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Report: Obama aides ignoring potential $150M fraud by Chicago Transit Authority

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Politics,Beltway Confidential,Joel Gehrke

Valerie Jarrett / AP

President Obama’s Department of Transportation (DOT) has reportedly ignored information that the Chicago Transit Authority, which used to employ the president’s closest advisor, has defrauded taxpayers by as much as $150 million.

Cause of Action (CoA), a government corruption watchdog, “uncovered the potential of up to $150 million in taxpayer funds being improperly awarded to the Chicago Transit Authority (CTA) due to CTA’s potentially fraudulent reporting dating as far back as 1982 and possibly continuing to the present,” according to a report released today. Cause of Action bases that figure on an audit that indicates CTA received $1-5 million in 2006 alone by providing the Transportation Department with false information.

The watchdog group explained how the alleged fraud works:  The federal government subsidizes transit systems under the Urbanized Area Formula Program. The funding that transit systems receives increases or decreases in part based on the number of Vehicle Revenue Miles are driven by the transit system. Obama’s hometown transit system manipulated the federal program by over-reporting the number of Vehicle Revenue Miles (VRM) that it drives annually, according to Cause of Action.

DOT inspector general Calvin Scovel was “informed of the fraud in 2009″ but “to our knowledge, no federal investigation has taken place,” Cause of Action said. The Justice Department also knows if the report. The House Oversight and Government Reform Committee was informed in 2011.

CTA has close ties to the White House and Obama’s Transportation Department.

“Robert. S. Rivkin, the current General Counsel of [DOT] was General Counsel of the Chicago Transit Authority from 2001 to 2004, during the time CTA was likely overreporting its VRM,” CoA says.

Moreover, Valerie Jarrett — Obama’s close friend and senior advisor — served as chair of CTA from 1995 to 2003. “As of April 2009, Jarrett was still receiving deferred compensation from the Chicago Transit Authority,” CoA noted. Earlier this year, the New York Times dubbed Jarrett “the other power in the West Wing.”

Cause of Action suggested that these relationships may have sheltered CTA from investigation thus far. “[S]everal individuals formerly and currently involved with CTA and DOT have connections that raise questions concerning the propriety of any investigation (or lack thereof) into CTA’s overreporting of VRM,” CoA says.

The watchdog group has filed Freedom of Information Act requests for any information pertaining to the investigation that Scovel had told them would take place, but the Transportation Department and the inspector general both failed to respond within the federally-required time frame.

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