Lollapalooza, liquor sales, and the links to the mayor's nephew

July 13, 2010


Alcohol sales at Lollapalooza 2009

Ties between Lollapalooza promoters C3 Presents and attorney Mark Vanecko, a nephew of Mayor Richard M. Daley, run deeper than previously reported, and include a link to alcohol sales at the massive three-day music festival in Grant Park, according to public records and corporate filings.

Although the liquor license for the concert is issued in the name of Parkways Foundation, the non-profit arm of the Chicago Park District, beer and hard liquor actually are sold to the crowd of as many as 95,000 daily by Lollapalooza Festival Services, a company co-owned by Kevin Killerman, a Wrigleyville bar owner with dozens of complaints for underage drinking on his record, and a friend and legal client of Vanecko.

The deal for Lollapalooza was awarded to Austin, Texas-based C3 without competitive bidding, and it precludes any other festival that is not run by the city from taking place in Grant Park. Lollapalooza has had a major impact on the local music scene because of its controversial radius clauses prohibiting bands playing at the festival from performing within 300 miles of Chicago for as many as six months before and three months after—a policy that is being investigated for anti-trust concerns by Illinois Attorney General Lisa Madigan.

 

FRIENDS IN HIGH PLACES

After conducting three years of “brand analysis and marketing surveys” to determine that “Lollapalooza is the most recognized name in music today,” C3—which was operating under the name of its parent company Capital Sports & Entertainment at the time—partnered with Lollapalooza founder Perry Farrell and his partners, Hollywood’s William Morris talent agency, and first brought the alternative rock concert to Chicago as a reinvented “destination festival” in 2005.

The first two concerts in 2005 and 2006 established a unique partnership between Parkways, the city, and CSE/C3. The 2005 concert raised $400,000 for park programs and improvements, and the 2006 concert raised $928,000. CSE/C3 reportedly operated at a loss during the first two years to help establish its “brand,” which helped remake the summer concert industry locally and across the country.

After the 2006 concert, CSE/C3 hired Mayor Daley’s nephew Mark Vanecko as its attorney and lobbyist to work on its first long-term contract with Parkways and the city. Vanecko helped negotiate a five-year deal netting Parkways $1 million a year and keeping Lollapalooza in Chicago through 2011.

Only two years into that deal, C3, Parkways, and the city struck a new 10-year contract that will keep the festival in Grant Park through 2018. Vanecko is not listed as an attorney or lobbyist in that contract, but his ties to C3 remain:

  • Named for the “three Charlies” who run Lollapalooza and the Austin City Limits Festival—Charlie Jones, Charles Attal, and Charlie Walker—C3 branched off from CSE in March 2007. CSE originally was established as a superstar sports agency by Texans Bart Knaggs and Bill Stapleton, built around their biggest client, bicyclist Lance Armstrong. Knaggs and Stapleton still are listed as officers of C3 in corporate filings in Texas, but the January 2008 corporate filing in Illinois lists only the three Charlies. According to that filing and the company’s last report in December 2009,though C3 could have chosen any qualified representative, Vanecko is listed as the company’s registered agent. (Under Illinois law, every corporation must have a registered agent to receive tax notices and other legal documents, such as service of process or official government communications.)
  • Lollapalooza’s 10-year contract notes that “for so long as the Festival is called ‘Lollapalooza,’” another corporation, Caring & Daring, “will receive a benefit from [the Chicago Park District] and Parkways,” though exactly what that benefit is never is spelled out. Incorporated in Delaware in December 2007, Caring & Daring lists Jones, Attal, “Perry Ferell” [sic], and Peter Grosslight, chief of William Morris’ music department, as its managers. Once again, as of its last reporting in October 2009 and though the company could have chosen any qualified representative, Vanecko is listed as Caring & Daring’s registered agent.

In an interview in March 2008, the three Charlies said Vanecko was not involved with Lollapalooza during its first two years in Chicago. According to Attal, Vanecko was hired to work on the first five-year deal after we met him through a friend of a friend”—Chicagoan Graham Hickey—“and we became friends with him.” Jones added that hiring Vanecko “had nothing to do with him being the mayor’s nephew… So what?”

Hickey does not work in the music business, but he is a music fan often seen backstage at concerts around town. His sister-in-law works at C3, and he has said that he went to high school with Vanecko. He is a frequent and vocal defender of C3 and Lollapalooza whenever they are criticized, and he has posted in the comments section of almost every story this reporter has written about the festival.

WE DON’T WANT NOBODY THAT NOBODY SENT

In sharp contrast to most of Chicago’s high-powered lawyers and lobbyists, Mark Vanecko flies so far under the radar that he almost is impossible to find. The only image of him that turns up in a Google image search is a photograph from the Sun-Times of him serving as a pallbearer for grandmother Elanor “Sis” Daley, the wife of the legendary Chicago machine politician and mayor, Richard J. Daley.

In a series of articles entitled “Daley 3.0: Meet Chicago’s New Power Generation” published by the Sun-Times in June 2008 and profiling the clout-wielding grandchildren of the first Mayor Daley, investigative reporter Tim Novak noted that Vanecko, a big music fan in his early 40s, “lives in Lake View with his wife and baby, [and] left his family’s law firm of Daley & George a few years ago, opening his own legal practice, focusing on sports and entertainment. He also represents developers, including a company that bought and sold land near the mayor’s proposed site for a temporary Olympic stadium. Vanecko is also a registered lobbyist, helping bars get liquor licenses from the mayor.”

Mark Vanecko is one of three children of Mary Carol Vanecko, daughter of Mayor Richard J. Daley and sister of Mayor Richard M. Daley. Mark’s brother Robert Vanecko frequently has made headlines for controversial business deals involving city pension funds and risky real estate ventures, most recently last month, when the Sun-Times reported that several of hisreal estate deals are falling apart, records show, potentially jeopardizing the money he got from the pension funds representing Chicago’s police officers, teachers, city employees and CTA workers.” The story went on to note that:

Vanecko has been a source of public embarrassment for his uncle, the mayor, who said last summer [2009] that he’d been unaware of Vanecko’s deal with the city pension funds until he read about it in the Sun-Times. “When I did find out, I made it very clear that it was not a good decision and that he should end the business relationship immediately,” Daley said then. “But, as an adult, Bob made… a different decision, which led to a very painful string of news stories that have, indeed, caused tension in my family. I love my nephew. It’s difficult for me to have my disappointment in him made public.”

Robert’s brother Mark Vanecko seldom has appeared in news stories, except for his role with Lollapalooza. An Internet search yields few results if you want to learn anything about his legal practice: Listings for his office appear on a few directory Websites, giving only an address and a phone number. Use the wrong listing, and both are out of date; use the right one, and the office appears to have no receptionist, just voice mail. There are no descriptions of what services Vanecko provides or what type of clients he services, though Novak’s Sun-Times article reported that in addition to Lollapalooza, Vanecko has represented:

  • Eurus Development, a company that bought and sold property that had been earmarked as the site of a temporary stadium if the city won its bid for the 2016 Olympics. C3 Presents staged several of the events intended to woo the Olympic committee, and the three Charlies said they hoped to play a major role in staging the games here if the city won its bid.
  • And Kevin Killerman, whom Novak described as “a businessman who pleaded guilty in 1992 to 45 counts of serving alcohol to a minor at a North Side bar.”

The list of bars in which Killerman has an ownership interest include Casey Moran’s Tavern, 3660 N. Clark; the Martini Club, 4933 N. Milwaukee; Kendall’s Food and Spirits, 2263 N. Lincoln; the Twisted Lizard, 1964 N. Sheffield; O’Donovan’s, 2100 W. Irving, and Kelsey’s, 2265 N.  Lincoln. According to public records, Killerman also is one of two officers of Lollapalooza Festival Services, the corporation that sells beer and liquor at the music festival.

FOLLOW THE BEER

As noted in this blog’s previous analysis of Lollapalooza’s deal with the city, the contract stipulates that the non-profit Parkways Foundation shall “obtain the Festival Permit… obtain a liquor license in the name of Parkwaysand assist C3 in making appropriate filings (in Parkways’ name if necessary) to eliminate or reduce the amount of taxes, including sales tax and amusement tax, that must be paid in relation to the Festival.”

Nothing in the municipal code prohibits C3 or Lollapalooza Festival Services from applying for the liquor license themselves, and some attorneys who’ve examined the contract say it’s unusual to have Parkways doing it. Questioned about the liquor license in August 2009, Parkways’ Brenda Palm—the executive director who has seen her annual salary jump from $62,000 to more than $109,000 in the five years since Lollapalooza came to Chicago—wrote via email that, “Parkways’ agreement with C3 Presents is for producing the event, including the sales of alcohol. The alcohol is purchased from distributors who have the Chicago metro area in their territory for specific products.”

In response to the same question at the same time last year, C3 spokeswoman Shelby Meade wrote, “Our concessionaire is Lollapalooza Festival Services. Local beverage distributors are: US Foods, City Beverage, Beverage Capital Corp, Mayor Brothers”—sic; she presumably meant soft-drink vendor Mayer Brothers—“Heritage Wine Cellars, Coca-Cola, [and] Power Distributing.”

Incorporated in Texas in July 2008, Lollapalooza Festival Services lists its two officers as Killerman and Jeffrey Waughtal, co-owner of Stubb’s, the Austin barbecue joint that also is C3’s major concert venue in its hometown. The corporation’s registered agent in Illinois is CT Corporation Systems, a company that serves as registered agent for businesses operating in foreign jurisdictions, and which also serves as C3’s registered agent for filings in Louisiana and California. But Vanecko is or has been the registered agent for several of Killerman’s other businesses.


The only images that turn up for Mark Vanecko (left) and Kevin Killerman
(right, from his Facebook page) in Internet image searches.
 

Like Vanecko, Killerman has a very low public footprint for such a high-profile businessman in the hospitality industry. No photos of him turn up on a Google image search, and he represents himself on his Facebook page with a cartoon image of the villainous Snidely Whiplash.

Vanecko did not respond to a message left on Monday on his office voice mail, and he has not responded to numerous other requests for comment about Lollapalooza in years past. Killerman did not respond to messages left at two of his bars on Monday.

Citations for underage drinking are among the most serious that the city can levy against bar owners, and some have reported being shut down for a week or more because of one complaint. Beyond the 45 guilty pleas for serving alcohol to a minor in the early ’ 90s, it is difficult to determine if Killerman has any other more recent marks on his record as a liquor vendor.

The city has cited Killerman more than 20 times in the last three years, with most of the citations in 2009. However, notices of these citations do not list the specific violations behind these complaints. Though all of these citations have been settled for over a year, efforts to retrieve most of the publicly available case files for these citations at the Daley Center were unsuccessful. The few case files available for public examination were for violations cited by the Department of Streets and Sanitation.

As in most festival settings, alcohol sales at Lollapalooza are handled via a system that only distributes wrist bands to those who have proven that they are of legal drinking age. This policy can be circumvented by legal-age drinkers passing the wrist bands or alcoholic beverages to minors, but there are no complaints of underage drinking on record for the festival, as far as could be determined.

 

According to Parkways’ annual reports for 2008 and 2009, Kevin and Julie Killerman donated between $5,000 and $9,999 to Parkways for each of those years, and Mark and Kim Vanecko donated between $2,500 and $4,999 for each year.

Asked on Monday if Parkways was aware of Killerman’s guilty pleas for serving minors, executive director Palm wrote via email that the non-profit is “unaware of any conviction”–though a guilty plea is of course different than a conviction. She added that Parkways “played no role in selecting subcontractors”—that is, Killerman and Lollapalooza Festival Services. She also added that Parkways still has not been subpoenaed as part of the Attorney General’s investigation, though Madigan’s office has oversight of all 501(c)3 corporations in Illinois.

C3 spokeswoman Meade said the Texas promoters had no comment for further questions for this story.

Chicago Park District spokeswoman Jessica Maxey-Faulkner made the same claim of ignorance of Killerman’s record of serving minors, saying that the city agency “is not aware of any conviction of any Lollapalooza liquor manager for the charge of serving alcohol to a minor”–though again, she was asked about guilty pleas, not convictions. As in the past, she had no comment on the Attorney General’s investigation.

WHY SHOULD CHICAGO MUSIC FANS CARE ABOUT ANY OF THIS?

In the 2008 interview in which the three Charlies were questioned about their relationship with Vanecko, Jones ruminated about how C3 came to Chicago: “We were just naive enough not to know that we needed to know anybody. We had a great product, we sent somebody up to the Park District who spoke publicly, and the deal got done before anybody realized it was actually happening.”

Twenty-one years into the second Daley administration, many Chicagoans have come to believe that any major undertaking in this city has to have been blessed by one of the most powerful mayors in U.S. history, and it probably has some business connection to his cronies. But even given this cynical acceptance of the way things work in the City That Works, Lollapalooza stands out.

C3 has secured an exclusive, long-term contract for the city’s largest and most prestigious public park to hold a lucrative and expensive private concert complete with corporate underwriting under the aegis of a non-profit city group and in partnership with the city itself. All of this was done without competitive bidding and with no hint of the sometimes insurmountable hurdles placed in the way of other concert promoters, or of harsh anti-music initiatives such as the rave ordinance, the promoters ordinance, and the overly zealous post-E2 wave of code enforcement raids that have hassled smaller music venues in recent years.

The Park District scoffs at the notion that plans to promote a concert such as Lollapalooza in Grant Park should have been put out to bid, saying that it “issued a permit to use land for a specific time limit, it was not purchasing a commodity, nor anything else.  The Chicago Park District receives compensation for the permit… it does not ‘bid out’ any of its athletic permits or special use permits for instance,” Maxey-Faulkner wrote. But the 10-year contract with Lollapalooza in fact makes Parkways and the Park District partners in the festival—partners that are actively colluding to hurt the business of smaller local music venues via the unprecedented terms of Lollapalooza’s restrictive radius clauses, to the point where the Attorney General has launched an investigation of these anti-competitive measures.

As it has since news of its investigation broke two weeks ago, the Attorney General’s office declined on Monday to comment for this story.

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