen by the governor that's hired Builders Paving for road work, said they are "deeply concerned by reports regarding Builders Paving LLC and it is closely monitoring this developing situation."

The IDOT examination followed questions from the Sun-Times about connections between Orange Crush and Builders.

An attorney shared by Palumbo and Builders has said: “Sebastian Palumbo has never owned any interest, direct or indirect, or invested in either of the Builders Companies” — which includes Builders Paving and at least one affiliate, Builders Asphalt LLC — “and has not been an officer, director or employee of the Builders Companies and has never received compensation from the Builders Companies.”

But the attorney won’t say whether Palumbo served in any consulting role for Builders and the younger generation there, helping form or guide the newer enterprise.

Builders Asphalt was started in 2005 with five or so employees, according to a company timeline. Builders Paving was formed in 2010.

The Gandys both attended college until 2007, according to their LinkedIn profiles.

In a recent interview on a construction-oriented podcast called Dirt Talk, Ryan Gandy talked about his entry into the industry.

“I wanted to be a home builder . . . I worked for a home builder right coming out of school,” he said, referring to the University of Tennessee, which his wife also attended. “Loved that and then what happens? ‘07 hits, the crash, the housing crash, and that didn’t work out.”

“So I had an opportunity to move to Chicago and work in the road construction space, that’s kind of how things got started. Worked for a company for a few years and transitioned out and was able to get an opportunity to develop and run an organization that we are here today.”

Builders Paving has shared in more than $80 million in IDOT work over the last five years alone, and the company is pushing IDOT in court to remove the hold on new contract awards so it can get to work on more than $20 million in new road work.

At the time of the 1990s criminal case, Palumbo Brothers was a king of Illinois road building, with the firm and other companies run by the family sharing in more than $350 million in state road projects from the late 1980s to the mid-1990s alone, according to published reports.