For the second time this year, Gov. Pat Quinn has suspended state funding to the scandal-scarred United Neighborhood Organization, the biggest charter-school operator in Illinois.
A Quinn spokeswoman said Thursday the state has frozen the final $15 million of a $98 million state school-construction grant that the Illinois Legislature promised UNO in 2009 to help build a network of charter schools, the Chicago Sun-Times reports.
As a result of our own internal review conducted earlier this year, we have not approved any new projects, and we have suspended future capital projects," spokeswoman Sandra M. Jones said.
Her statement came a day after the disclosure that the federal Securities and Exchange Commission is investigating the clout-heavy group for possible securities violations.
The Sun-Times reported Thursday that, in a Sept. 20 letter to UNO's board, an attorney from the SEC's enforcement division in Chicago notified the organization that the agency "is conducting an investigation . . . to determine if violations of the federal securities laws have occurred."
The SEC is asking UNO for records related to $37.5 million that the group raised by selling state-backed bonds in 2011.
Its investigators also want records from UNO regarding two contractors hired to help build schools with state grant funds. In February, the Sun-Times reported that the companies, owned by brothers of a top UNO executive, had been paid $8.5 million in grant funds. The executive, Miguel d'Escoto, resigned days after the report, and the Quinn administration suspended funding for UNO in April.
Quinn restored the state funding in early June, saying he was confident UNO had implemented reforms, including the appointment of a new board chairman. Longtime UNO boss Juan Rangel stepped down as board chairman but has remained as the charter operator's $250,000-a-year chief executive. Rangel served as Mayor Rahm Emanuel's 2011 campaign co-chairman.
Less than three weeks after the state restored funding, Quinn's Department of Commerce and Economic Opportunity — which oversees the grant — got a letter from the SEC requesting documents about UNO.
The brief suspension of state funding had halted construction of UNO's $25 million high school at 51st Street and St. Louis Avenue on the city's Southwest Side. By restoring the grant, the state allowed work to resume on the half-built facility, and the new UNO Soccer Academy High School opened last month.
Asked why the state continued funding UNO despite the federal probe, Jones said Thursday, "The funding was released because the work had already been completed, children needed to go to school, and the contractors needed to be paid."
An UNO spokesman could not be reached Thursday night for comment.
UNO officials had hoped to build two more schools with the remaining $15 million and with another $35.2 million they asked state lawmakers to provide earlier this year.
Last month, Chicago businessman Martin Cabrera Jr. — whose appointment as UNO chairman was cited by Quinn as an important reform — resigned.
The governor has attended UNO events, including the ground-breaking for the UNO Soccer Academy High School, and signed the legislation awarding the grant to UNO. Illinois House Speaker Michael Madigan (D-Chicago) sponsored the grant, which is believed to be the largest government subsidy in the country for charter schools.
UNO also has close ties to Ald. Edward Burke, a major Quinn fund-raiser. The alderman had urged the governor to reverse the initial suspension of the grant.
The new high school is in Burke's 14th Ward, and his daughter-in-law has worked for UNO. Contractors with close Burke ties also have done work for the charter operator.
Founded in the 1980s as a Hispanic community activist group, UNO went into the charter business in the late 1990s, and its network has grown to include 16 schools across Chicago with more than 7,600 students.
While the massive state grant and more than $70 million in private loans have helped the charter network expand rapidly, most of its operating budget — as well as the money to repay the loans — comes from the Chicago Public Schools, which gives UNO tens of millions of dollars a year.